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Surprise Crude Build Threatens Oil Rally

Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Extreme Weather Could Send Global Energy Demand To Record High

The world is moving further away from a sustainable path as carbon emissions increased last year at the fastest pace since 2011 due to unusually hot and cold spells in many parts of the world that drove a rise in energy use.  

This was one of the key messages in the 2019 BP Statistical Review of World Energy which the oil and gas giant presented this week.

Despite the growing use of renewable energy sources, the high energy demand last year resulted in increased use of coal-fired electricity generation, leaving the global energy mix “depressingly flat,” Spencer Dale, BP group chief economist, said at the presentation of the benchmark report.

The shares of non-fossil fuels at 36 percent, and coal at 38 percent, in the global fuel power mix stayed unchanged last year from their levels 20 years ago, Dale noted.

Earlier this year, the International Energy Agency (IEA) warned that carbon emissions broke their previous record in 2018, reaching 33.1 gigatons.

BP’s new report suggests that “global energy demand and carbon emissions from energy use grew at their fastest rate since 2010/11, moving even further away from the accelerated transition envisaged by the Paris climate goals,” chief executive Bob Dudley said. Related: Escalating Trade War Signals More Pain For Oil

“The world is on an unsustainable path: the longer carbon emissions continue to rise, the harder and more costly will be the eventual adjustment to net-zero carbon emissions. Yet another year of growing carbon emissions underscores the urgency for the world to change,” Dudley said.

Global primary energy consumption grew by 2.9 percent last year—the fastest growth since 2010 and almost double its ten-year average of 1.5 percent growth, BP said.

Last year’s growth occurred despite cooling global economic growth and higher energy prices. At the same time, emissions increased by 2.0 percent in 2018—the fastest pace in seven years, BP’s Dale noted.

BP has estimated that a large part of the surprisingly high growth in energy demand last year was due to weather-related effects, with an unusually large number of hot and cold days across major demand centers, especially in the U.S., China, and Russia.

“The acceleration in carbon emissions was the direct result of this increased energy consumption,” Dudley said.

BP’s stark warning comes at a time when the world’s largest oil companies face increased investor pressure to start addressing climate change risks and set emission reduction targets if the world is ever to achieve the Paris Agreement targets.

Some supermajors, including BP, have started to cave in to shareholders’ demands.

Last month, more than 99 percent of BP’s shareholders voted in favor of a climate change shareholder resolution, pushing the supermajor to set out a business strategy consistent with the Paris Agreement goals.

“We aim play our part in the transition and to deliver on a strategy that is consistent with the goals of the Paris Agreement,” BP’s chairman Helge Lund said at the shareholders meeting in Aberdeen in May, while climate change activists shouted “this is a crime scene” outside the building where the meeting was held.

Another supermajor, Shell, announced earlier this year its first-ever short-term goals to cut the carbon footprint of its operations and product sales.  Related: Analysts: 2019 Oil Demand Growth Could Be Lowest In Years

On the other side of the Atlantic, however, U.S. supermajor Exxon continues to push back against resolutions from activist shareholders who demand their voice be heard. In May, Exxon’s shareholders rejected a proposal to set up a climate change board committee and voted down a proposal for corporate governance changes that some shareholders had proposed to protest the fact that Exxon had left another climate change vote out of the ballot at the annual meeting.

All major oil firms are touting their continued efforts to reduce carbon emissions from their operations, yet emissions are rising at an alarming pace.

As BP admitted in its report this week, the accelerating emissions growth is steering the world away from a sustainable path and there is urgent need to remedy this if the world were ever to reach its climate goals.  

“My guess is that when our successors look back at Statistical Reviews from around this period, they will observe a world in which there was growing societal awareness and demands for urgent action on climate change, but where the actual energy data continued to move stubbornly in the wrong direction,” BP’s Dale said, noting:

“A growing mismatch between hopes and reality. In that context, I fear – or perhaps hope – that 2018 will represent the year in which this mismatch peaked.”  

By Tsvetana Paraskova for Oilprice.com

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