RE: FT30 Sep 2025 17:02
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What’s causing sluggish energy efficiency gains?
Oil company BP published its Energy Outlook last week, something of an industry bible and feast for those who like to gorge on energy statistics to try to figure out a rapidly changing world.
The headline conclusion was stark — in its central outlook, BP now anticipates global oil demand to peak in 2030, five years later than its expectation last year.
India and other Asian countries will make up for waning appetite for oil in some other markets and support global demand of about 103.4mn barrels per day in 2030, BP expects, up from about 102.2mn bpd this year.
Its “scenarios” (BP is wise enough not to call them forecasts) are built around certain assumptions on lower carbon energy and economic growth. But Spencer Dale, BP’s chief economist, also draws attention to some lesser-discussed unknowns that could have a huge impact on oil demand — in particular, energy efficiency.
“I realise that shifting patterns in energy efficiency may seem a little arcane,” he says, in the foreword to the report. “But I would argue that the sustained weakness in efficiency gains over the past five years was one of the most important factors shaping global energy over this period.”
Between 2011 and 2019, BP says, energy efficiency had been steadily improving at a rate of about 2 per cent a year (ie the world needed 2 per cent less energy on average to produce the same unit of GDP).
But between 2020 and 2023, it slowed, averaging about 1.5 per cent a year. And experts, including BP, don’t really know why.
“The causes of this sluggishness in efficiency gains are not well understood,” says BP, pointing to suggestions from others such as a slowdown in investments in efficiency improvements and the growth of factories in some emerging economies.
One theory put forward by some experts is that people have been replacing their cars at a slower rate, meaning less-efficient models are still on the roads.
Because the reasons are not well understood, it’s hard for BP to work out where the trend is heading. And the direction matters hugely for energy use and for global climate goals: BP expects fossil fuels to pick up the slack, as they are typically able to respond quickly to fluctuations in demand.
For the purposes of its “current trajectory” scenario — in which oil demand climbs about 600,000 bpd by 2030 — BP assumes efficiency gains will gradually pick back up to their pre-2019 rate.
But if they don’t, oil demand could
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