BP p.l.c. (BP) Earnings Call Transcript & Summary

Welcome, everyone. I'm Spencer Dale, BP's Chief Economist. And thank you all for sparing the time to join us today for the launch of this year's Energy Outlook, both here in BP's headquarters in St. James, London, and virtually around the world where, at last count, we have really quite several thousand people joining online. So you're all very welcome. And again, thank you for sparing your time. We don't take your time for granted. We will try and make this session as informative and as interesting and as fun as possible. So thank you all very much. Also at this point, let me also just give a shout out to the rest of the team that helped produce this year's outlook. Many of them are in the room with you today. Much of the outlook was put together over the summer, most normal people either at the beach, sitting under a tree with their feet up. So thank you, the team for all your time and effort, especially over the summer. Much appreciated. The energy system sits at the heart of modern day society. It's critical for the everyday needs of people and businesses around the globe, adapting to changing political, technological and environmental priorities. That central role is a very reason why many of us choose to work in or around the energy industry. It's also why the challenges and forces shaping the global energy system are forever changing. And the past year has been no different. Geopolitical tensions, which came to the fore with a war in Ukraine escalated further with the conflicts in the Middle East and increasing use of sanctions and tariffs refocusing attention on energy security. The seemingly exponential growth in data centers to support the increasing use of AI, gains in energy efficiency growing at subpar pace, boosting energy demand and carbon emissions continuing to rise with the risk that it becomes harder and more costly for the world to remain within a given carbon budget. So lots of issues for this year's energy outlook to get its teeth into. And this outlook is based around 2 main scenarios shown here, current trajectory in green and Below 2 degrees in blue. The scenarios are framed around different assumptions about the speed and nature of the energy transition, the single biggest uncertainty facing the energy industry. Current trajectory, as the name suggests, tries to capture the broad pathway along which the global energy system is traveling. It places weight on climate and energy policies already in place. It places weight on government aims and pledges for future decarbonization, but it also places weight on the fact or the difficulty of actually meeting those aims and pledges. So there's a great judgment in here. As you can see on the whiteboard here, carbon emissions in current trajectory sort of stabilize through this decade, and then they gradually decline during the 2030s and '40s. But the pace of that decarbonization is slow and shallow, so by 2050, carbon emissions are only around 25% lower than they are today. In contrast, Below 2 degrees, explores how different elements of the energy system might change in a pathway in which the world achieves a faster and deeper reduction in carbon emissions. Carbon emissions in Below 2, shown in blue here fall by around 90% by 2050. Below 2 assumes a significant tightening in climate policies, it also embodies shifts in societal behavior and preferences, which further support gains in energy efficiency and the adoption of low carbon energy. In the outlook, we show Below 2 is broadly consistent with limiting the increase in global average temperatures to well Below 2 degrees. Now at the risk of sounding like a complete stack record, let me repeat the warning I always make at this point. The energy system won't exactly follow either of the past described by the scenarios. The scenarios are not predictions. We can't predict the future. We know we can't predict the future. Now I can imagine some of you are sitting there thinking, well, hold on, so Spencer's just told us both of these scenarios are going to be wrong. And neither of them consider those other issues he mentioned at the beginning, increasing geopolitical fragmentation, weak energy efficiency, the risk of delayed transitions, so what am I doing here? Am I wasting my time? Don't worry. I feel your pain and no, you're not wasting your time. Today's presentation will address both of those concerns. Although there's only a tiny chance of the energy system turning out exactly in line with either of the scenarios, we can still use the scenario to develop key insights about how the energy system might develop. In particular, we can identify different aspects of the energy system, which are common across both scenarios. And so the idea here, the way to think about this, if I can see qualitative trends in the energy system, which are apparent in a pathway which similar to one we're on now, remember that slow, shallow decarbonization pathway. And that same trend is also apparent in that rapid decarbonization pathway shown by Below 2, it may give us extra confidence that those same trends were also being pathways between those 2 cases. In contrast, if other elements of the energy system are very different in Below 2 relative to current trajectory, it suggests they're more dependent on the speed of transition. And so the first part of today's presentation will identify some of those key common trends and some of the key differentiated trends. But what about those other issues affecting the energy system over and above the speed of transition. In this year's outlook, we've developed a series of sensitivity analyses to consider those other issues. And in the second part of the presentation, we'll take you through 2 of those sensitivities considering the possible implications of increased geopolitical fragmentation and also the potential implications of weaker energy efficiency. At that point, you're pleased to know that we have stopped bombarding you with charts and more charts and more data, and we're going to stop and we'll switch to the Q&A session for the final 40 minutes or so, which is always, I think, the most fun and interesting bit. For those of you online, please feel free to submit your questions at any point during the presentation. You can also vote for the questions which you think are most interesting and put them to the top of the list. I'm afraid, guys for you in the room, you'll have to show a little bit more restraint, no shouting out and you have to wait until the Q&A. Also for those joining online, we'll invite you to take part in the real-time poll on some of the issues raised by this year's outlook and with feedback the answers from that poll before the end of the presentation. So we have an action-packed session ahead of us. So please don't go anywhere. If you watch it online and thinking, is this the right time to go and get a cup of tea? No, it's not. You have to stay with us, otherwise, you're going to miss something really exciting. So please stay with us. You may have noticed from the opening slide that we're going to do something different today. We're going to have a 2-handed presentation. So I'm super excited that Gareth Ramsay is going to take you through the next part of the presentation, and then I'm going to come back to outline the results of the sensitivity analysis. I've worked with Gareth, I think, for the best part now about 20 years in a variety of different economic and energy roles. For the past few years, Gareth has been leading the production of the energy outlook. And as some of you may know, Gareth will be taking over from me as BP's Chief Economist from the beginning of next year where I know he will do an awesome job. So Gareth, why don't you come up, and I'll hand over the Chief Economist pen?

Thank you. Thank you so much, Spencer. And as he says, don't worry everyone. That is not the last you're going to see in Spencer today. But as he said, I've been leading production of this energy outlook. And so first, I'm going to talk you through some of the key elements of the outlook. What happens to the crucial sort of moving parts of the energy system in our scenarios. And then Spencer is going to come back to do his even more fun bit at the end and to look at a couple of fundamental ways that things might be different to these 2 scenarios. But before that, what do we want you to know about what's in them? So as Spencer said, I'm first going to highlight key features, which are there in both our 2 scenarios, things that might, therefore, be likely to occur across a range of other pathways as well, perhaps those in between the 2 scenarios as well. And the first of those common trends is around oil. So this chart shows the path for oil demand in our 2 scenarios. Now you will see, they are not the same. The profiles do indeed differ in terms of how long demand carries on rising for and then how much it declines. Now in the current trajectory scenario, that's the pathway that the world is on at the moment, oil demand keeps on rising over the rest of this decade before it then starts to gently fall back. But by 2035, it's only fallen back to around its current level. It then gradually falls over the second half of the outlook to a little above -- to around 85 million barrels a day by 2050. Whereas as you can see in Below 2, the falls in demand start a bit sooner and then they happen with much greater intensity. So the oil consumption is still -- is -- it falls all the way to around 35 million barrels a day by 2050. But the common trend that I want to pull out here is that both scenarios imply that oil carries on playing a central role in the energy system for at least the next 10 to 15 years. And that matters a lot for the investment that we're going to need. As the international energy agency pointed out last week because of the way the output of oil fields naturally declines, we're going to need hundreds of billions of dollars of new investment every year to meet these kind of levels world wide. But there is a second common element in the 2 all demand profiles that I want to pull out as well. And that's a change in where this oil is going in our economies. Now this one might seem a bit more technical, but it is really important. So this chart shows the growth in oil demand sort of average growth per year, both in the past, that's the bar on the left, and then in the future, the bars on the right in our 2 different scenarios. And it shows where that oil is going, marked in the different colors. Now for a very long time, including since 2010, as you can see on the chart here, the single biggest driver of oil demand growth in the global energy system has been rising demand for oil in road transportation, in our cars and in our trucks. But we're now at an inflection point in these scenarios. You can see that all of those blue bars are negative in the future. That's the use of oil in road transportation falling in both our scenarios. Now in some ways, that might seem surprising. We know that in emerging economies, in particular, as people get richer, their demand for mobility, including for road transportation rises. But that's more than offset at a global level by 2 things happening. First, importantly, the average vehicle on the road becoming more fuel-efficient over time; and second, of course, an increasing shift towards EVs. Instead, the biggest single driver of oil demand growth in the future is not oil being combusted. It's all being used as a feedstock in what we call the petrochemical sector, particularly for the production of plastics as well as other oil-based materials, and that's the red bars on this chart. And this use of oil pushes up on demand throughout the whole outlook period in our current trajectory scenario. And even in the first half of the outlook in Below 2 as well. So oil for this kind of use as a feedstock, it's only around 15% of total oil demand out. That rises to over 30% in 2050 in current trajectory and to more than 50% in Below 2. That's more than half of oil being used to make things not for energy. But although we know this is going to be important in the future, the precise scale of it is still pretty uncertain. I won't get into the maths here, but we show in the outlook that different, but equally plausible assumptions about how much plastics we're going to want in the future can lead to really big differences in feedstock demand of as much as 10 million barrels a day oil equivalent, most of -- the large majority of which will be oil by 2050. So this is seemingly quite niche question. basically of how this feedstock demand is going to evolve in the future is actually going to have a really big bearing on the prospects for oil demand in the future. Now the next feature of the energy system that you can see in both scenarios is that the world continues to electrify. Over the past 10 years, our demand for electricity has grown twice as fast as our demand for energy overall. And that trend just continues over the outlook with the world's demand for power doubling or more than doubling by 2050. Now the vast majority of this electricity demand growth is in emerging economies, driven again by rising prosperity. It means that the share of energy that the world consumes taking the form of electricity rises from only a bit more than 1/5 now to around just below 30% in current trajectory and to -- sorry, to 30% here about 1/3 and to more than 50% in Below 2 as more than half of the world's energy use electrified by the end of the outlook period. Now most of this higher power demand is for growing demand where we already use a lot of our electricity, that's in industry and in our buildings. But of course, that's being supplemented by newer uses of electricity, including, of course, those electric vehicles, but also higher data center demand to enable rising use of artificial intelligence. That higher data center demand on its own makes up around 1/10 of the extra demand for electricity over the next decade or so, so important, but far from everything. But of course, data centers have a much bigger impact than that in some places globally, especially in the U.S. where it accounts for about 40% of electricity demand growth over the next decade. Now of course, AI makes its way into every conversation you have anywhere. And of course, data centers are being discussed an awful lot at the moment. In this year's outlook, we have a special section, which is talking about how AI might affect the global energy system, how it might impact the system. And I'm not going to talk you through all of that today. Instead, I just want to give you one takeaway from that discussion. And that is that the impact of AI on energy is unlikely to hinge on how much data -- how much power data centers need. Now none of us know how much AI is going to improve our productivity, and so how much it's going to improve economic growth. But plausible estimate of that impact could imply increases in energy demand 20x greater than the growth in data center power demand. But AI won't just affect energy demand, it could have equally big implications for the supply of various types of energy and the efficiency of many parts of our energy system. So just the bottom line here, if we're going to think about AI and energy, we do need to think much wider than just data centers. Now this increasing electrification of our energy system takes us to another feature of the energy system, which is common across both our 2 scenarios, which is that the growth in power generation is, in essence, a story about wind and solar power. So wind and solar generation, the orange bars here, account for all of the increase in power generation globally in both our 2 scenarios. In the case of Below 2, more than all of it. And that means that wind and solar are going to become a central foundation of our energy systems in these 2 scenarios. So added together, they generated about 15% of our electricity last year. By 2050, they account for more than half of global power generation in current trajectory and more than 70% of it in Below 2. Now we often talk about wind and solar together, as I have here, but as has been the case recently, solar grows faster than wind in both our 2 scenarios. It's costs go down faster, it's quicker to deploy and also it gets greater policy support as well. Of course, this increasingly central role for wind and solar power does bring with it new challenges. As we mentioned in the report, changes are going to be needed to our power systems to make them more resilient and reliable and capable of balancing demand and supply as generation comes more and more from these weather dependent variable sources. I want to think about power generation from a slightly different angle now so just help us think about the energy transition in a slightly bigger picture way. In last year's outlook, we introduced a distinction between 2 different phases of the energy transition. First, the energy addition phase. Now in this, low carbon energy is growing rapidly, but it's not growing fast enough to meet the overall growth in energy demand. So use of unabated fossil fuels is growing as well. And then the energy substitution phase, that's in which low carbon energy is growing fast enough to more than meet the increases in overall energy demand, so the unabated fossil fuels decline. Now one point we made in last year's outlook was that in previous energy transitions, the world has stayed in this energy addition phase. It's not consumed less of the old energy sources. And this alteration has been used by others to highlight just how challenging it's going to be to actually reduce carbon emissions. But although it's true that the world as a whole is still in this edition phase, we show in this year's outlook that the switch from energy addition to energy substitution has already happened in a lot of places, including the EU and the United States. We calculate that around 1/3 of the world's primary energy today is being consumed in regions which have moved from the energy addition phase to the substitution phase, and that increases to around 60% of energy by 2030 in current trajectory, that's helped in part by China moving into this substitution phase. And we can see the same trend for power generation. So this chart shows the share of global electricity generation, which is in the power sector equivalent of energy substitution. So that's the share of the world's generation where low carbon power generation is rising fast enough to more than meet the increases in overall power demand. So the generation from unabated fossil fuels is going down even if power demand overall is rising. Already, as you can see, around 1/3 of electricity used today is now in countries in this power sector substitution phase. In current trajectory, this increases to around 60% by 2035 and over 70% by 2050. And this is in current trajectory, remember. This is the pathway along which the world is currently traveling. Of course, the increase in Below 2 is even quicker than this. So those are the key common trends I want to highlight across the 2 scenarios, trends that we think might also happen in pathways that perhaps in between those 2 scenarios as well. First, oil demand played a major role fueling the global economy for at least the next 10 to 15 years. But with that demand increasingly supported by oil for making things, not moving things as its consumption in road transport gradually wanes. And second, the continuing electrification of our energy systems with a huge growth in power demand met by more solar and wind power. So I want to switch now to those trends which differ materially across the 2 scenarios, suggesting these ones are much more sensitive to how fast the energy transition turns out to be over the coming decades. And the first example is the outlook for natural gas shown in this next chart. Now natural gas demand is actually pretty strong in both scenarios over the next decade. But as you can see on the chart, it then takes 2 quite different parts. And that's because of 2 different forces that are pulling gas demand in different directions in the 2 scenarios. In current trajectory, so that's the pathway the world is currently on, natural gas demand keeps on rising basically over the entire outlook or at least until the mid-2040s. So that by the end of the period, it's around 20% above its current level. And that's mostly driven by rising demand in emerging economies as they grow and they industrialize. So gas demand up by around 1/5 by 2050. But in stark contrast to that in Below 2, natural gas demand starts to decline in the early 2030s. And by 2050, it's down around half from its current level. And dominant force in that scenario is just the push for greater decarbonization. So with gas losing even more share to wind and solar power in -- wind and solar in power generation and being displaced directly by the faster electrification of buildings and industry. Now in practice, both of these forces are likely to be at work in the future. So the outlook for natural gas is going to depend on the relative strength of these 2 forces. The other feature finally of the energy system that I wanted to highlight as being particularly dependent on the speed of transition is the outlook for low-carbon energy technologies and low-carbon energy vectors which are newer, less mature, more expensive. So the charts here focus on just 2 of those. On the left, demand for low-carbon hydrogen, on the right, carbon capture use and storage. But I should say the same big picture that I'm about to tell you about these 2 charts hold for others of the newer, higher cost, low carbon energies and vectors like sustainable aviation fuel, ammonia and methanol in shipping, in direct capture of emissions from the air. And the story is that in current trajectory, the growth of both low-carbon hydrogen and carbon capture use and storage is pretty limited. Low-carbon hydrogen reaches around 75 million tonnes per year in 2050 in current trajectory. How do you think about that number? Well, that's less than the current demand for hydrogen, which we get almost entirely from unabated fossil fuels, so-called gray hydrogen. Likewise, CCUS, carbon capture use and storage, reaches only around 700 million tonnes of CO2 in current trajectory by 2050 or 700 million tonnes. Well, that means only around 2% of energy sector emissions are being captured in 2050. But the growth of low-carbon hydrogen and of carbon capture use and storage is much stronger in Below 2. Low-carbon hydrogen gets to around 350 million tonnes per year by 2050, not just replacing gray hydrogen, but also being used, for example, in transport and in industry. CCUS reaches around 6 gigatonnes of CO2 by 2050 in Below 2. And the reason for these sharply different profiles in our 2 scenarios is pretty straightforward. These types of technologies are just expensive relative to their current alternatives, whether that's coal and natural gas unabated in the case of hydrogen production or whether it's the fossil fuels that hydrogen might be competing with, or whether it's just simply not capturing emissions in the case of CCUS. So these types of technologies increased materially in pathways in which we, society, are willing to bear the additional costs of reducing these harder to abate carbon emissions. Even then, much of the growth in these technologies, you can see, is concentrated in the second half of the outlook, really after 2035 as carbon policies tighten enough and also as cost decline. So those 2 key features of the energy system, which are particularly dependent on how fast the transition goes. First, with the natural gas demand rises or falls over the next 25 years. And second, the pace and the extent to which these less mature, higher-cost low carbon energies and technologies like low-carbon hydrogen and CCUS develop. At which point, as promised, we're going to go back to Spencer. He's going to step back from the detail and do a bit even more fun. So Spencer, let me hand you back, the pen for now.

Thank you. I'm certainly not sure if I want to give up that pen actually. Thank you, Gareth. So as Gareth said, in this final section, I want to shine a light on those other issues affecting the energy system over and above the speed of the energy transition. And I want to focus on 2: increased geopolitical fragmentation, and the possible implications of weaker energy efficiency. And as I said, we do this by conducting some so-called sensitivity analysis of the main scenarios. So this type of analysis has the benefit that most elements of the scenarios are assumed to be unchanged, allowing the key features of each issue to be isolated and explored. But it has a drawback that in reality, other elements of the energy system wouldn't be completely unchanged if these issues were to materialize. As such, the results of the sensitivity analysis that should be viewed as sort of illustrative rather than providing a complete characterization or a detailed quantification. So with that caveat in mind, I want to start by considering the possible implications of a significant increase in geopolitical fragmentation. The motivation for this is, I think, unfortunately, pretty clear. There's been a significant escalation in geopolitical conflicts and tensions in recent years, including the wars in Ukraine and the Middle East, and the greater use of trade sanctions and tariffs. Further escalation could be to increasing geopolitical fragmentation. Such an increase could impact many different aspects of our economic and political world. The focus here is on how it may affect the global energy system. And in particular, I want to focus on the possible implications of increasing fragmentation causing countries to reduce their exposure to international trade and becoming more self-reliant. So that's the focus here. And what's sort of interesting is there's been quite a lot of discussion about this type of issue over the last year or so. Quite a few people, different people have been writing about it. But what's interesting is you read those different commentaries, they often come to different conclusions. And I think, in part, it's because different people have focused on different aspects of how this may work. So one of the things we wanted to do today or in the outlook is to try to carefully map out the various different ways, the various different channels through which a shift towards greater self-reliance may impact global energy. So let me take you through where our thinking got to. So most directly, a shift to greater self-reliance might dampen the growth on international trade as countries move their supply chains back home or restrict them to countries or regions most politically stable or aligned with them. That weaker international trade will tend to dampen economic growth as a scope for increased specialization and competition is limited. And that weaker GDP growth, weaker economic growth, will then tend to feed through into lower energy demand. So that's one of the channels we want to think about. Increased geopolitical fragmentation may also heighten the importance of energy security as countries seek to reduce their dependency on imported energy and energy technologies. Concerns -- heightened concerns on energy security may trigger 3 types of reaction. First, an increased preference for domestically produced energy relative to imported energy. If I'm worried about my energy security, I don't want to keep on importing my energy from abroad all the time. There's a similar desire that you also may want to reduce your dependency on imports on energy technologies, including low-carbon technologies, with a corresponding emphasis on developing domestic or at least diversified supply chains even if they come at a greater cost. And third, you may place an increasing weight on energy efficiency as this reduces the need for all types of energy and so bolsters energy security. Increased geopolitical fragmentation might also lead some countries to place less weight on climate and sustainability goals. In part, this simply reflects the nature of the so-called energy trilemma. If countries place greater weight on energy security, it necessarily implies they must place less weight on the other 2 elements of the trilemma, either energy affordability or energy sustainability. Moreover, that slower economic growth we just talked about stemming from weak trade may also mean that countries have less resources to devote the deep to decarbonization, especially to those mature higher-cost, low-carbon technologies that Gareth was just talking to us about, low-carbon hydrogen, CCUS, sustainable aviation fuel. So this is sort of where we got to over the summer when you were on the beach, trying to think about through all these different channels. And in the outlook, we explained how we go about calibrating these different channels. Don't worry, I'm not going to go into that today. Rather what I want to do is try and focus what the -- on the results, how does this impact the global energy system? And that's shown in this next chart here. So this chart shows the impact of increased geopolitical fragmentation on the level of primary energy relative to current trajectory. And those color blocks show you how -- where the different energies have increased or decreased. So the first bar here shows you the impact of that lower GDP stemming from weaker net trade. So primary energy falls, you can see here, and it's then spread across these different fuels in terms of oil, gas, coal and renewables. The relative weight impact on those different energies depends on the weights of those fuels in the end uses. So how much importance of the role of oil in transport, the role of coal in industry and in buildings and how sensitive demand in those different end sectors are to movements in GDP. The second bar shows the impact of increasing concerns about energy security. And the important point here is that concerns about energy security generate a mix of offsetting effects. So the increased preference for domestic rather than imported energy leads to a shift away from oil and natural good -- and natural gas, which are the most heavily traded fuels towards renewables and coal, which tend to be produced and consumed more domestically. But the higher cost of renewable energy, energies as countries move away from international supply chains, together with the lower weight attached to climate goals, weighs against low-carbon energy and favors fossil fuels. And so this is what you end up with this result here. So what happens here is, as a result, at a global level, less oil as people move away from terms of importing oil, less renewable energy as people place less weight on climate goals and also the cost of renewables have gone up. More coal because for many countries, particularly in Asia, that's a source of domestic energy. Gas is the interesting one. So gas, on its own, the increased preference for domestic energy would mean that gas would fall, that's a similar way to oil. But as you place less weight of renewable energy, and you're using less wind and solar, you need more gas to do your power sector -- to your power generation, which pushes it back and the net is, it sort of what evens out. So that's a way to think about what's going on here. The third bottom bar shows the net impact of these 2 broad channels. Overall energy demand is lower and the carbon intensity of the fuel mix is slightly higher, reflecting that increased share of coal. Now I must confess I was a bit nonplus, when I first saw these results. We've gone to this trouble to model all these different channels. We've done all this different calibration, but the impact on the energy system is pretty limited. Energy demand is a bit weaker, but the fuel mix isn't much changed. But as we dug into the results, we realized the limited impacts at a global level are not because increased geopolitical fragmentation doesn't have important implications for energy systems. It does. But rather because increased fragmentation impacts different countries in different ways, which, at a global level, tend to offset each other. And so it's more interesting to look at fragmentation, how fragmentation impacts individual countries. And that's what this chart does here where I've compared the impact on the U.S. on the left with China on the right. And the reason for picking the U.S. and China is not just because they're the 2 most important countries in the energy system, but also because their economic and energy structures differ in several important ways. As you know, the U.S. is a net exporter of fossil fuels. And so a heightening in energy security doesn't need it to wanted to reduce its demand for oil or natural gas. But it does cause it to reduce its dependency on imports of low-carbon technologies. Moreover, the U.S. economy is relatively less trade intensive and is therefore less exposed to that weaker net trade channel as I'll tell you about. China is close to the mirror image. Heightened energy security concerns caused it to reduce its dependency on imported oil and natural gas. But since it's a dominant producer of low-carbon technologies, its access to low-cost, low-carbon energy is largely unaffected. China is also highly exposed to international trade and so is more affected by the impact of weaker net trade on economic growth. These differences in economic and energy structures lead to differences in the impact from increased fragmentation. So you can see for the U.S., the overall impact on primary energy relatively limited is a relatively less trade-intensive economy. The impacts produced in oil, just reflecting the shear size, the importance of oil in the U.S. economy and also lower renewable energy as it shifts away from importing low-cost renewables. And again, natural gas sort of having those 2 cost-cutting impacts. At one level, the lower demand for energy just reduces natural gas, but it then gets crowded in because you have less renewables going on. In contrast, in China, bigger impacts on the overall energy demand and more broadly based across all 4 sources of energy. The general point here is that an increase in geopolitical fragmentation would be likely to lead to more differentiated energy pathways, differentiated depending on each country's natural resources and the structures of their energy systems, accentuating some of the trends that are already in train today. For energy importers, accelerating their transition to greater electrification, powered by domestic low-carbon energy as they seek to reduce their dependency on imported fossil fuels, perhaps fostering the emergence of new electro states. In contrast, fossil fuel producers may become more wary of increasing their dependency on imports of low-carbon technologies, preferring instead to concentrate on their comparative advantage in producing fossil fuels. Greater geopolitical fragmentation is likely to lead to greater energy differentiation. The second issue I want to consider is a potential implications of a sustained period of weak improvement in energy efficiency. Now I realize that first blush, this may sound a bit dull and arcane, especially relative to all those interesting people I was just talking about geopolitical things and all that. Stay with me. The recent weakness in energy efficiency, and importantly, its persistence could have a major bearing on the outlook for energy demand over the next 10 years or so. This chart shows the annual growth in energy efficiency over the past 15 years measured in terms of final energy consumption. For the first 10 years of this chart, from 2010 to 2019, energy efficiency has averaged around 2% a year. That's shown by that dotted line. So the way to think about this, each year, the world needed 2% less energy to be used for the same level of output. But over the past 5 years, energy efficiency has only averaged 1.5%. And you can see we've had some particularly weak outturns in both 2020 and also more recently in both 2023 and in 2024. The causes of this recent weakness are not fully understood. A recent study by the IEA suggested it may reflect several factors: the increased importance of manufacturing intensive industries in driving the post-COVID economic recovery in some key emerging economies, also perhaps the increasing intensity of extreme weather events and the implications for energy. So think about the increasing need for air conditioning as heat ways get more and more intense. Also, the IEA point to a slowing in investment in energy efficiency projects. But I think it's fair to say that the understanding of what caused the recent period of week efficiency gains is still quite patchy. As such, it's hard to know if and how quickly the pace of gains in energy efficiency is likely to revert back to something closer to their historical trend. In current trajectory, the pace of efficiency gains -- that weakness in efficiency gains gradually dissipates. So it's by around 2030 or so the trends in current trajectory are back to their normal historical rate. But suppose the recent weakness is more persistent. Suppose, for example, the weakness in energy efficiency persists for 5 more years and only goes back to the current trajectory profile by 2035. If we hold constant, all the other aspects of the energy -- current trajectory, just this weaker profile for energy efficiency leads to a materially stronger outlook for energy demand, with total final energy consumption growing by around 20% by 2035 compared with 15% in current trajectory. Total energy demand growing by over 90 exajoules in its alternative case relative to less than 70 exajoules out to 2035 in current trajectory. This stronger energy demand is important in its own right, but its impact on the fuel mix is even more pronounced. And sort of this is a key point here. The key point is that short-term cyclical fluctuations in energy demand are typically largely met by changes in fossil fuels and not by movements in renewables and nonfossil fuels. So if you -- for those of you who like to think in statistics, the correlation between fluctuations in energy demand and fossil fuels is over 0.9. In contrast for nonfossil fuels, it's around 0.1. And if you think about it, this greater responsiveness of fossil fuels to demand fluctuations isn't surprising. The cost structure of renewable projects, high levels of upfront capital expenditure, low operating costs make them less responsive to cyclical fluctuations. Moreover, there's greater scope to vary the production and storage levels of fossil fuels over relatively short periods. This greater responsiveness of fossil fuels to demand fluctuations means that even short-lived variations in energy efficiency can have significant implications for fossil fuel demand. To illustrate this, in the sensitivity, we take limiting case, and we say that all the additional energy demand implied by the slower efficiency gains is met by fossil fuels, and we keep the growth of nonfossil fuels completely unchanged from current trajectory. Now that's obviously highly stylized assumption, but it captures the essence of those correlations I just talked to you about, and it highlights the potential significance that even a relatively short period of weak energy efficiency can have a big impact for fossil fuel demand. In particular, in its alternative case, oil demand after 2035 grows by around 6 million barrels a day. That compares to almost no growth in current trajectory. So you remember that story that Gareth was telling you about, the current trajectory for oil demand broadly flat between 2023 and 2035, no growth in demand. 6 million barrels a day growth in oil demand just through that weaker profile for energy efficiency, everything else unchanged. Likewise, for gas demand growing by over 1,000 bcm in the alternative case compared to less than 700 in current trajectory. The key takeaway here is that a weaker profile for energy efficiency, even for just 5 years relative to the counterfactual could lead to a significantly stronger outlook for oil and natural gas, indeed, coal as well, with a corresponding deterioration in the outlook for carbon emissions. Trends in energy efficiency may sound a bit dull and techy, but they really matter. Let me conclude. The system -- the energy system is currently consuming more of all types of energy. In the language that Gareth used earlier, it remains in the energy addition phase of the energy transition. How quickly it moves to energy substitution with the growth of low-carbon energy displacing unabated fuels and the intensity of that substitution is the single biggest uncertainty facing our industry. The scenarios included in this year's energy outlook help explore that uncertainty. As Gareth highlighted, this switch from energy addition to energy substitution has already happened in many individual countries, both for the power sector and for energy as a whole, but to do so at a global level would be historically unprecedented. That's the challenge. It's possible to use the scenarios to identify some features of the energy system, which are likely to be more robust to a range of different transition pathways, the increasing electrification of the energy system, the rapid growth in wind and solar power, the central role that oil and natural gas will continue to play at least the next 10 or 15 years. But there are many uncertainties. Some of those issues are at the top of our daily news feeds, such as the escalation in geopolitical tensions, where, as we argue, greater geopolitical fragmentation is likely to lead to greater energy differentiation. In contrast, others struggle to even make it to the inside pages of specialist trade journals. But as we show trends in energy efficiency, and indeed, petrochemical feedstocks really matter. The one thing I know for sure, fast forward a year from now, there will be plenty for the 2026 energy outlook to get its teeth into. Thank you very much. Okay. So before we move to the Q&A, I want to briefly take you through the online poll. So for those of you watching online, 3 multiple choice questions will appear on your screens. With apologies for those in the room, we thought about phones and QR codes and thought this is going to be disaster. So apologies to those in the room. So for those online, I will talk you through each question and for those in the room, I'll talk you through each question. You will have a minute or 2 to answer that question, and then we'll move on to the next one. And we'll share the results of the poll at the end of the Q&A session. Easy. What could possibly go wrong, a real poll, thousands of people globally. Easy. No problem. Okay. So question #1, what do you think will be the most important feature shaping the global energy system in the next 10 years? And we've given you 5 possible answers. 4 of those relate to the issues that we've discussed today: energy efficiency and its implications for energy demand; geopolitical fragmentation and the impact this may have on different countries' energy choices; the continuing electrification of energy systems; or the impact of AI. And we've also given you a fifth option, option E, which is something else. There's something else which we haven't talked about this morning -- this afternoon. So the most important issue is shaping the global energy system in the next 10 years, 5 possible options: energy efficiency, geopolitical fragmentation, continuing electrification, the impact of AI or something else. Okay. So hopefully, those of you who haven't -- you've made your choice because you're about to lose your opportunity because we're going to go to question #2. So question #2 is, what do you think the natural gas demand will be in 2050? Or where do you think natural gas demand will be in 2050 relative to today's level? And we've given you 5 choices ranging from a lot higher to a lot lower. And we thought this would be interesting because, as Gareth showed, the range of possible outcomes for natural gas is particularly wide. And so your choice may depend on your views of the resilience of natural gas demand in different parts of the world, or it may also be influenced by your view of the likely speed of the energy transition. You can remember that Gareth told you, in current trajectory, with a slow shallow trajectory, the gas demand continued to rise pretty much all the way out to the mid-2040s. In contrast in that rapid decarbonization scenario, natural gas starting to decline from the sort of early 2030s onwards. So your view of the level of natural gas demand in 2050 relative to today's level, 5 options from a lot higher to a lot lower. Okay. Hopefully, you've made your choice. Let me go to the third and final question. Following today's session, how have your views changed about the likely pace of the energy transition? And again, we've given you 5 options here, ranging from a lot faster than you previously thought to a lot slower. And if today's discussion haven't really changed your views at all, you can pick option C that it hasn't really changed my views. So to be clear, this is not about your view of the likely absolute pace of the transition, but rather, was there anything in the discussion or anything that you've seen in the outlook that have caused you to alter your view. And so you can pick if it's faster, A and B, slower D and E, it really hasn't changed your view, a question, option C. So if I can encourage you to make your final choice, and then we'll come back to show you the results at the end of the session. And here, everybody in the room, you can see whether the results accord with your own thoughts as well. Okay. The plan now is to move to the Q&A session, which is always the most fun bit, or the scary bit, depending on which seat you're sitting on. Gareth is going to come back to the front. And we're also going to be joined by Aisha Dhaliwal. Aisha works in our team and leads all our work on thinking about an analysis of energy in industry and Aisha has kindly agreed to help moderate the Q&A session. So Aisha, thank you, and over to you.

Thank you, Spencer. I have to say as someone who studied chemical engineering worked in power, then transport and now industry. I'd say energy efficiency is far from dull. It's very exciting. And as you showed in your chart, it's one single measure that can really move the needle when it comes to energy demand totals. So we're going to take questions both from inside the room and online. With the questions online, please up vote your favorite questions. The question we ask might not be exactly what you've asked in your books, but it will be a combination of the top voted questions that we've seen. If you're in the room, please put your hand up to ask your question and introduce yourself, your name and where you work before you ask your question. So if there are any questions in the room, we can start here.

I was really drawn into the point on energy efficiency, actually, if I may start there. I know Spencer, you said that, that drop is not well understood, and maybe, therefore, this is a bit of a loaded question. But what is informing your perspective on the path forward therefore? How do we think about energy efficiency? Is it because of end use? Is it -- what would drive a recovery back to that historical trend or potentially a path where we remain at sort of low improvement in efficiency?

So when we go about producing the outlook, we don't take a view on energy efficiency in a top-down way. We don't sort of draw a line in and then say, let's do it that way. What we do is we do it from a bottom-up perspective. So you would take a view on vehicles. And so in terms of road transport, we take a view about how quickly big efficiency is improving. And quickly and importantly, how quickly the vehicle stock is turning over. If people just hang on to their old cars. It doesn't matter when new cars are really efficient if nobody is buying them, how quickly people will move to energy -- to electric cars, which tend to be far more efficient. So that's the story for transport and so on and so forth and so on. And so that's why we built it up. And then you sort of then look from a top-down perspective and you sort of draw comfort from the fact that it's going back to around its sort of trend level. So that's how we do build that up. I think one of the big uncertainties here is the ones that Gareth was talking about is how might AI affect everything here in terms of energy efficiency. So that's a significant one. A sort of related question is, if we had a silver -- what are the things that we really worried about that energy efficiency, what should we be really focusing on? And some work, I think some really nice work. I'm not sure if they published it yet, but we'll do soon a group called the Energy Transitions Commission, I'm a part of that group, has done some really nice work on something called energy -- what they call energy productivity, which is sort of what we would call energy efficiency. And they say, if you want to do the 2 most important things you can do to get improvements in energy efficiency, it is, first, electrify as many things you possibly can. Just electrification is just a far more efficient way of powering most goods. And secondly, is to improve the efficiency of electrical applications. And those 2 things, in terms of their calculations, are by far more important than, say, insulation of buildings and so on. All those other things matter, but those are the 2 things that the ETC highlight has been important.

Thank you very much. So our next question comes from online. And the question is to do with the transition, and actually goes nicely with the last question in the poll. So what do you think -- what's your view on the speed of the energy transition? And how do you think it's changed in recent years?

So I will grab this one. So how do we think, what's happened in the energy transition and what's happening in the last few years? If you look at the headline numbers, the ones that really matter, clearly, progress has been disappointing. Carbon emissions are still going up. Moreover, they're going up at quite significant levels. The -- in the statistical review, which is now produced by the Energy Institute, they calculate, I think that carbon emissions grew by about 1.8% in '23, another 1% in '24. So these are really significant levels. And the sort of counterpart to that is the fossil fuels, oil, natural gas, coal are all -- have all been surprising us to the upside. So we've revised up our views of these different profiles. That's a counterpart to those things. The interesting question is sort of why and the cause, which I think is a more interesting bit. Because at the same time that we've been surprised by the growth of oil, natural gas and coal, we've also been surprised by low carbon energy. Wind and solar has surprised us to the upside. The IEA estimate that this year, the well will estimate 2.2 -- will invest $2.2 trillion in low-carbon energy. That's up 70% in 5 years. Did anybody really think it's going to go quicker than 70% in 5 years? So at this point, you're scratching your head to go, "Well, hold on, if low-carbon energy is growing more quickly than I thought, how can fossil fuels be growing more quickly than I thought?" But now you know why because energy efficiency has been surprised us on the downside. So the world just needed more energy. So despite low carbon energy growing more quickly than we expected, is still not feeding through to the other side. And if you -- just as a sort of back of the envelope calculation here, just the sort of way of thinking about this with all the caveats I gave. If I do a same sort of calculation as I did going forward for 5 years, over the past 5 years and say, let's suppose energy efficiency had averaged 2% over the last 5 years. And then I allocated across the fossil fuels in that way, so oil demand over the last 5 years, 2019 to 2024, has grown by about 2.5 million barrels a day. That's what we've observed. Under that sort of counterfactual, oil demand would have grown by less than 1 million barrels a day. over 5 years. So a completely different sort of story. So the answer to the question is, have we been disappointed by the energy transition? Yes. Carbon emissions continue to rise. But when thinking about why, I think the key thing is, I think some of the common narratives I see don't really play enough attention on the why. And the why, I think the key thing is what's happened to energy efficiency, and that's why we sort of have labored, and I promise we're soft talking about energy efficiency now. That's why we've labored it so much today.

You have anything to add?

No.

I see a question in the back.

Martin Hague from Shell Scenarios. I very much like to enjoy your exposition about the fragmentation and how to assess that. I thought that was quite novel to try and break down the impact actually from GDP concerns and security concerns. I'm wondering how you did it. I can see how you do the GDP bit by looking at the responsiveness to GDP in the past, whether short or long-term recessions or long-term cycles. But with this fragment -- the security concern, did you look at past incidents did you try to validate it in a way? Was it a sort of an expert judgment? And how much fragmentation, how much security concern did you -- because there could be some countries that really perceive a really existential threats immediately and it puts them on to a sort of a war footing that means also of historical parallels out of track. And your sort of numbers don't surprise me, but they don't look like that sort of extent of security concern, for example?

Can I get this one? You know that sometimes you get those things where somehow -- one of your teachers is asking you a question, you're really scared. So Martin works for the Shell Scenarios team, and we're all in all of the Shell Scenarios team. So I'm now feeling very worried about answering this question. So the truth answer, Martin, is, with a lot of judgment and a lot of humility, and I'll talk -- I won't bore everybody. We made different judgments on the different bits. What we try to do was give enough to calibrate it in such a way that the effects would shine, would come out, but not in such a way that will be implausible. Because what we are trying to do here is not -- and I didn't -- I don't think I quoted any number during that -- those sessions. I just quoted sort of qualitative changes because I think then, in some sense, we don't sort of want to sort of stand and fall on the precise numbers. What we want to do is highlight those sort of the different impacts. And that's -- so I wanted -- the calibration was done enough to try to sort of bring those effects out. So we could have that conversation. I haven't thought about natural gas being sort of caught up in that way. And it was only when we did the work. They saw it. And I also haven't really thought about how a global level, it all sort of wash out, but you saw it in the fast start. So it was done to do that rather than try to have any degree of precision. Is that fair?

Yes, that is fair. Yes. I was speaking from the nerdy side of it from helping the person who actually did a lot of the heavy lifting of business in the room, I tempt to drag it up here. But -- we -- I would say about, it wasn't just judgment, the way Spencer described it, although there's lots of that. We're also trying to use a sort of structure of the global energy system. So thinking about proxy in the best way we could these kind of channels for -- it's as if oil demand is in some ways more expensive -- sorry, oil is a bit more expensive for you if you're an importer of it than otherwise. It's a bit -- it's as if the cost of electricity from renewables are going to rise a bit faster on average just because you're no longer going for the cheapest cost producer in the case of many countries because they want to diversify their supply chains or go internally for supply. So we're sort of trying to think about what the different kind of correlations between different types of energy and the energy system and thinking about how they operate. But as Spencer said, putting a lot of judgment on. But we can compare that after the session.

You can tell from those answers, the relative close proximity to the people doing the work.

That's a great answer. I think a good conversation after this.

No one else, just like 2 of us.

So we've had many questions online regarding oil demand and the changes between last year's outlook and this year's outlook. So one of the big questions is, why have we revised up our oil demand projection compared to last year?

Do you want to take it?

Yes. So it is true. So someone online has been looking at last year's energy outlook and this year's energy outlook. We tend not to talk about changes year-by-year because we're trying to take a fresh look and sort of think about things bottom up. It is true, though, for those of you who want to go online or look at previous booklets. So we've revised up the pathway for oil demand in our current trajectory scenario, which we also had last year by about 6 million barrels a day by the end of the outlook period. So a sizable increase in our projection for demand by the end. I think all of the reasons why I'm interesting is kind of 3, and I'll just mention them just talk about what's informed us over the past year. One of those are just the data. Some of the things that Spencer has been talking about. We have seen stronger oil demand than perhaps we expected in the near term, and we expect that to sort of persist for a bit. So some of it is just what we have seen. And I think that kind of comes back again. Spencer promised we wouldn't talk about energy efficiency anymore. I will just mention it. It's one of the things that's happened. The second one is a sort of part of that in a way, I guess, which is every year, we have to -- when we do these numbers, and Martin does his and Shell, I'm sure, we're thinking about what's the sort of efficiency of the vehicle fleet in particular are going to be? And we've actually -- and we kind of try and model that bottom up. We've got a big model of the entire vehicle stock around the world. And we've actually revised down the projection for improvements in vehicle efficiency gain over the next 25 years compared with what we had last year. That's not to say it's not still really important. As I said when I was talking, that's still a really important factor that actually pushes down on oil demand in road transportation, but a bit less than we had in last year. And that's because, in part, it's because it looks like vehicles are turning over less quickly than we had thought. We've done some analysis looking at that. Again, persons in the room, I apologize if I get numbers wrong, but average age of vehicles has risen from 12 years to about 15 years over the last few years, quite big change actually. And so that has pushed down a bit on the speed with which we think those efficiency gains come in. And then the third one is actually something else I mentioned, which is feedstock demand. We are forever thinking about this. I talked about it in the presentation. I think it's more important than many people realize. And we actually have pushed up on our estimate of feedstock demand in this projection relative to the one we did a year ago. And actually, the second part of that question which was there other ways in which all demand might keep rising over the '24?

To '24 and beyond.

I think it's worth coming back to that feedstock thing, which I mentioned, which is I think I promised you I wouldn't go into the maths. I will try and do this in a way that does not make you all stumped for the exit and switch off online. But this all comes down or a lot -- I've lost something. This all comes down to -- so as we get richer, basically, how much more stuff that is made from oil do we want? A large part of this, how much more plastics does the world use as economic growth happens? And that relationship has been changing. What -- it's really interesting what's happened over the last few years. It's been getting less responsive the amount of plastics we buy relative to how much our economy grows. And so you need to think about, well, how is that relationship going to change in the future? And so one thing that could easily push up on oil demand is if it turns out that actually that relationship goes back to something more like its historical trend, that's where you get nearly 10 million barrels a day extra oil demand by 2050. it's a huge oil demand. So that's one thing that could push up. Another one is we have to take a judgment on future mandates and policies around road transportation. And we -- as Spencer said, in our current trajectory pathway, we don't just look at policies currently in place, but also the direction in which they're traveling. And we assume in many places that those stick. And who knows, if mandates change, that could be another thing that could push up on all demand. I mean, as we said, current trajectory is our best attempt to model the pathway were currently on. It's not a forecast. And so there are many things which could push up on oil demand relative to that.

Got a question at the front here.

Paul Butler from CRU. You started off with some emission trajectories, current trajectory and 2 degrees. And I didn't know if that was a start point from your analysis or an output from your analysis. But I'm sort of assuming it's a start point. I mean you derive your -- it's an output. If it's an output then -- well, the same question applies. You've mentioned petrochemical has been really important. What's your basic question? What's your assumption about the carbon in petrochemicals? Does it ultimately get emitted? Or is it never emitted? I could ask the same question about natural gas, I suppose. Is it just the direct emissions you're thinking about? Or is it the upstream emissions and everything else? Because that might -- that will affect, obviously, what the trajectory is?

Yes, So the answer, Paul, to the first question is, we use -- it sounds I'm going to go to fence straight away. The carbon accounting methodology we use is sort of similar to all of these frameworks and all of these frameworks is floored because essentially, it's used at the point where the energy is used. At the point where energy is used as a feedstock is not combusted, and therefore, there's no carbon emissions. Implicitly, therefore, assuming that at some point at the end of that plastics life is sort of -- is stored in some sort of perfectly sealed landfill, which is clearly not right. So it doesn't take account of that. We do take account, however, of -- I think which related to your other one, if we take -- we include estimates of methane emissions associated with the production, transportation and distribution of fossil fuels, and that is included in our measure of emissions, and so that bit is there.

And we also include process emissions from things like cement. Energy and the line. Again, and I've got a question online and then I've seen some more hands in the room, so don't worry, we'll get to you. Spencer, what surprised you most over the course of your time here at BP?

COVID, war in Ukraine, OPEC behavior. I think actually the thing which has surprised me most of all, I think, is just, I think, the pace of change in China is the thing which I have been most surprised about. China today accounts for about 60% of the world's purchases of EVs. It accounts for about 65% of new solar installations, about 65% of new wind installations, about 30% of new nuclear installations. We're now talking about will carbon emissions in China peak this year or 1 year out or 2 years out? I just don't think that was a part of the conversation 11 years ago. So I think that's the biggest change. It's just the unbelievable pace of change that we see in China. And I must have been one of the unbelievably lovely things about this job is you get to travel and meet people. And the importance that China has placed on changing the nature of their energy mix has been a consistent narrative the whole of the time I've been going over that 10 or 11 years. So I think that is the single biggest surprise, I think, for me over this period.

I think many can agree. And a question from the room.

There's a question right at the back. I can see.

Yes. Curious to how the investment in the grid, your views on that play into the outlook. Clearly, a lot of renewables today is delayed because of congestion and grid. Battery technology is coming, but it's not quite there yet. So just curious as to what you assumed about grid infrastructure in the energy outlook?

Do you want me to take that one?

Yes.

Yes. So we recognize -- I talked about this electrification and that enormous growth in power demand, 100% or 130% Below 2. So we recognize that grids -- I think I mentioned it as an aside that there are significant challenges associated with essentially meeting this growth in power demand. And I think we recognize that, that is going to be among the headwinds in current trajectory in particular, that it's going to be something that is restraining the pace of power demand over the next decade at least. But fundamentally, I think we assume that there is going to need to be a significant increase in good investment over the coming years. Now we don't model every bit of that bottom up in every country. I think some ways are sort of helpful to look at others in BNEF and the Internet -- sorry, Bloomberg New Energy Foundation and the IEA have done some good work on this, which kind of talks about something up to sort of a doubling in grid investment relative to the kind of $300 billion, $400 billion a year that we've been seeing recently. We have seen an increase, but I think implicit in our current trajectory pathway is a significant further increase, whether that's a doubling or something like that from the good investment we've seen over the last few years, and therefore, by implication, stronger than that in Below 2 higher than that. I think, yes, that's the way I think about it is, it's a headwind, and it's a challenge, but it's one that we think can assume is met in order to meet the pathways in there.

Sticking with the Power theme, we've had a question online regarding nuclear. So do you have any comments on the role of nuclear and the trends in nuclear and in the energy system?

Sure. So yes, I sort of almost felt apologetic that we didn't say a word about nuclear energy in the presentation. I know that people are always really interested in it. It's just I would have made you sit there for even longer if we'd also talked about nuclear energy. Obviously, we do model nuclear and it's in there. We talk about it actually. There's a couple of pages in the outlook, which talk about our assumptions and what we have in the 2 trajectories. So to summarize it. Basically, nuclear power has actually been falling as a share of generation over the past few years. And we do see something of a turnaround in our current trajectory pathway for nuclear power. So essentially hold steady as a share of generation over the pathway in current trajectory. Now that means it has to go up quite a lot because power generation is going up quite a lot. It doesn't do more than that though. So it stays at around sort of 8%, 9% of total generation over the outlook. I would just say, I suppose the only other thing I'd mention on that is a lot of that is China, again, from Spencer's last answer. So that is responsible for quite a lot of the increase in nuclear generation. It's a lot harder in developed economies given time lines, permitting processes, you all know about. Also the fact that I don't think costs are completely transparent in China sometimes, but they are managing to develop nuclear more quickly and more cheaply than in western economy. So more than half of the increase in nuclear over the future is just taking place in China and quite a chunk in India as well, actually.

That's brilliant. We got two questions at the back.

I'm Elena Pravettoni from the Energy Transitions Commission. Thank you so much for the presentation and also for the reference to our work. The question I had was about the rate of energy substitution in the countries where that's already happening. I wanted to ask how much do you see data center demand slowing down that rate, if at all?

Can I take that?

Yes.

So it's useful to come back to that. So some of you, they're more eagle-eyed. In fact, I'll bet if you want anything like me, there'll be someone at least in audience who is thinking of asking the question of power sector substitution does actually sort of dip a bit in the chart I showed before it then goes up again. And part of that is the increasingly strong power demand growth we are seeing and some countries are sort of hovering a bit between substitution and addition in the power sector, in particular, less so actually for the energy system as a whole. I suppose I'd come back to what I said, I think, in the presentation on the way, which is, data center demand matters a lot for a few places. It matters a lot for the U.S. And a chunk of that, we talk a little bit about it in the outlook, is going to be met by higher gas generation than I think would otherwise be the case. It's 40%, as I said, I think, of high U.S. power demand. And as you know, I know that's happening in a place that has not really experienced rising power demand for quite a long time. So they've been operating in a world where they haven't had to cope with that, and they are now having to cope with increasing power demand. And I think, for them, something which is adding 40% of the increase in power demand you're facing, that is clearly affecting the energy mix, and they're having to devote more natural gas to that amongst other things. So it does make the margin a difference in some places. I suppose I would just come back to the point, though, that we do see that substitution rate that the share of the world that moves into that power substitution picking up pretty substantially over the coming 10, 15 years, even with the additional boost in data centers. And while no one knows, I would say, we are -- our forecast is just relatively robust to how much we think data centers, that projection in current trajectory is relatively robust or how much we think data centers are going to do is material.

I've got another bit just to add from online to that question. Can wind and solar handle the demand required to power the infrastructure for AI? And if I may, just say a couple of words on that. I think that there is a chance for wind and solar to have a great impact and be very useful when it comes to data centers, empowering them, especially when coupled with batteries. And we've seen stories of small-scale data centers where they've been coupled with reused and recycled batteries with PV. That mean that they can run 24/7 on renewable generation. How well that will be replicated across the world will be interesting to see, but there's definitely use cases where renewables will definitely be powering data centers, but we might see gas turbines used to supplement that.

I guess just to round it up, we've got profiles for power demand going into data centers built into these trajectories. Those profiles are pretty much in the pack compared to everybody else's. And the big picture point that Gareth said was, all of the growth in power demand is met or more than met by wind and solar. So it will vary across different countries in different regions. But big picture, we think all of the growth in power demand, including that needed for data centers over the long run, over this period can be met by wind and solar in both of those scenarios. And remember, we can't predict the future, but if you see the same quality of trend in those 2 very different ones, it may start to give you more confidence that it may be also apparent in somewhere in between as well.

Really sorry, can I just jump in because I'm regretting not saying one thing, which is on that -- come back to the question. It's funny, isn't it? Because I have warned you in the presentation, we shouldn't just think about data centers to AI and then I just -- we just talked about data centers to AI. And I sort of mentioned in passing that AI may well be really important for how we operate our energy systems. And the power system is one of those places, in particular, where AI could really make quite a difference. We have to keep reminding ourselves, this AI is going to be used for something. Some of it may be making videos, but it will also be used commercially. If it really is going to grow at these kind of paces for -- I see some shaking of the head. But it may well be used for some commercially useful applications. And one of those may well be enabling us to operate grids much more efficiently, able to absorb lots and lots more smaller assets on the grid, balance demand and supply much better. So it may turn out, I can perfectly well imagine in 10 years' time, well, when we think about the implications of AI for our power systems, we may well not be talking nearly so much about data centers because we'll be operating them much more efficiently.

Very true. Very true, Gareth. Are there any other questions in the room?

My name is [indiscernible]. I'm the Head of the Commercial section of the Bulgarian Embassy, but I have a background in project development and project management and I dealt a lot with cogeneration. Do you factor this in into your analysis because this is an ongoing interest from investors? Or it's too minor to be making impact right now of all the big numbers? Also, data centers, there is technology that uses the heat produced by the computers into cogenerating them into heating for houses or factories or all these approaches and new technologies, how do they impact the big numbers?

So yes, we do try to take account of cogeneration in different parts, and there's a sort of buried within our details of some of our analysis. So perhaps I don't think it's simple to describe it, but we do try to take account of that of cogeneration as part of that as we're building up our sort of picture of the energy system. So yes, often doesn't make the headlines because it doesn't have a huge impact on the energy system, but we try to do it to the extent we can. Absolutely.

Our final question. Does our analysis suggest that there's a climate change threshold that forces the world to move from CT to a more rapid transformation?

So the simple answer is no, we don't try to predict when things will happen. Remember, we're not in the game of predicting. We're in the game of sort of looking at different scenarios. We do, do the third sensitivity analysis, which I didn't talk about today is one similar to what we included in last year's energy outlook, which will be called a delayed and disorderly scenario. And this is just recognizing that the pathway we're on at the moment, that slow shallow pathway is gradually, each year, using up carbon budgets. And so if, for example, the world wanted to stay within a 2-degree carbon budget, we show that if you stay on that pathway, you entirely exhaust that carbon budget by 2040. It's actually a little bit worse than that because if you stay in that pathway and you've exhausted the carbon budget in 2040, you still got carbon emissions at 30 or 35 gigatonnes. And so to actually get down to something close to Net Zero, we sort of -- we do some analysis and it's in the book. We sort of suggest that you need to move away from the current pathway on to something which is faster, more rapid decarbonization pathway similar to Below 2 by the early 2030s. And if you haven't moved off that carbon budget pathway -- that pathway onto something quicker by the early 2030s, your ability to stay within a 2-degree carbon budget without sort of undertaking a costly or disruptive transition becomes harder and harder. So I think the answer is, we don't know we don't try and predict when this will happen. But what we do talk about is sort of recognizing that often when you talk about 2050, it's a bit like my children. My children are in their early 20s. And I say, "Guys, pensions. And they all look at me and go, "Dad, I'm wrong, I'm not going to do that now. I'll do it later. That's what I'm a little bit worried about when you have these conversations about carbon. And when I say 2050, yes, absolutely get to it soon. And it's not 2050 or 2030 saying, if you're still on this pathway in 5 years' time, your ability to stay within 2 degrees is getting harder and harder. That's why this matters. Thank you. Is that the last question. We're going back to the poll, right. Okay. So okay, the poll. We had about 1,300 people applied to the poll. So the first question was, if you mind you, what do you think will be the most important feature shaping the global energy system in the next 10 years? And the answer shown here, wow, this is really interesting. You never know what people are going to say. They do, and it's -- so here, pretty much half the people look like they're saying the geopolitical fragmentation, they think is going to be one of the -- sort of the most significant factors shaping the energy system. I had no idea what people were going to say. That -- and then pretty evenly spread then across the other 3: energy efficiency, electrification and AI. AI coming forth. I'm quite pleased about that. I'm also quite pleased about only 3% said something else, which suggests that we haven't completely wasted everybody's time for an hour and half. So that was the answer for number one. Number two, where do you think natural gas demand will be in 10 years -- in 2050 relative to today? Quite evenly spread here, actually between -- but I mean, high 30%, is that -- so I've got my numbers here. So about 33%, about 1/3 of people thinking it will be a bit lower.

A bit higher.

A bit higher. Okay. The numbers I've got in front of me are wrong here. So here, the biggest number here is a bit higher. So suggesting are pointing to a world of a relatively slow energy transition with some people thinking a bit lower. So that story here, a bit higher, sort of pacing greater weight, if you like, on the current trajectory. And the third question. Following today's session, how have you changed your -- how has it changed your view? And people -- the majority of the biggest vote, I think it will be a bit slower than I thought before. I'm not sure if that's a good thing or a bad thing. Perhaps I'm looking at the energy efficiency and worrying about it. So 30 people haven't really changed my view, but the biggest one, 40% thinking that it will be perhaps a bit slower than they thought before. All right. Sort of a bit of fun. I also think it's quite interesting as well those results. So let me stop and thank everybody again. And for those of you watching online, I'm reliably informed a pop-up box will pop up on your screens now with a very short survey just sort of saying, what bits did you find interesting today? What bits would you like to change? Please fill that in, lots of food for thought for Gareth for next year. Far more importantly, all of this information is now available on bp.com. We've only touched a fraction of the type of analysis that's in this year's energy outlook. So please go online and start exploring. If you have views of the things you disagree with, just let us know. This is a whole part of a continuing dialogue. The same here for people in the room, please go on bp.com. If those of you who quite like still the hard copies of the book, the hard copies of the book will be available outside. With that, there's teas and coffees outside for people in London. Thank you very much, and thank you all for your time. Thank you.