Rising geopolitical tensions will slow global trade and GDP growth, dampening energy demand worldwide and in India, as nations prioritise self-reliance over imports, said BP’s chief economist Spencer Dale.
“If the world becomes more self-reliant, they will tend to have less international trade,” said Dale. “If there’s less international trade, that would tend to slow global economic growth because there’s less chance for people to do trade specialization and there’s less scope for new technologies to be quickly transferred around the world.”
This year’s BP Energy Outlook examines how increased geopolitical fragmentation could reshape energy demand, with the impact varying by country depending on the structure of their energy systems.
For India, which imports nearly 90 per cent of its oil and 50 per cent of its gas, “you’ll want to reduce your imports of those if you’re able to,” Dale said. “And so, your natural instinct will be to try to consume less of oil, and natural gas.”
This would mean placing “increased emphasis on domestic oil and natural gas” production, he said. “And you try to electrify as many processes as you possibly can and then produce that electricity with a combination of domestic coal and renewables.”
“For India, oil, natural gas, and renewable energy demand fall by broadly similar proportionate amounts (over the next decade), offset by a greater share of coal in its energy mix,” the Outlook noted.
For the US, a net energy exporter, the shift will look different with renewables losing share and fossil fuels gaining ground, according to the report.
China, meanwhile, will experience yet another dynamic. As a net energy importer but a global leader in low-cost green technologies, “China’s increased preference for domestic energy increases the share of coal and renewable energy at the expense of imported oil and natural gas.”
