Oil demand to peak, BP invests in second generation biofuels

The consensus about oil's continuing dominance may be misplaced
(AP Photo/Paul Sakuma)

British Petroleum (BP), that recently agreed to spend more than $161 million on pollution controls to resolve Clean Air Act violations in Texas City, has formed a 50-50 joint venture with Verenium Corporation to develop and commercialize cellulosic ethanol, a noon food crop.

The companies are planning to together commit  $45 million to what is indented to be the nation’s first commercial scale ethanol facilities located in Highlands County, Florida.

“This next step in our relationship with Verenium demonstrates our real commitment to making cellulosic ethanol a reality in the U.S fuel market in the near term”, said Sue Ellerbusch president of BP Biofuels North America.

It may also show that BP is preparing itself for what management consulting firm Arthur D Little calls “the beginning of the end of oil”. In a new report, Peter Hughes Director Global Energy & Utilities Practice, finds that oil may lose its share in the energy mix more quickly than the energy industry expects. 

The consensus within the energy industry is that oil supply tightness will reemerge when the world economy starts to recover, and that prices will start rising again.  But even though this is true, Mr. Hughes places a question mark as to when it will begin.  Instead he sees a long-term downward pressure on oil demand. The reason? The convergence of three powerful policy drivers: price volatility, security of supply, and climate change.