This is Ed Whittingham here, head of the Pembina Institute, which is a climate and energy think tank with offices in four locations: Calgary, Edmonton, Vancouver, and Toronto.
Since I'm going to talk about the oil and gas industry, I just want to acknowledge off the top that at Pembina, our hearts go out to the people of Fort McMurray, who have been forced from their homes due to the devastating fire there. All of us here in Alberta are doing what we can to help out.
I am not a futurist but I will try to do my best Nostradamus and speak to some of the trends that we see coming from the oil and gas industry. I can benefit from the research that the Pembina Institute has undertaken, and some of the forecasting that we do. I will draw upon work that I have done with the World Economic Forum's Global Agenda Council on the Future of Oil and Gas, where I pulled together a table of people far smarter than I, and all of us put on our Nostradamus hats to try to cast out.
Perhaps suffice it to say, with everything that's going on, not the least of which are the events of the last couple of days, the oil and gas industry is facing a number of challenges. On the ongoing challenges to do with the sector right now, you have concerns over future demand, concerns over the cost of project development, governance, deteriorating community-level relationships, and climate change. The industry finds itself in a delicate situation right now, but it's a robust, resilient industry and we're sure we'll be able to navigate these challenges.
Let me start by quickly talking about the orthodoxy which until very recently was championed, especially here in Alberta, and that is that the industry would continue to grow and grow as the world added two billion people to its population between now and the middle of the century—30% of that growth happening in Africa and 20% happening in India. As people shift towards cities—half of the world's population lives in cities now and by 2050 it will be three-quarters—this means that 80% of global energy will actually be consumed in cities. That becomes a key battleground for how we get over the consumption problems associated with energy.
Many prognosticators forecast that demand for energy would double during that time and much of that demand, if not most, would be met primarily by oil. Thus, the orthodoxy was that if we're at 85 to 90 million barrels of oil consumed per day, that number would march up to 125 or 130 million barrels, and as a result, companies had to align themselves around growth strategies to take advantage of that. The fossil fuel industry is very innovative at finding lots of ways to pull hydrocarbons out of the ground so they can meet that demand.
Recently, though, there has been a shift in that thinking. What has changed? Several things have changed. One is just the notion that we are going to march up to that level of oil consumption on a daily basis, and I'll speak to that in just a moment. Two, also something that Pembina works on, is this imperative around what we do to produce energy in a way that doesn't put us over the tipping point of dangerous climate change.
There are three scenarios I'd like to bring to the committee's attention that look at oil demand and consumption in a 2°C world; a 2°C world being what it would take in order to stay within two degrees of warming. Of course, with what happened in Paris last December with some 190 countries signing on to a climate agreement that is based around keeping warming to 2°C, we also see the ambition set for 1.5°C of warming, which would require even greater levels of ambition in refining and changing our climate and energy system.
First, on the three scenarios, one is the International Energy Agency's 450 scenario, which is consistent with a 50% probability for less than 2°C of warming. In that scenario, global oil demand rises slightly by 2020, but then falls to a little under 75 million barrels a day by 2040. Of course, the heaviest polluting, greenhouse gas emitting hydrocarbon, coal, would fall more drastically than that.
Another interesting one is Statoil's renewal scenario. In that scenario, it looks again at a 2°C scenario and it sees demands for oil falling to 80 million barrels a day by 2040, but on a net:net basis, and this might speak to Tim's presentation earlier, you would see consumption of gas going up. This is Statoil, the big state-owned Norwegian oil firm. To be clear, oil does this, natural gas does this, and on a net:net basis by 2040 at least, according to Statoil, fossil fuel consumption between oil and gas would remain the same, but to be clear, oil consumption drops.
Then there is an interesting study done at the University of California Davis that looks at a number of things that it calls disrupters around the oil and gas industry, things like tripling vehicle fuel efficiency, which could happen between now and 2040; a change in urban transportation patterns, and that change could be from car sharing; it could be from services like car-to-go; it could be from location-efficient developments, which is simply a proxy for people, especially the millennial generation, not my generation or most of you in the room, but the generation coming up behind us forgoing the two-car garage and the house in the suburbs and increasingly living in urban centres close to where they work and close to where they recreate. Then also you have slowing economic growth in Asia.
All of that, the Davis study suggests, is putting downward growth on the growth prospects for oil. It also looks at what's happening from big data and big technology trends, some of them being optimized routing, timing, loading, and information sharing that will lower overall energy use, or pulling upon GE's forecast, that a doubling of rate of energy productivity via the industrial Internet will reduce energy demand or some big data analytics that could be applied to aviation navigation operations or, for instance, smart phone applications, eliminating the need for partial loads in trucks on our roads. There's a service called—