Business

BP takes hit of up to $17.5bn as it forecasts cheaper oil

BP has forecast lower oil prices for decades to come as governments speed up plans to cut carbon emissions in the wake of the coronavirus pandemic.

It has cut price forecasts by about 30%, and expects Brent crude to average $55 a barrel from now until 2050.

As a result, the oil giant says it will revise down the value of its assets by between $13bn and $17.5bn (£13.8bn).

BP said it would have to become a “leaner, faster-moving and lower cost organisation”.

Last week, the firm announced plans to cut 10,000 jobs following a global slump in demand for oil.

Countries across the globe have ordered people to stay indoors and not travel as a result of the coronavirus pandemic, which has caused a slump in demand for oil.

Countries across the globe have ordered people to stay indoors and not travel as a result of the coronavirus pandemic, which has caused a slump in demand for oil.

As a result, the cost of oil fell to less than $20 a barrel at the peak of the crisis, less than a third of the $66 it cost at the start of the year.

For a brief period buyers were actually paid to take delivery of crude oil amid a shortage of storage.

The price has since partly recovered to around $37 a barrel.

BP says it has “a growing expectation that the aftermath of the pandemic will accelerate the pace of transition to a lower carbon economy and energy system, as countries seek to ‘build back better’ so that their economies will be more resilient in the future”.

The BBC’s environment analyst, Roger Harrabin, said: “The North Sea is difficult and expensive to exploit, so this is clearly a business-based decision by BP.

“But the ramifications for the climate are potentially very significant. Experts have been warning for years that firms have already discovered far more oil than we can afford to burn if we want to protect the climate.

“This, in part, is a reflection of that new reality. We’ll see how other firms respond.”

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