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This Is What the Demise of Oil Looks Like

Consumption
From giant companies like Exxon Mobil Corp. to OPEC members such as Saudi Arabia, oil producers say their industry will enjoy decades of growth as they feed the energy needs of the world’s expanding middle classes. But what if they’re wrong? There’s a host of reasons to think they might be. Here’s what happens when you test their central assumptions.

The International Energy Agency sees oil demand rising more than 10 percent, to 103.5 million barrels a day by 2040, while companies predict even faster growth.

Traditional Forecasters See Nothing But Growth

Global oil demand, millions of barrels per day

110

100

90

80

70

OPEC, Exxon and BP

 

IEA base case

2000

2010

2020

2030

2040

Source: IEA

But forecasters don’t always anticipate seismic shifts in technology and policy that could slow demand growth, or even eliminate it altogether in some parts of the economy. Even small changes could add up. Advances in vehicle efficiency, a rise in electric cars, tighter emissions standards and shifts to other fuel sources would result in oil demand much lower than the industry is banking on.

“We cannot even begin to comprehend the transformation in the mobility arena that is coming at us,” Jules Kortenhorst, chief executive officer of the Rocky Mountain Institute, based in Boulder, Colorado, said in an interview. “It’s not a question if it will come, it’s only a question of what the timing of the arrival will be.”

Technological Change

About 60 percent of oil is used in transportation, which is also where the biggest technological changes are emerging.

All over the world, governments concerned about climate change or air pollution are pushing tighter fuel-efficiency standards, or creating low-emission zones for cars and even ships. The exposure of cheating on diesel-emissions test by Volkswagen AG, and similar accusations against other automakers has added to the pressure on regulators to toughen standards.

The proliferation of big data analysis is set to dramatically curb fuel waste, according to the Rocky Mountain Institute. Aircraft being produced today by companies like General Electric Co. can already detect small changes in engine performance, meaning engineers can be sent out to fix any issues and keep them operating at peak efficiency. Smarter navigation technologies allow truck drivers to reduce the distances they travel, while improvements to aerodynamics will enable vehicles to travel farther on less fuel.

These and many other technologies would reduce emissions, while also save money, especially in a world where the International Energy Agency sees oil prices rising from about $50 a barrel now to $80 at the end of the decade, and to above $100 by 2030.

All told, efficiency improvements could eliminate the need for about 11.6 million barrels a day of supply, according to the IEA. That’s about six supertankers of oil every day. Here’s what the future looks like with efficiency gains:

Squeezing More From Each Barrel

Global oil demand, millions of barrels per day

110

100

90

80

70

IEA base case

Efficiency

2000

2010

2020

2030

2040

Source: IEA

Probably the most noticeable shift in transport will be the electric car. This won’t just be about cars with batteries, but part of the wider trend led by companies including Uber Technologies Inc. and Lyft Inc. toward transportation as an on-demand service in driverless vehicles summoned from your smartphone, according to RethinkX, a think tank based in San Fransisco.

A move away from the current norm of individual ownership of traditional petroleum-powered vehicles toward the sharing of high-tech, possibly driverless cars would have far-reaching economic and social consequences, particularly because they’re being pushed hardest in the fastest-growing major economies. China’s latest auto industry plan sees all new vehicle growth coming from electrics. India plans to sell only electric cars by the end of the next decade.

The Drive to Electric Cars

More than 20 million sales are predicted by 2030

China

Rest of world

U.S.

Europe

21M

14

7

0

2030

2016

’17

’18

’19

’20

’21

’22

’23

’24

’25

’26

’27

’28

’29

Source: Bloomberg New Energy Finance

“In a nutshell, the industry is going to evolve more in the next 10 years than in the last century,” said Gilles Normand, head of electric vehicles for Renault SA, in an interview.

If electric cars attain a “cool factor” on a par with the iPhone, the global fleet could expand to 450 million by 2035, from about 1.2 million currently, according to BP Chief Economist Spencer Dale. Adoption of electric vehicles on this scale could take away another 5.2 million barrels per day of oil demand, according to the IEA.

So now the baseline looks like this:

A Very Different Outlook

Global oil demand, millions of barrels per day

110

100

90

80

70

IEA base case

Efficiency

Electric vehicles

2000

2010

2020

2030

2040

Source: IEA

Even as U.S. President Donald Trump wavers over his commitment to the 2015 Paris Accord on climate change, envoys from Europe to China and the Middle East say the shift to a low-carbon economy is now unstoppable.

The Future Is Clean

New clean energy investment in world’s biggest economies

$600B

400

200

2004 to Q1 2017. Source: Bloomberg New Energy Finance

Some major oil companies are reacting to this shift. Royal Dutch Shell Plc, Europe’s largest energy company, is betting on zero-emission hydrogen cars and building liquefied natural gas refuelling stations for trucks in the U.S. and ships in Europe.

Biofuels are also set to take share away from oil in some markets—such as airlines seeking to cut carbon emissions, for which battery power isn’t currently suitable. The growth of bioplastics could also eat away at demand from the petrochemicals industry, which McKinsey and Co. estimates will drive 70 percent of growth in demand for oil through 2035.

Beverage makers like Coca-Cola already pay a few cents more for bottles made from plant-based materials, which won’t add to the growing plastic soup in our oceans.

Widespread switching to alternatives including natural gas and biofuels could displace about 13.5 million barrels a day of oil demand by 2040, according to the IEA. That’s more than double the gains from electric cars.

A Radically Different Future

Global oil demand, millions of barrels per day

Oil industry

110

100

90

80

70

IEA base case

Efficiency

Electric vehicles

Fuel switching

2000

2010

2020

2030

2040

Source: IEA

All these things together, which is what the IEA says would be required to limit global warming to within 2 degrees Celsius, would mean oil demand peaking around 2020 and declining by about 20 million barrels a day by 2040. That’s 36 million barrels a day lower than the average oil company forecast for 2040—a gap larger than OPEC’s current production.

Some oil companies have acknowledged the potential for demand to peak sooner. Shell has said oil could peak somewhere between five and 15 years, while Total thinks a surge in battery powered vehicles will cause demand for oil to peak in the 2030s.

Dramatic Shifts

A demand shift on this scale would have dramatic consequences for oil producers, who are among the world’s biggest companies today.

“If you take a large bite out of transportation fuels, then suddenly the economics of the whole downstream oil and gas business look dramatically different,” said Kortenhorst.

There may be a lesson in the dismal fortunes of the U.S. coal industry. Demand for the fossil fuel peaked there in 2007 and has gradually declined as power plants switched to natural gas. That triggered a collapse in the value of some of the nation’s largest producers, including Peabody Energy Corp., which is among about 50 coal companies that filed for bankruptcy in recent years.

Peabody Shares vs Coal Demand

Oil companies now tilting toward renewable energy, such as Norway’s Statoil ASA, are best placed to survive peak demand, said Deutsche Bank AG. Exxon Mobil Corp.—due to its size and “reluctance to change”—is the most vulnerable.

State-run giants of the type that dominate the Organization of Petroleum Exporting Countries are even more at risk and could one day be left with billions of barrels of unwanted crude.

bloomberg



21 Comments on "This Is What the Demise of Oil Looks Like"

  1. makati1 on Wed, 31st May 2017 5:42 am 

    More techie dreams from the Blooming Idiots and the U# propaganda mill: EIA. They cannot even predict tomorrow, let alone next year or 2040. Not even mentioning the coming financial collapse or climate change. Pure bullshit.

  2. Cloggie on Wed, 31st May 2017 5:46 am 

    Interesting data:

    Annual carbon dioxide emissions [tonnes] per capita

    https://en.wikipedia.org/wiki/List_of_countries_by_carbon_dioxide_emissions_per_capita

    Country 2013 1995
    ==================
    USA 16.4 19.3
    Germany 9.2 10.6
    France 5.0 5.9 (nuclear!)
    Russia 12.5 11.0
    China 7.6 2.8

    In other words, the developed West managed to decrease fossil fuel consumption between 1995-2013, where recovering Russia and most of all furiously growing China increased their consumption.

    The world may increase oil consumption, but the developed world is pausing and moving away from fossil.

  3. Davy on Wed, 31st May 2017 5:57 am 

    Per capita is a way to exaggerate a condition that cannot be fully appreciated without a total figure.

    http://www.wri.org/sites/default/files/uploads/historical_emissions.png
    https://www.eia.gov/todayinenergy/images/2016.05.16/main.png

  4. makati1 on Wed, 31st May 2017 6:10 am 

    Cloggie, ship the pollution causing corporations back to the U$ and watch the numbers change back to 1995 levels. The “developed” world is moving away because they are broke/in deep debt and are buying less oil. The numbers will continue to fall there as poverty sets in.

  5. Davy on Wed, 31st May 2017 6:18 am 

    Ship the profits and benefits back too.

  6. ALCIADA-MOLE on Wed, 31st May 2017 6:39 am 

    I told U guys. One minute of sunlight equals energy 1 year but let’s say just 1 hr.

    420

    I observed these little windmills for decoration and they spin like crazy. I think there’s wind there because the ground channels it.

    I think there’s plenty more in the winter when leaves fall off and winds hug the ground.

    I think maximum wind generation is in the lower temperature scale. Not only the atmosphere is denser and has more momentum, but it seems air is more mobile at when it’s colder.

  7. ALCIADA-MOLE on Wed, 31st May 2017 6:47 am 

    Guys, I have horrible horrible bad news.

    It’s not one minute but it’s 1.5 hrs!!!

    We’re doomed. Let’s change the political system and put Nazi’s in powa! They will keep more for themselves and scrape the bottom of the oil barrel. Problem solved!

    “This theoretical potential represents more energy striking the earth’s surface in one and a half
    hours (480 EJ)
    67 than worldwide energy consumption in the year 2001 from all sources combined
    (430 EJ)68”

    http://www.sandia.gov/~jytsao/Solar%20FAQs.pdf

    Oh wait..That’s the surface of the earth, nevermind.

  8. ALCIADA-MOLE on Wed, 31st May 2017 7:13 am 

    guys, who cares if people can’t surf the air because of peakoil. I mean only the elites do it anyways. If you see these stories have elites travel in private jets to attend climate change conferences.

    Let’s not forget Mother Teresa who surfed the international air in her private jet in order to “save the poor”.

    No she didn’t save them. She was more interested in spreading Christianity.

    Think about it. If we want to eliminate poverty we need to empower women. We need to let them know about their sexual market value and it’s not the same as pumping out babies. Fewer mouths to feed, more available for everyone!

    Just cuz I can’t score doesn’t mean I have to be bitter and hate women.

    Here’s Hitchens

    http://1.bp.blogspot.com/-k-ox_6gsfns/VIIsBHn41sI/AAAAAAAADhg/lk5IN6H5K5Y/s1600/HitchnsC-D13.jpg

  9. Sissyfuss on Wed, 31st May 2017 10:20 am 

    For f&%ks sake mole, change your meds.

  10. ALCIADA-MOLE on Wed, 31st May 2017 10:27 am 

    @sis haha srs bro? i speak my own mind cuz i purposely reject highly intelligent people ..i’ve found that they’re out for themselves.

    I doubt you’re authentic. I’m going to continue with the meds because that’s how you kill the bugs.

    I realized that a single dose of antibiotic is not going to get rid of bacteria so u have to sustain the uptake of medication to weaken and eventually eliminate it.

    i have to continue with it and see where it goes. I’m a tinkerer

  11. joe on Wed, 31st May 2017 10:34 am 

    With Trump poised to end US involvement in climate change deals its very likely that gas guzzlers will be the future. Thats great and all but one aspect of this great again America other than the wonderful cars and obvious admission that we can’t stop global warming is that the US will suck the world dry of oil, and if as one would expect that if carbon emissions standards and efficency standards are abondoned then oil demand will skyrocket, prices will rise and the world will tip from a managed stasis as it is now to a cliff edge collapse as cities flood and governments topple.
    We are supposed to forget that Obama was pissed off having to deal with Europe not paying for its own defense in the post soviet world and so they daily create this anti – Russian myth that Putin is evil blah blah blah to justify the existence of a pork barrel system for people who can’t really justify their roles if the people were not afraid. Christian America is forgetting Jesus central philosophy, judge ye not lest ye be judged, do unto others as you would have them do unto you, follow the only commandment that matters LOVE ONE ANOTHER. Our failure is that we are not Christians, muslims think their victory is at hand and their future will be to dominate the earth, I laugh at the idea, when Christian whites are done, the muslims can have it cause it won’t be fit to live on! Trump might be all kinds of things but people are being totally manipulated by the msm and Trumps great error is that he wanted to honor the letter of his message, not the spirit, most Americans hate the 9-11 hijackers, the Boston Bomber, Isis, all Sunnis and friends of the Saudis, but Trump banned the Shia. He wanted a wall, so he’s fixing a fence, he knows that Americans dont care about climate change really (like 90% of everyone else outside the liberal elite) so he will do somthing that doesn’t matter anyway cause the truth is that the damage was done decades ago and we can’t stop it now despite our good wishes and intentions now.

  12. ALCIADA-MOLE on Wed, 31st May 2017 10:38 am 

    @joe ok joe if Putin is so so good then why is Snowden not liking it? If you believe Putin white helmets were in Ukraine to “keep peace” then you think it’s an act of love that he killed off political opponents.

    You also believe that Hitler built up luffwafe and panzer divisions for “peace parade”.

    Just because the alternative media love Putin doesn’t mean u jump on the bandwagon.

    Maybe you all should because I’m hoping US take Siberia eventually.

  13. bobinget on Wed, 31st May 2017 10:49 am 

    Joe, Trump officially took the US out of the 21 nation climate agreement. PoO continues struggling to hold $47 handle.

    Trump will surly stop them damn foreigners from laughing at US.

    Listen. They stopped laughing. US credibility just crashed. You’ll need to wait a few years till next generations call for today’s US politicians to be dug up, dismembered and burned.

  14. ALCIADA-MOLE on Wed, 31st May 2017 10:49 am 

    just because women are subjected to powerful biological impulses doesn’t mean we take advantage of it, as if men aren’t subjected to the powerful impulse to f* women.

    If u don’t empower women u basically say that somewhat the equivalent thing that if fishes congregate in school due to safety in number then we need to send trawlers to scoop them all up.

    unfortunately that’s what we did and now there’s no sardines. It used to take up an entire aisle in a grocery store.

  15. daniel on Wed, 31st May 2017 10:50 am 

    Fake news!!! U.S economy seems to be doing fine…low unemployment…..I don’t believe anything I read any more….Peak Oil…Gail the Actuarary …..all this is manipulated data….everyone has an agenda and will fight for that meme until they die…..

  16. ALCIADA-MOLE on Wed, 31st May 2017 11:18 am 

    @daniel are you being sarcastic? I’m somewhat serious on my belief because I was a Paultard and I lost a lot of money in Gold.

    Ideas have consequences.

    Don’t give in to fear. You can never get rid of fear but we all should try.

  17. Davy on Wed, 31st May 2017 12:36 pm 

    “4 Wildly Different Oil Price Scenarios For 2020”
    http://oilprice.com/Energy/Oil-Prices/4-Wildly-Different-Oil-Price-Scenarios-For-2020.html

    “After the nine-month extension of the OPEC deal, there is a growing consensus that oil might bounce around in the $50s and $60s for the rest of the year. But as we move into 2018 and beyond, there is a great deal of disagreement among analysts about what happens to oil prices.”

    “One school of thought is that the severe cuts to upstream spending that have stretched into a third year are sowing the seeds of a supply shortage around 2020. The IEA is probably the most recognizable forecaster that falls into this camp. The agency has repeatedly pointed to the fact that new oil discoveries are at their lowest level in 70 years. “There were no discoveries because there is no money for exploration. You find something if you look for it,” the IEA’s executive director Fatih Birol said earlier this year.”

    “The IEA says the industry must step up spending if they are to avoid a supply crunch in a few years’ time. “[W]e are emphasising an important message: more investment is needed in oil production capacity to avoid the risk of a sharp increase in oil prices” by the early 2020s, the IEA wrote in a March report.”

  18. Sissyfuss on Wed, 31st May 2017 1:27 pm 

    Mole, Walmart’s having a sale on tin foil. Better stock up cause that’s alot of melon you gotta cover up.

  19. Sissyfuss on Wed, 31st May 2017 1:30 pm 

    Joe, the people that don’t care about AGW are the scientifically illiterate and that gives Trump a YUUUGGE majority.

  20. joe on Wed, 31st May 2017 5:26 pm 

    Sissy, im pointing out the obvious, most people could give a fuck about GW, they just want to make it another day and fill their own pot of gold a bit more. I believe that despite all the so called advances of liberals in the last 30 years, they can all be thrown away so long as people don’t feel like it affects them. Some guy whoes future ended in 2008 and has either been working in McDonald’s or has never got pay rise above inflation and sees the wealthy jizz their pants at the word ‘globalism’ really couldn’t care less what Trump does. People are losing their stake in what was the Social Contract. The so called recovery is dependent on stimulus, as soon as that ends its over for all kinds of demand and asset prices. The bubble has to re burst.

  21. makati1 on Wed, 31st May 2017 6:44 pm 

    Right on, Joe!

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