It’s a resource that has started wars and caused global market turmoil. Oil fuels more than half of the world’s transportation like cars, planes, and trucks. But in the age of electric vehicles and renewable energy – is the oil era over? Well, it all depends on who you ask. This chart from the International Energy Agency lays out the debate.
One scenario has oil peaking in the mid-2020s. And the other shows oil demand growing until 2040. So, why the difference? Well, on one hand, climate policies are getting stricter. So, here in the EU, renewable energy sources account for 80% of new capacity and wind will become the number one source of electricity soon after 2030.
China, the world’s largest polluter, is now leading the way in the push for clean power. Just take a look at the streets – It’s predicted one out of every four vehicles on the road in China will be electric by 2040. And the total number of electric vehicles on the road worldwide is expected to reach nearly 300 million in just over two decades – there are only around 2 million today.
More electric cars equal less gas guzzling. Okay, but let’s not get ahead of ourselves.
The International Energy Agency says it’s too soon to write oil’s obituary. Oil and gas still received two-fifths of global energy supply investment in 2016. That was less than electricity got for the first time ever – but still much higher than investment in energy efficiency, and renewables in transportation and heating. Experts say it’ll be a long time before the infrastructure is in place for electric cars to overtake the streets. And even then, there will still be demand for oil.
Oil will be a dominant energy source for emerging markets like India, and for industries like trucking, petrochemicals, shipping, and aviation. One reason why these industries haven’t backed off oil yet? Well, prices are pretty low historically.
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Back in 2014, the price for a barrel of crude oil traded above $100. Today it’s around $60 – where it’s expected to stay for a while.
So how did this happen? Put very simply, too much supply and not enough demand. In 2014, economic growth slowed in countries like China and Brazil – which made oil demand go down. At the same time, the global oil supply was going up, fast. The U.
S. experienced an oil boom thanks to new technology — shale drilling. Meanwhile, OPEC, which is a cartel of oil-producing countries, decided not to cut their own supply. And despite geopolitical tensions in countries like Iraq and Russia, oil production didn’t go down in those regions either. It was good for consumers who pay less at the pump.
But low prices hit oil producers and exporters hard. Big oil companies like Shell and BP have responded to low oil prices and increased regulations by trying to “diversify” their businesses. That’s a fancy way of saying they’re investing in other things besides oil.
Some of that investment is going toward solar or wind – but most of it is going toward gas. Exxon predicts demand for natural gas will grow more than any other energy source and by 2040, will make up a quarter of the global energy mix.
Some analysts say it’ll take a long time for us to switch to alternative power sources, especially when oil prices are so low. But whether the oil era ends or not, a new era of alternative energy has already begun.
Transformation! 