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.
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.”
The U.K. on Wednesday said it would ban the sale of gasoline and diesel cars by 2040, becoming the second Group of Seven nations to do so, following France. Sweden’s Volvo said earlier this month that by 2019 all of its cars will have an electric motor, while BMW will build an electric version of its iconic Mini compact car in Britain.
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 tests 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.
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