ExxonMobil and its peers risk blowing $2.3 trillion on oil projects that will not be needed if the world hits peak demand in the next decade.
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The End of the Oil Age Gets Postponed Again. Really?
It looks like we have to wait a little more to see the end of the oil age. Our desire to burn more and more stuff knows no limits — at least not when talking about the foreseeable future. Statements like “oil will be needed for at least another 10 years” or “independent experts agree that global oil and natural gas demand will increase over the next 30 years” suggest that transitioning to ‘renewables’ will have to wait a little. Will we burn as much carbon as we see fit then? Well, as usual, reality will have a thing or two to say in the matter.
Up until the war in Eastern Europe broke out and a wast array of sanctions were unleashed on one of the world’s biggest fossil fuel supplier, the ruling meme on how the oil age would end was called ‘peak oil demand’. According to this myth, pushed by mainstream media, ‘progressive’ oil companies and high tech automakers, we would eventually reach a peak in fossil fuel consumption as we seamlessly transition into an electrified road transport powered by ‘renewables’. Demand increase for oil would thus stop at some point in time, then start to fall gently like a feather on mom’s belly. The climate would be saved, meanwhile everybody could keep on shopping and consuming happily as if nothing happened.
British Petrol (or BP for short) has famously put this ‘peak demand’ date into 2019 — a forecast they would quickly backtrack two years after. A couple of more years into this brave new world, and after years of unprecedented shortages, the world has started to realize that fossil fuels might indeed be needed for a while down the road.
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Oil Industry To Waste Trillions As Peak Demand Looms
Oil Industry To Waste Trillions As Peak Demand Looms
A new report from The Carbon Tracker Initiative analyzed what would happen if the oil market saw demand peak by 2025, a scenario that would be compatible with limiting global warming to just 2 degrees Celsius. The headline conclusion is that about one-third of the global oil industry’s potential spending – or about $2.3 trillion – would not be needed. In other words, the oil industry is on track to waste a massive pile of money if demand peaks in less than ten years.
Which projects are subject to redundancy largely comes down to economics. U.S. shale drilling has seen dramatic costs declines, pushing some higher-cost projects out of the range of viability in this scenario.
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Why the World’s Appetite for Oil Will Peak Soon
Why the World’s Appetite for Oil Will Peak Soon
The conventional wisdom about steadily rising demand is wrong. Within two decades, global oil use will start to fall.
When it comes to oil demand, the conventional wisdom is clear: Population growth and a rising global middle class guarantee that demand—and prices—will rise over the coming decades. It is a story line that is almost universally accepted by investors, governments and industry alike.
But like many such consensus views, it is one that should be treated with caution.
The world’s economy is experiencing transformational changes that, I believe, will dramatically alter patterns of energy use over the next 20 years. Exponential gains in industrial productivity, software-assisted logistics, rapid urbanization, increased political turmoil in key regions of the developing world, and large bets on renewable energy are among the many factors that will combine to slow the previous breakneck growth for oil.
The result, in my opinion, is as startling as it is world-changing: Global oil demand will peak within the next two decades.
A less potent weapon
The geopolitical and economic implications of peaking demand will be huge. The fall in the importance of Saudi Arabia is already palpable, with all the major powers from the U.S. to China more willing to accommodate Saudi archrival Iran. In addition, Russia’s ability to use oil as a weapon will wane, as will the economic leverage of the Organization of the Petroleum Exporting Countries. As economic growth becomes increasingly disconnected from oil, world powers will likely shift their attention to other increasingly scarce resources that will be equally critical to economic well-being, such as food, water and minerals. A greater interest in Africa, for example, is already starting to emerge.
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