The future is not looking bright for oil, according to a new report that claims the commodity would have to be priced at $10-$20 a barrel to remain competitive as a transport fuel.
The new research, from BNP Paribas, says that the economics of renewable energy make it impossible for oil to compete at current prices. The author of the report, global head of sustainability Mark Lewis, says that “renewable electricity has a short-run marginal cost of zero, is cleaner environmentally, much easier to transport and could readily replace up to 40% of global oil demand”.
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The oil industry has a massive incumbency advantage at the moment – 33% of global energy comes from oil at the moment, compared to 3% for renewables – but that advantage is time-limited to about 15-20 years, because every year, the sector has to invest in new projects to replace lost production and depleted wells. But because of the time it takes to develop new wells, by the time facilities that are approved today come online, “a growing portion of their output will be subject to fierce competition from a cheaper, cleaner fuel source”. This means many projects will struggle to make an economic case for development, or if they do go ahead, they may end up as stranded assets.
www.forbes.com
The new research, from BNP Paribas, says that the economics of renewable energy make it impossible for oil to compete at current prices. The author of the report, global head of sustainability Mark Lewis, says that “renewable electricity has a short-run marginal cost of zero, is cleaner environmentally, much easier to transport and could readily replace up to 40% of global oil demand”.
<...>
The oil industry has a massive incumbency advantage at the moment – 33% of global energy comes from oil at the moment, compared to 3% for renewables – but that advantage is time-limited to about 15-20 years, because every year, the sector has to invest in new projects to replace lost production and depleted wells. But because of the time it takes to develop new wells, by the time facilities that are approved today come online, “a growing portion of their output will be subject to fierce competition from a cheaper, cleaner fuel source”. This means many projects will struggle to make an economic case for development, or if they do go ahead, they may end up as stranded assets.
Economics of Electric Vehicles Mean Oil's Days As A Transport Fuel Are Numbered
Oil's days as a transportation fuel are numbered because the economics of renewable energy are so compelling, says a new report from BNP Paribas. In order to compete, the oil price would need to be $9-$10 a barrel, says the report's author Mark Lewis, the bank's head of sustainability.
www.forbes.com
