I often speak to people who are concerned about how long the oil industry will last and have the misconception that its demise is just around the corner.
This is very far from the truth and I think comes from two factors, that oil price has been below the heady days of $100/bbl for some time and confusion between electricity and energy.
Since the oil price drop in 2013 the world has increased its oil consumption every year. In 2013 we consumed around 91 million barrels a day and now it’s about 97 million barrels a day and unless something very dramatic happens, this trend will continue for the near future. I expect that on the current evolution to cleaner energies peak world oil consumption is about 15 to 20 years away. Most of the increase in demand comes from the developing world driven by improving living standards and population increases. In the western world we have nearly reached peak demand mainly due to improved efficiencies but also due to a growing substitution of cleaner fuels starting to have an effect.
There is plenty of oil around to meet this demand so oil basins around the world are going to have to be able to produce at competitive prices or will lose out. In the UK there are several initiatives from the OGA and others enabling this, but the main driver will be technology. We need to find more efficient ways to produce our oil if we want to remain a significant producer for the next few decades.
The other reason for misconception that oil is on its death bed is the confusion between energy and electricity. We have all seen commentators in the media, including our politicians, saying Scotland supplied all its energy from renewable sources. In fact what they mean is we produced all our electricity from renewable sources. Unfortunately, electricity is a relatively small element of our energy usage, in the UK a little less than a fifth, low on a world scale as we use gas extensively for heating. Most of the rest of our energy needs are still fulfilled by fossil fuels, over 70% of the total.
If we want to reduce our carbon footprint then we need to convert end users to electricity generated from renewable sources or use a clean fuel like Hydrogen where Aberdeen leads the way. The way getting most traction is going to electric cars with Scotland being committed to stop selling combustion engine driven cars by 2032 and the UK by 2040. This is no small undertaking as to convert all cars to electricity will require close to doubling our electricity generating capacity, lots of windmills, and substantially upgrading the grid. Large investments and a flood of planning applications required, hope they are approved more quickly that our offshore windfarm.
If we go for Hydrogen, we still need the windfarms, to make the hydrogen renewably, and a network of Hydrogen fuelling stations covering the country, another massive investment which I think unlikely in addition to the infrastructure for electric vehicles. So Hydrogen will be limited to vehicles making or working locally around a limited number of fuelling stations, like the buses here in Aberdeen.
So even with the renewable energy supply evolving oil is still going to be around for many years to come unless the world gets a catastrophic wakeup call on the impact of global warming and evolution turns to revolution and things are forced to change more rapidly.