The article in the url below argues that, in spite of the rapid drop in demand for oil during the COVID-19 pandemic and associated drop in economic activity, and also in spite of oil companies writing-down large proportions of their reserves (e.g., see Strategic CSR – BP (I) and Strategic CSR – BP (II)), the point of peak oil has not yet arrived:
"Ambitious green policies—from politicians and even the newly climate-conscious oil companies—suggest the world is moving at warp speed away from fossil fuels. But the transition might not be easy on consumers' wallets, which is precisely why it could take a while."
Not only has this point not yet arrived, but the author argues that it may not do so for many years yet:
"Under its 'stated policies scenario,' the International Energy Agency estimates that oil demand will peak around 2030 and plateau. That scenario takes into account announced policy measures and its own judgment of how attainable they seem."
This contrasts markedly with BP, that suggested peak oil had already passed in 2019. The difference can be accounted for in the assumptions that underpin the respective projections, as presented in a chart that accompanies the article:
The key, of course, is the extent to which legislation is introduced to combat climate change (in particular, a price on carbon), and how aggressively targets are set and enforced:
"Transportation plays a key role in the timing of that peak; it accounts for the largest share of petroleum consumption globally. For electricity to crowd out oil as a transportation fuel, governments must either provide taxpayer subsidies that make electric vehicles more affordable or place a cost on not switching over, such as even higher taxes at the pump."
Another related factor is how quickly technology develops to enable more rapid curbing of the worst pollutants (the higher the carbon price, the greater the incentive), and the speed at which different economies progress toward change (politically and socially). But, as ever, the legislation that politicians are willing to pass is most likely going to be driven by voter demands. If there is a reasonable chance that their chance of re-election will drop as a result of a particular vote, then we can all assume that the corresponding piece of legislation is unlikely to be passed any time soon:
"Nobody likes paying more for energy. Policies that directly raise prices have a track record of sparking a backlash. Such setbacks seem more, not less, likely in the post-pandemic world when economies around the world emerge with weaker balance sheets and a price-sensitive population. As Bob McNally, president of Washington, D.C.-based consultancy Rapidan Energy Group, puts it: 'motorists are voters.'"
What is clear is that the two projections compared in the article are starkly different, and we can only afford for one of them to be right.
Take care
David
David Chandler
© Sage Publications, 2020
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
Peak Oil? Not this Year. Or this Decade
By Jinjoo Lee
January 9-10, 2021
The Wall Street Journal
Late Edition – Final
B12
