The Dusk of Big Oil’s Day

June 9, 2017

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CBC:

A move by OPEC sent a brief surge of optimism through the Canadian petroleum industry last week, when the oil cartel announced it was extending its production cuts.

But according to research released shortly after that announcement, the world is on the verge of an electrifying change that will have a cascading effect on the entire global energy industry — and even OPEC isn’t big enough to stand in its way.

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A report from Bloomberg New Energy Finance (BNEF) shows that within as little as eight years, electric cars in Europe and North America will be cheaper to buy and run than traditional vehicles powered by internal combustion engines.

The report comes at a vital moment for the world’s oil industry.

According to BNEF, a trend to improving battery technology and falling costs, combined with higher costs for diesel and gasoline cars, will mean electrics will match the cost of internal combustion engines by about 2025.

As is usual with such long-range predictions, the exact dates can only be an estimate, but the direction of the trend is clear: People are going to be using less gas.

And while the world continues to pump out more and more oil, total demand will begin to slow and then decline.

If that prediction comes true, then the U.S. strategy — to extract as much oil as possible to fulfil existing demand — is a good short-term business decision. Cutting back on production and leaving oil in the ground may just mean it will stay there forever, as demand eventually shrinks.

Fighting a rearguard action against change, the companies at each step of the fossil fuel industrial complex that want to be successful must also prepare themselves for a new world.

If the BNEF research can be trusted, falling prices for electric vehicles will have a greater impact than a study by a Canadian advisory group. Falling prices could also lead to exponential sales growth from today’s low levels, sharply cutting global demand for gas and diesel.

While digging in their heels may be a good strategy for the short term, companies and countries that are already planning how to adapt to that inevitable change will be the biggest long-term winners.

New York Times:

For decades, Edward Heerema, head of Allseas, the Swiss-based energy services company, dreamed of building a giant vessel to install oil platforms offshore. But the Pioneering Spirit has found another purpose: dismantling oil fields in the British North Sea.

With oil prices dropping sharply in the last two years, Mr. Heerema said he was now just focused on finding enough work to meet his payroll. “I can’t say how long it will take to pay for itself. Maybe 10 years, maybe 30 years,” he said of the ship.

The British North Sea was once a crucial source of oil for the world. At its peak in 1999, it produced about 2.9 million barrels of oil a day, more than Kuwait or Iraq at the time.

Since then, production has generally been in a long slide as oil fields discovered decades ago are exhausted and high costs discourage new exploration. Its diminishing fortunes have been cemented by the rise of renewables and the push for cleaner alternatives to oil.

“It is one of those signs that we may be at a tipping point,” said Anthony Hobley, chief executive of Carbon Tracker, a nonprofit group that studies the investment risks of the shifting energy landscape. “We may well be at that critical point in history where people will say that this is the point where the oil industry reached its peak and began to decline.”

This spring, the Pioneering Spirit headed to the Brent field in the North Sea, a major oil and gas trove named after the Brent goose. The field helped define the business, giving its name to Brent crude, the global price benchmark for oil.

After 40 years of production, the field is nearly pumped out. And a group of four platforms in the field — giant rigs that stand around 1,000 feet tall and weigh a combined million tons — are gradually being shut down.

This spring, the Pioneering Spirit transported one platform to its final resting place, a shipyard in Hartlepool in northeast England where it is being dismantled and sold for scrap. An industry in itself, this so-called decommissioning process creates jobs and profits along the journey.

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3 Responses to “The Dusk of Big Oil’s Day”

  1. vierotchka Says:

    Interesting, and it can’t happen too soon.

  2. fjohnx Says:

    It is astounding that currently available vehicles which are already cost of ownership competitive do meet mid-century requirements.

    This MIT study has been out for a while

    http://news.mit.edu/2016/study-finds-low-emissions-vehicles-less-expensive-overall-0927


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