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Stanford professor Topny Seba claims fossil fuels will be obsolete by 2030

Is it the beginning of the end of oil era?


From Deccan Herald: There’s a great deal of disagreement between those who predict the end of oil era and those who believe in the need to look for more oil reserves. Since India’s ready to invest a huge amount in transforming its economy, there’s an urgent need to find out which scenario will pan out.

Bhamy V. Shenoy, Deccan Herald

Forecasting oil price has never been an easy task even for the best of experts. Now with the rapid advance in solar technology, costs of renewables competing with fossil fuels and meteoric demand for electric vehicles like Tesla, the task of predicting oil prices is becoming even more difficult.

Countries like Norway, Germany, The Netherlands and even India have announced goals to stop the use of fossil-fuel based internal combustion engine (ICE) cars by 2030. However, for most countries, perhaps with the exception of Norway, it may remain a mirage.

An economist from Stanford University, Tony Seba, has predicted that by 2030 all energy will be produced from solar and wind. He compares the likely disruption to auto and petroleum industry to that of horse-driven vehicles in the US in 1900. In a mere 13 years, horse-driven vehicles disappeared in the US. He predicts similar disruption from electric vehicles (EVs). Even considering his analogy being too simplistic, his prediction cannot be totally ignored.

At the other end, there are well-known world energy forecasts by government agencies (US Energy Information Agency, International Energy Agency), oil companies (BP, Exxon) and consulting companies (PIRA, IHS) which do not see a peak oil demand (POD) before 2035.

None have the perfect crystal ball to predict the future and none claim to be accurate. The experts who claim the dawn of the end of the oil era are not any better. The trillion dollar question is who is likely to be prescient? However, for a country like India, this uncertainty can create a big problem. Since India is ready to invest a huge amount in transforming its economy, there is an urgent need to find out which scenario will pan out.

Recently, BP unveiled its Energy Outlook for 2035. There were no surprises. Instead of Peak Oil Supply which was in vogue a few years ago, now we have started to discuss Peak Oil Demand (POD). BP does not expect to see POD before 2035. So do several other major forecasters like Statoil, Exxon, Chevron, Total etc. Only under its ambitious scenarios to meet the Paris summit requirement, IEA expects POD to occur before 2035. However, IEA does not expect any possibility of oil reserves being stranded. This is mostly because IEA’s more realistic scenario expects POD to occur much beyond 2040.

The BP’s energy outlook 2017 forecasts total world energy to go up by 31% in the 2015-2035 period versus 53% for the period 1995-2015. This is not a dramatic decrease when seen in the background of the urgency to limit global warming to below 2 degrees Celsius. Also, renewables which help in decarbonisation of the world economy will have only 10% share by 2035. Oil consumption in 2035 will still be at a high level of 107 millions of barrel per day (mbd) in comparison to 95 mbd in 2015- no peak oil demand any time soon.

According to the BP report, the global economy continues to electrify with the power sector playing an ever increasing role to account for two-thirds of increased energy demand. The BP expects 100 million EVs by 2035 (currently it is just two million out of around 1.2 billion vehicles in the world) which will reduce world oil consumption by 1 to 1.5 mbd.

On the other hand, according to Tony Seba, POD may occur as early as 2020-21 – just within three to four years. There is a great deal of disagreement between those who predict the end of oil era and those who continue to believe in the need to look for more oil reserves.

The BP’s report on energy demand for India has no surprises as in the case of world energy demand. There is not much change in the role of fossil fuels. Their combined share drops from 93 % in 2015 to just 87 % (versus 75% for the world) in 2035. The share of renewables is expected to go up from 2% to only 8%.

Though the NDA government has ambitious plan to increase power generation from renewables like wind and solar to 1,75,000 MW by 2022, BP forecasters did not think that the government will succeed.

Major takeaway

The most significant conclusion that can be drawn from the BP report is the inability of the world to decarbonise the economy to limit the rise in temperature to 2 degrees Celsius and there is likely to be little disruption caused by the penetration of solar and wind energy.

In other words, the end of oil era is not anytime soon in contrast to those who predict peak demand before 2025. The latest pull back from Paris climate change agreement by US President Trump will likely extend POD by few more years.

Only if the economy is disrupted as predicted by some experts like Tony Seba, the world stands a chance to limit the global warming to 2 degrees Celsius. For this to happen, the entire power sector has to be totally decarbonised (a miracle has to take place for this), the carbon price has to exceed $100 per tonne in large economies, rapid policy interventions to achieve large-scale energy efficiency and large-scale fuel switching like the complete replacement of ICEs by electric vehicles.

The NDA’s policy of reducing fossil fuel subsidies, implementation of ambitious renewable energy target of 1,75,000 MW by 2022, stopping the construction of new coal power plants, encouraging exploration of gas reserves by liberalising gas prices, encouraging energy efficiency in all sectors of the economy are in the right direction.

In addition, the government should start planning seriously on a war footing to stop the use of ICE based vehicles by setting a realistic target of say 2040. To prepare for such a scenario they should assemble a world-class team of experts with different expertise to prepare the economy to transit to solar and wind energy from fossil fuels.

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