The peak oil claim is beginning to become a normal slogan or better still a concept that’s yet to be proven true.
This is because oil discoveries have been on the rise from one nation to the other and also current production fields are being enhanced. This enhancement is leading to continuous improvement in the oil production on various fields.
The continuous discovery of oil at various locations and the enhanced oil recovery technologies are refuting the claim that oil has peaked. A clear indication that oil is not peaking anytime soon, may be one day.
The question here is when will this become a reality? Notwithstanding the volumes of oil derived from shale production the rest in shale activities doesn’t seem to be on the decline anytime soon. This because of the cost advantage in shale production
According to so-called Hubbert’s curve, a bell- shaped distribution, initially proposed by M. King Hubbert in 1949 in relation to US oil production based on statistical methods every natural resource will reach it maximum overtime and begin to decline. In the light of Hubbert’s curve, three questions pop up;
- Has Oil peaked?
- Will Oil peak?
- How soon will oil Peak?
Aside oil been perceived as peaking, there is another school of thought that focuses on the need to substitute oil for other alternatives sources due to the environmental impact among others. All these claims, perceptions and proposals but the future of Crude Oil in a state of review and discussions. Various stakeholders have their views with respect to crude oil, which still remains the greater proportion of the global energy mix. The future of Oil is a major concern to almost everybody in the world because of the high dependency on it
All other things being equal, not being able to validate that oil has peaked or is peaking soon, It will be reasonable to consider the future of Crude oil by considering the competition it faces from proposed and existing alternative sources.
Industrial and Economic Dependency
As indicated earlier, a majority of industrial activities depend on oil. The BP statistics for 2017 still shows that Oil remains the greatest share of global energy mix. This statistical evidence that the absence of oil or the reduction in the production of oil can have an adverse effect on global industrialization and productivity. Below is the distribution for oil demand worldwide by sector in 2016
|Rail & Domestic||1.7%|
Reviewing the sectors and the dependency on oil, it is admittedly evident that oil is vital to global industries. The Challenge is how soon alternatives can meet these demands. And also how accessible are these proposed alternatives compared to oil. Most importantly, the willingness of consumers to change their tastes and preferences.
Aside the industrial dependency, there are major countries and economies that depend on oil to finance most of their developmental and economic growth agendas. Countries Like Saudi Arabia, Nigeria and Ghana have oil is the major contributor to their Gross Domestic Product (GDP) and the future of oil has gotten a lot to do with survival of these countries.
Aside the direct benefits that countries receive from Oil by being owners of oil reserves, there are other countries who will either suffer or benefit from the ripple effect of the future of Crude Oil. Oil producing countries who provide humanitarian assistance and other grants to other nations might be forced to rescind or revisit their decisions in this direction depending on the signal the future of the industry will give them.
The future of Crude Oil will not affect producing countries and consuming countries alone but will extend to other countries who might not necessarily be producers or consumers, but having bilateral relationship with the identified nations (producing and consuming countries). The aggregate dependency on crude oil should be considered since any acts of omission whether deliberate or unintentionally will affect policy across the globe.
OECD and NON-OECD
Renewable sources of energy are been identified to spearhead the switch from or the minimization in the production and consumption of crude oil. Should there be the reality that oil is not peaking anytime soon, the projected competition will be an interesting one.
This agitation is however being pursued by most members of the Organisation of Economic Co-operation Development (OECD). In order to reach fruition in this pursuit, all OECD members must be on the same page, have a strong case and then get NON-OECD members to buy into such initiative. This will take some time because, countries must review it in line with their respective energy policies and pursuits among others.
Oil Producing Companies and The Future of Crude
Almost all the Oil giants have established wings and even subsidiaries that are pursuing renewables. In summary most oil giants have “renewable portfolios” they are managing strategically. This is very interesting because the availability and accessibility to renewable energy will be determined by the same oil producing enterprises to a large extent. These enterprises having interested a lot of money and allocated resources into oil field development will not run a structure or a system that will have a negative impacts on their investment portfolio.
The Future Of Crude Oil
Profitability will therefore determine the future of Crude oil despite the environmental benefit renewables have over crude. The question here is who is producing the renewables, what is the percentage of the renewables to oil in their production mix or portfolio. Between oil and renewables, which one is profitable, because various producers are in business for profit (maximizing returns on investment).
If the same producers of Oil are going to spearhead the era of renewables, then it won’t be done at the expense of investment they have made in the development of oil fields.
Who will be producing renewables to compete with compliment oil, is a subject of great concern in determining the future of oil.
The author is a Global Energy Analyst/ Petroleum Economist with Global Energy Insight, GEIN