On one side, significant investments in natural gas, carbon capture and storage and renewable energy; on the other one electro-chemical batteries that have achieved unpredictable performance and cost improvements in the transportation field.
When clients fear that their bank is no longer reliable, they run to withdraw their deposits and that bank goes bankrupt, even if the worry was overstated.
That may be is happening in case of the plunge of oil prices. Both oil exporters and oil companies might be engaged in selling as soon as possible as many barrels as they can, because they are afraid of a demand peak in the near future. Otherwise, they would find more convenient some sort of production agreement, after oil prices have decreased well below values capable not only of ousting marginal producers, but also of challenging the economic resilience of the big oil players and, besides that, the political balance of countries like Saudi Arabia.
Why should one care about peak of the oil demand? Today one can expect a long lasting phase dominated by the impact of lower GPD increases in the emerging countries, since it is physiologic that their trends should approach the rates now common in developed countries, but in the near future this scenario would still generate a moderate demand increment, sometimes may be a steady state period, however no peak demand. Neither the latter situation can come from the compulsory implementation of measures enacting carbon pricing, as expected by some analysts. The COP 21 agreement carefully refrains from mentioning carbon pricing: not even a single word envisaging its adoption somehow in the future. Thus it will take a long time before global warming effects will compel decision makers to price carbon emissions so high to make oil unprofitable.
Consequently neither scenario can influence todays’ Big Oil policies.
On the contrary, in China air pollution reached so high levels to make the situation unbearable because of its political, economic and sanitary costs, then forcing changes in the energy mix. As for electricity generation, today’s policy is leaning towards coal replacement by nuclear and renewables. This policy, however, does not help solving the most urgent problem, i.e. urban pollution, largely due to the road traffic.
As the way chosen by the Chinese government to lower air pollution driven by the transport means complies with both the incoming technology innovations and vested interests growing in western countries, a synergistic effect is already operative and could have a worldwide impact on the transport policies.
On the technology side, in a few years electro-chemical batteries have achieved unpredictable performance and cost improvements, so as to make plug-in or electric automobiles and light trucks close to competitiveness. What is happening in some western countries, where car makers over and over bring out new electric vehicles and implement joint-ventures with companies like Google, points out that the time is nearly ripe for the commercial take-off of this technology. It goes with saying that the Diesel gate is helping the development of this new market, which is obviously backed by electricity producers, distributors and vendors too.
USA, Europe, Japan are however lagging with respect to the Chinese accomplishments. In 2015 (first 9 months), plug-in vehicle sales have risen to 136,733 units sold — more than doubling the sales seen during the same period of time in 2014, and in the first 10 months of the year nearly 114,000 electric units, according to official industry figures [2] – more than the roughly 100,000 [3] cars Tesla has sold since the company was founded 12 years ago. 230 million of electric bykes are on the road and a new wave of non glamourous, but cheap EVs, which aim at replicating the Ford T model story, was launched.
The like stands for the heavy transport. China is the forefront in the LNG use as an alternative to the Diesel fuel - the best and quickest choice to mitigate air pollution - but western countries, particularly in Europe, are tackling China. In order to prevent pollution in the Baltic Sea, EU rules ask for sea carriers to be LNG fueled, and the same rules are going to be applied in the Mediterranean too. Within the frame of global warming mitigation, EU is also pressing Member States to switch the heavy road transport to LNG or CNG and the Third International LNG Conference for Transport, held in Rome in June 2015, witnessed how advanced its implementation is (e.g. Eni foresees that 25% of the Italian transport energy demand will be met by LNG and CNG within 2030).
Vested interests are playing an important role in this case too: the gas glut, along with the recent discoveries of relevant offshore gas resources in the Eastern Mediterranean, helps to make the gas conversion easier.
If one adds the highly probable10-15% efficiency increase of the transport means in the next 15 years, the above stated scenario implies a sharp fall in gasoline and Diesel oil demand, which account for around 70% of today’s oil products.
Oil companies, which often are oil&gas companies, are well aware of this likelihood and it could explain their current policies. A confirmation comes from the CEOs of the ten companies that currently make up the Oil and Gas Climate Initiative (OGCI) – BG, BP, Eni, Pemex, Reliance Industries, Repsol, Saudi Aramco, Shell, Statoil and Total – who in the eve of COP 21 launched the report “More energy, lower emissions”, highlighting practical actions taken by member companies to improve GHG emissions management and work towards improving climate change impacts in the longer term. These actions include significant investments in natural gas, carbon capture and storage and renewable energy, as well as research and development on low greenhouse gases solutions, whilst the future role of oil is barely mentioned.
This position was made clearer by an article published on the June 11 2015 issue of “L’Osservatore Romano” (the Holy See daily newspaper) and written by the Eni CEO, Claudio Descalzi. When mentioning the open letter sent by the CEO of Eni, BP, Shell, Total, Statoil, BG to the United Nations and to the top political leaders, asking them to fix an unambiguous global action plan to be approved in Paris, he quotes two targets of the plan only: carbon pricing and natural gas replacing other fuels.
According to Poirot "one coincidence is just a coincidence, two coincidences are a clue, three coincidences are a proof". In this case a clue can then be taken for granted.