The hug says all you need to know. Our kids, our grandchildren, and generations to follow will all be wondering why we we fiddled so long while carbon burned. The consequences of choices we make now related to the future of fossil fuel use are epic:
For years, analysts have predicted that rising world oil consumption would peak and start declining in the coming decades. But with a recent string of setbacks for big oil companies and the rapid advance of electric vehicles, some now say that “peak oil” is already here.
May was arguably the worst month ever for big oil — and the best for its opponents — as courts and corporate shareholders sided with environmental activists to humble the biggest of the fossil-fuel giants, culminating in “Black Wednesday.”
On that day, May 26, three events occurred that would have seemed nearly impossible not long ago: activists angry at ExxonMobil’s climate policies won three seats on its board of directors; Chevron shareholders voted to force the company to start cutting emissions; and a judge in the Netherlands ruled that Shell must slash its emissions by 45 percent by 2030.
So what’s next for big oil? Is the game up? Have we reached peak oil?
In recent weeks, the oil industry has been ambushed by a combination of the politics of decarbonization, lifestyle changes stimulated by the pandemic, and the rapid rollout of green technologies that could make its product increasingly redundant and turn its wells into stranded assets.
The moment when the century-long advance in global consumption of oil ceased has been predicted by industry analysts for a while now. But their trend graphs always suggested peak oil would not happen until the 2030s or beyond. No longer. The coronavirus pandemic drove a 9 percent slump in oil demand in 2020 that many economists think will never be recouped.
“Fallout from the pandemic may mean 2019 was the year of peak oil demand,” Mark Lewis, head of sustainability research at asset manager BNP Paribas, concluded in a blog post last June. Peter Nagle, an economist at the World Bank, said in a blog post that “a shift in people’s behavior” means that consumption is likely to “remain well below its pre-pandemic trend.”
Behavioral changes include reduced commuting as people work from home and gas-guzzling business flights being “curtailed in favour of remote meetings,” Nagle said. Add in the rapid rise of electric vehicles and the gathering force of action on climate change, and the fuse is lit for big change in the biggest industry on the planet. Nagle too concluded that “oil demand may have peaked in 2019.”
Big-oil shareholders have been restive for a while, following a string of dreadful financial returns. In 2020, ExxonMobil saw the first net annual loss in its merged history, losing a staggering $22.4 billion. Chevron too was in negative territory.
Lewis cites “three Ds” driving down the world’s taste for oil: decarbonization of economies to meet the Paris climate agreement; deflation of demand as renewable energy sources and electric vehicles kick in; and “detoxification” as cities, emboldened by the experience of clean air during the Covid lockdown, curb particulates and nitrogen oxide emissions from burning petroleum. Most of this hinges on the future of motor vehicles…
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