The long and slow demise of big oil…

Having worked in the energy industry basically ever since I left the university, I really can’t help it, when a lot of my thinking revolves around energy.

That turns out to be the case also today, as I have just finished reading a small blog piece about the coming break up between big oil and big auto.

Peak oil has been a concept for as long as I have been in the energy world. When I started, I believe projections were for peak oil to be reached around 2013. However, the concept of peak oil has been around for much longer, as you can see on wiki. So far, however the promised land of peak oil has continued to be pushed further and further into the future. I think now it is widely believed to be reached sometime between 2020 and 2030.

The funny thing about peak oil is that initially the concept was used to describe the situation where maximal oil extraction would be reached, as a consequence of the oil industry not being able to identify, develop and extract additional resources. Back then it was theorized, that this situation would be followed by increased price volatility, and societal consequences due to the fact of basically running out of oil.

Nowadays it seems more likely that peak oil will be reached not because of the supply sides inability to increase, but because of demand side stagnation and eventually contraction.

Ever since I started in 2004 trading electricity professionally, I have anticipated, and even longed for this day to be reached. The promise, finally seems within reach. There are more and more signs from near and far (China) and in the east (BYD) and west (Tesla) that the world is finally reaching peak oil.

Instead of excessive upwards oil price volatility, we have seen oil plummet in the aftermath of the financial crisis, only to briefly rise up again towards 100$ before finally falling down to the 50-60$ price range. I foresee that it will not rise up again, but instead continue to be priced at a margin which will continue to be lower and lower, as demand stalls, and hopefully starts a falling trajectory in the coming years.

The renewable energy industry continues to make incremental improvements in both higher efficiency and lower cost of energy. The internal combustion engine finally has some decent alternatives, and society is by and large turning against plastic which is no longer viewed as a savior of the modern world, but as one of its biggest problems.

For my part, I find comfort in the prospects of finally reaching a state of peak oil.

I foresee, that there will be rather large societal changes following these changes. The amount of capital that is tied up in the entire fossil fuel value chain is enormous and the lobbying efforts of the industry will continue for years to come, in order for them to maintain some sort of status quo, and controlled transit of their capital interest to slowly be changed and put to alternative use.

When the oil industry’s largest customer (the internal combustion engine) no longer utilizes its product, and society at large is no longer being driven forward by the fossil fuel industry is indeed a day to look forward to.

If you want to know a bit more about my own considerations for the future of my family’s transportation you can read this piece; Car considerations – I so want that Tesla …

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