I read an interesting article on Bloomberg – “Big Oil Just Woke Up to Threat of Rising Electric Car Demand” (14^th July 2017) which made me think about the whole question of why oil is so central to our economy and how its replacement by renewables will affect carbon emissions.

The article said that the world’s largest oil producers are starting to understand that electric vehicles are a serious long-term threat, and that they will reduce the demand for oil. Bloomberg New Energy Finance expects electric vehicles to reduce oil demand by 8 million barrels by 2040, I seriously hope that they are wrong, for this would be far too small a reduction, in light of the need to reduce carbon emissions, in order to comply with the Paris Agreement.

Firstly, we need to understand the role of oil in our economy, according to figures produced by the international energy agency total crude oil production in 2014 was 3,761 million tonnes oil equivalent (MTOE), of this 64.5% was used for transport and the bulk of this would be the production of petrol, followed by diesel, heating oil jet fuel and kerosene. So the amount of oil used for transport in 2014 was 2,425 million MTO, and the largest share of this was taken by road vehicles. It is important to note that since 1971 both the amount and the proportion of oil used for transportation has steadily increased, it is therefore essential that any effective programme to reduce emissions must tackle, and dramatically reduce, the use of oil for transportation.

If this consumption is calculated in terms of common emissions, it is equal to 6,800 million metric tons or 6.8 gigatons (GT). In 2014 total global emissions of carbon dioxide were equal to 35.9 gigatons, the use of oil for transportation was therefore approximately 19% of all emissions.

According to the calculations set out in The World in Crisis (tbp), we currently have carbon budget for the remainder of the century of 1,130 gigatons if we are to have a 66% chance of not exceeding 2°C, as set out in the Paris Agreement. A slightly larger carbon budget of 1,430 gigatons would give us only a 50% chance of reaching this target. But in order to do this we will need to reduce carbon emissions to approximately 13 gigatons by 2050 (for a 66% chance) or 20 gigatons by 2050 in order to have a 50% chance. This is a dramatic change from current usage and we only have just over 30 years in order to achieve this. I believe, but we will see fossil fuel vehicles prohibited much earlier than 2040, as proposed by France, because as the impact of climate change, in the form of extremely high temperatures, unprecedented storms, extended droughts, and other forms of extreme weather, including tidal surges and ocean flooding, begin to affect people around the world, I think we will see a clamour for dramatic changes in our usage of fossil fuels.

Analysts who only look at the business case for electric vehicles, will make a misjudgement, the key driver is the restrictions imposed by the global carbon budget. The need to replace fossil fuels, is urgent, and will be driven by a general understanding of the necessity of immediate action. We are fortunate, that the technology for electric vehicles is now available, and the progress in introducing them into the world vehicle fleet has been far quicker than expected.

To put the use of oil for transportation into context, even if we were able to remove fossil fuels entirely from our transportation sector, something which will be virtually impossible to achieve for aviation, this would in 2014 have only reduced our carbon emissions down to a level of 29 gigatons.

When I listen to oil company executives, explaining that the Paris Agreement is going to be good for gas, I wonder whether they have ever considered the reality of the carbon budget that we must now impose on our global consumption of fossil fuels. The amount of carbon that we can safely burn over the next 83 years in truth is zero, but there’s no way we can make the transition to a zero-carbon future without incurring some level of cost to our environment and our own well-being, the target set by the Paris Agreement is very ambitious, but it is necessary; we are in the middle of a planetary crisis the like of which our species has never seen before.

So when Bloomberg, said on 14 July 2017, that there are questions about the more than $700 billion a year, but are flowing into fossil fuel industries, I believe that they are being far too conservative. It’s questionable why any money is being invested in what is a dying industry, and the only reason I can see is that so many people involved in the production of fossil fuels have failed to comprehend the gargantuan changes which are now upon us. It is difficult to foresee the destruction of everything that you have worked for, in an industry that has been successful for over a hundred years. A way of life is ending. I’m afraid I ignore what is going on in Washington at present, President Trump will not be in office for over, and his policies are having the beneficial effect of focusing more and more Americans on the dangers of climate change; a case case of thesis and synthesis. We have seen the expression of denial from the President and CEO of Saudi Aramco, who made a speech on the 10th July, Mr Amin Nasser said, “there seems to be a growing belief that the world can prematurely disengage from proven and reliable energy sources like oil and gas, on the mistaken assumption that alternatives will be rapidly deployed.” His company plans to invest $300 billion on projects to maintain its oil production capability, it is questionable how of much of this output will ever be sold.

We are standing today, on the cusp of a dramatic change in the way that we use energy, there is an increasing understanding that we have become addicted to fossil fuels, particularly coal and crude oil, and that if we don’t end this addiction very quickly the consequences will be so severe, as to undermine our civilisation. If you doubt this read a recent interview in New York Magazine with Professor James Hanson, who said that rising sea levels will become an increasing problem and that “if you do begin to lose major cities [then] the planet becomes ungovernable.”  He added if the world did reach four or five degrees, this would mean “the tropics and the subtropics are going to be practically uninhabitable”.

Two years ago, the Bank of England warned British insurance companies about investing in fossil fuel companies, in particular the Bank took the view that many of these companies would end up with what they called “stranded assets”, in other words oil, gas and coal reserves which could never be recovered and sold. I think it is clear that some investors, at least, understand this problem, and that this is a factor in the recent decline in crude oil prices, and the declining attraction of oil majors’ stocks. However, it is essential that we look at the changes which must take place over the next 30 years, and not concern ourselves unduly with short-term price movements, in the long run these are of no consequence. I hope we can change now and that we never see the sight of the flood waters overwhelming New York, Shanghai, Miami, Manila and Jakarta.

(c) Andrew Palmer, 2017 (please do not reproduce without permission)