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‘’EVs, Solar Could Push Oil Down To $10 By 2025’’

Solar Panels

Oil prices could fall to as low as $10 per barrel within a decade as a “tsunami” of threats could undo demand.

That prediction comes from Engie SA’s innovation chief, Thierry Lepercq, who says that oil demand will be hit on multiple fronts. He lays out five tsunamis: solar power, battery storage, electric vehicles, “smart” buildings, and cheap hydrogen. “Even if oil demand continues to climb until 2025, its price could drop to $10 if markets anticipate a significant fall in demand,” Lepercq told Bloomberg in an interview. Solar, battery storage, electrical and hydrogen vehicles, and connected devices are in a ‘J’ curve,” he added. “Hydrogen is the missing link in a 100 percent renewable-energy system, but technological bricks already exist.”

Engie SA, formerly GDF Suez, is a French utility company that held coal and natural gas generation assets but has increasingly been moving into renewables and energy services. The cost of renewables will continue to decline while capacity ramps up. Lepercq asserts that renewables, EVs, and battery storage are on a ‘J’ curve because all of them feed into each other. The cost of solar could drop under $10 per megawatt-hour in less than a decade, making it the cheapest source of electricity. At the same time, falling costs for battery storage makes solar even more competitive. Cheaper batteries will also make EVs cost competitive with traditional passenger vehicles. “As carmakers offer more electrical vehicles with a range exceeding 500 kilometers, charging stations being progressively deployed and more cities banning gasoline and diesel cars, a shift will progressively take place,” he said. Related: A New World Order Is Emerging In Natural Gas

His prediction is in line with a growing number of estimates that predict a faster adoption of renewables and EVs than previously anticipated. For example, just a few weeks ago Wood Mackenzie estimated that electric vehicles could erase 10 percent of global gasoline demand by 2035. That would kill off between 1 and 2 million barrels of oil demand per day. WoodMac also estimates that EVs are already displacing about 50,000 bpd today. The IEA put out a less optimistic projection last month, predicting absolute growth in oil demand through 2040.

Meanwhile, Bloomberg New Energy Finance might be the most bullish of all on EVs, offering a scenario earlier this year in which EVs cut into global oil demand by about 13 mb/d by 2040, enough to probably keep oil prices from ever reaching $100 per barrel again.

For now, demand is still rising, and fluctuations in the pace of consumption depends much more on short-term factors, such as oil prices and the health of the global economy. The IEA says that 2017 will see demand growth drop to just 1.3 mb/d, the lowest expansion in several years.

By Charles Kennedy of Oilprice.com

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  • Tesla on December 20 2016 said:
    Why not 5 dollars? Or 1 dollar? Or minus 10 dollars?
  • mark urbanski on December 20 2016 said:
    The 2025 article is too funny. It is not realistic. Oil demand is still on pace for an increase of 1 Million barrels of more Oil per day every Year. So that's another 8 Million barrels a day by 2025. I hope renewables can help out in an ever growing energy demanding World.
  • James Hill on December 20 2016 said:
    Been wrong before, but in my mind, the lower cost of oil will reduce incentives for green and alternative energy. I work in the drilling industry, but I would commend Obama for his forward thinking. He thought forward, and looked at the environmental damage backward. Not a tree hugger personally, I see the real intrinsic value for energy workers and the affect on the economy, my personal finances as well. That said, even as I see the potential to benefit personally, I foresee the incoming administration as a destructive force for the groundwork and vision of the future guided by the previous administration. Not qualified to evaluate the long term effectiveness of wind and solar Federal Investments but it was a vision. There needs to be a balanced focus. There is no need to BAN drilling. Oil is not the enemy, offshore drilling, drilling in general is not the devil. Would suggest a balance. Do not ban drilling, set goals or compliance standards as needed. Continue to strategically invest in alternative energy but with quantifiable returns on investment.
  • JHM on December 20 2016 said:
    The anticipation of post peak demand decline is a very important issue. Once we are post peak, the value of untapped reserves will fall to zero. That is most of the reserves will never be worth producing. So before this happens there will be a rush to liquidate reserves while there is still some money to be made. Thus, a massive glut is likely to come before the demand peak. And no one will want to store this oil either. So inventory in storage will compete with reserves in the ground for what little demand may be left.

    This is why it is critical for oil investors to think clearly about when the demand peak may occur. Investors who overestimate the time to peak will suffer. My own view is that the peak happens at least by 2025. If I am correct, then by 2020 we could see a tremendous glut form. In deed, the current glut may never resolve itself, though investors are quite willing to store oil against a high futures curve.

    But the futures curve is largely a collective projection of belief. What will shift sentiment? In 2015, EVs were just 0.83% of the new car market. This year they should come in at 1.2%. By 2018, 2.5% and by 2020 5.0%. At what point do oil investors take this seriously? If you were a traditional auto maker and you saw 2.5% market share shift to EVs in just 2 years, what would you do? Would you stick to gas powered BAU and watch market share erode your top and bottom line? At some point all automakers will race to compete in the EV for basic survival. When that happens, I believe it will trigger a shock wave through the oil market. So the key is to watch EVs gain market share and know that it will reach a threshold that induces panic in the auto industry. The auto industry feels comfortable as long as EVs are only a compliance play. But those days are coming to an end. Soon it will be a market share defense play, then a survival game. By 2025, EVs will command at least 25% share of the market. Without a full line of competing electric products an automaker will be doomed at this point. So the panic needs to set in by 2018 to 2020.

    Good luck everyone.
  • Jimmy wang on December 20 2016 said:
    what a joke and EU liberal claim, what is solar panel made of? Silicon, which is energy intensive and heavy pollution products. EU can laugh, because the manufacturing is completed in China or USA. We already see how liberal destroyed EU, so we must say no to these idiot.
  • Jim on December 20 2016 said:
    Coulda, woulda, shoulda, Means nothing..........
  • Joe on December 20 2016 said:
    Your comment on solar energy selling for $10 per megawatt hr has all sorts of implications. I take it Engie SA's innovation chief believes that facilities can be built with a decent rate of return that can deliver power for $10 per megawatt hour. Some of the cheapest power available presently is in jurisdictions where hydro electric is the main source of power. I've seen power delivered at 10
    cents per kWh which is $100 per megawatt hr. So he thinks solar will be 10 times cheaper in 10 years than hydro electric power is today. Let's put that into perspective. Currently inexpensive solar panels can produce power for a dollar per watt. You could have a mega watt of capacity for a million dollars. If you ran that system for one hour you would produce one megawatt hr of power. Generally the claim is that a panel can last for 25 years and will generate a meaningful amount of electricity for 6 hours per day. Multiplying 6 hrs per day x 365 days per year yields about 2200 hrs.This assumes every day is a sunny day. (I wish). To be competitive with hydro electric the power would have to be sold for $100 per megawatt hr. So, this system which cost a million dollars to build would generate $220,000 worth of power with a one million dollar investment. Of course we haven't included the labour to set up the system or the rental for the land it sits on. To be 10 times cheaper the solar panels would have to sell for 10 cents a watt instead of a dollar per watt. The hundred watt panel would have to cost $10 instead of $100, or we boost the efficiency from 20 % to 100 % and still build the panel for half the cost. Call me in 10 years.
  • Bill Simpson on December 20 2016 said:
    This the worst prediction I have ever read. If the oil price ever went that low, there would be very little oil produced outside of the large fields of the Middle East. They could never meet the global demand for oil, at least not for another 20 years, minimum. Not to mention the revolutions and wars that would happen after the money dried up.
    And be WARNED. With debt levels at an all time high, a physical shortage of oil will cause a depression, and take down the entire banking system with trillions of dollars of loans not being able to be serviced. Less oil burned = less economic activity. It is that simple. You can't do work without using energy. Batteries won't be close to replacing oil by 2025. The lesser developed world will see to that. Think all those billions of newborns in Asia and Africa will be driving $40,000 electric cars, or $15,000 Chinese made 4 cylinder Great Walls?
    This article is like saying that copper should be selling for a dollar a ton. If it did, you wouldn't have any new copper on the market because the cost of producing it is thousands of dollars a ton. Supply and demand sets the price. And unlike copper or steel, oil can't be recycled.
    Soon after the global output of crude oil begins to decline ('peak oil') you will notice a series of enormous economic problems begin. Be very happy that George P. Mitchell perfected fracking with sand injection. That bough us a decade, or more, before the peak strikes.
    Hydrogen is such a pain in the rear, that even NASA tries to stay away from it. If you want a good laugh, read, 'The Hydrogen Hoax' by Robert Zubrin. It will never be widely used in cars. Some of the problems Zubrin mentions have been reduced, but not the main ones. Those tiny hydrogen molecules are tough to make and handle. And they always will be.
  • adec on December 21 2016 said:
    Yeah right. Somebody even claim by 2025 human will reach eternity. And maybe by that time, Musk has led you to live on Mars...What a bunch of fictions.
  • citymoments on December 21 2016 said:
    With all due respect to the Author of this article, I assume he is a typical product of modern mass high education. May I ask him two simple questions:

    1. If solar power will replace all energy derived from fossil fuel one day, has he ever calculated how much silicon we need dig out from the ground to manufacture enough solar panels to generate enough energy to replace fossil based energy???

    2. does he understand what is base power? the power to drive a drilling rig , can he demonstrate us how a solar panel power can drive a drilling rig to dig out the silicon 8k feet under the ground???

    I am not hopeful he will ever be able to answer the above questions, as mass modern high education has no intent to teach the young real knowledge; instead, it is propaganda based brainwashing. full of absurd courses based on censorship . Ironically, all college students must pay astronomical amount of money to receive this socialist thought education, if you can not afford, get a loan to pay for it.
  • Josh Jones on December 21 2016 said:
    I'm confused... why would anyone care about what this guy thinks, much less give him a forum to promote his idiotic predictions? And why call it oilprice.com? You might as well predict world peace in 2017 and the end of time in 2031.
  • Adrian on December 21 2016 said:
    For an early view of the future, keep an eye on Norway's petroleum demand. Plug-ins are now nearly 25% of the passenger and light-duty vehicle market there.

    For the moment, gasoline demand there is shrinking and distillates are flat.
  • Adrian on December 21 2016 said:
    Citymoments: You do know that silicon is obtained from sand, right?

    Sounds as though you may have some additional axes to grind.
  • Adrian on December 21 2016 said:
    Joe - Module prices for utility-scale projects are roughly $0.40/watt today. Your 100W panel is down to $40 at the end of 2016, from roughly $60 at the start of the year. There's no bottom in sight yet.

    The world-record solar PV 20-year PPA is currently $29.90/MWh (Abu Dhabi, earlier this year) . Progress towards $10/MWh by 2025 is being made rapidly.
  • GregS on December 21 2016 said:
    From the article "He lays out five tsunamis: solar power, battery storage, electric vehicles, “smart” buildings, and cheap hydrogen"

    Where is this cheap hydrogen going to come from?
  • zipsprite on December 21 2016 said:
    Agree with Bill Simpson that hydrogen cars will never win out. They are incredibly more complicated (expensive) than battery-electric and the infrastructure to refuel is a deal killer alone. Infrastructure for electric cars could not be more widespread. Battery technology will continue to improve and costs decline, while vehicle costs will decline with scale. Electric cars are not only far more efficient than gas or diesel, they are inherently simpler. Maintenance costs will be a small fraction of an ICE (internal combustion engine) powered car. NO oil changes, tune ups, fluid changes, exhaust replacement, very little if any brake work,...... the list goes on. As they scale up, the many advantages will at some point overwhelm fossil fuel powered cars. When BYD starts exporting an affordable electric car to the US (or building it here), the writing will be on the wall for gasoline powered cars. You can argue about when and how fast this will happen, but it WILL happen. My guess is the economic consequences that ripple through the economy as a result of this will be larger and more disruptive than those of the widespread adoption of computers and electronic devices.
  • citymoments on December 21 2016 said:
    My apology regarding silicon Mining, anyone interested in this subject please read the following paragraph. Please note the enormous energy needed during the process - Only at 1900 C, the chemical reaction is possible. Only fossil fuel based energy, the whole metallurgical process is impossible.


    Metallurgical grade silicon is commercially prepared by the reaction of high-purity silica wit wood, charcoal, and coal in an electric arc furnace using carbon electrodes. At temperatures over 1,900 °C (3,450 °F), the carbon in the aforementioned materials and the silicon undergo the chemical reaction:

    SiO2 + 2 C ? Si + 2 CO
    Liquid silicon collects in the bottom of the furnace, which is then drained and cooled. The silicon produced in this manner is called metallurgical grade silicon and is at least 98% pure. Using this method, silicon carbide (SiC) may also form from an excess of carbon in one or both of the following ways:

    SiO2 + C ? SiO + CO
    SiO + 2 C ? SiC + CO
    However, provided the concentration of SiO2 is kept high, the silicon carbide can be eliminated by the chemical reaction:

    2 SiC + SiO2 ? 3 Si + 2 CO
    As noted above, metallurgical grade silicon "metal" has its primary use in the aluminium casting industry to make aluminium-silicon alloy parts. The remainder (about 45%) is used by the chemical industry, where it is primarily employed to make fumed silica, with the rest used in production of other fine chemicals such as silanes and some types of silicones.[34]

    As of September 2008, metallurgical grade silicon costs about US$1.45 per pound ($3.20/kg),[35] up from $0.77 per pound ($1.70/kg) in 2005.[36]
  • Joe on December 21 2016 said:
    Adrian: Thanks. Let us know as soon as we get there. Joe.
  • david on December 22 2016 said:
    Ok. Great article, but we get it, some people are short on oil.
  • John on December 22 2016 said:
    Joe, The record price for solar was set in Chile, at $29.1 Per MWh. There are some errors in your maths, which has led to the wrong conclusion:

    “Your comment on solar energy selling for $10 per megawatt hr has all sorts of implications.
    I take it Engie SA's innovation chief believes that facilities can be built with a decent rate of return that can deliver power for $10 per megawatt hour. Some of the cheapest power available presently is in jurisdictions where hydro electric is the main source of power. I've seen power delivered at 10 cents per kWh which is $100 per megawatt hr. So he thinks solar will be 10 times cheaper in 10 years than hydro electric power is today. Let's put that into perspective. Currently inexpensive solar panels can produce power for a dollar per watt.”

    OK

    “You could have a mega watt of capacity for a million dollars."

    OK

    “If you ran that system for one hour you would produce one megawatt hr of power.”

    OK

    “Generally the claim is that a panel can last for 25 years and will generate a meaningful amount of electricity for 6 hours per day.”

    25% capacity factor, OK

    “Multiplying 6 hrs per day x 365 days per year yields about 2200 hrs.”

    OK

    “This assumes every day is a sunny day. (I wish).”

    This assumes it has a 25% capacity factor, solar typically has 10-25% capacity factor

    “To be competitive with hydro electric the power would have to be sold for $100 per megawatt hr.”

    OK

    “So, this system which cost a million dollars to build would generate $220,000 worth of power with a one million dollar investment.”

    $100 per mWh x 2200hrs = $220,000 per year
    $220,000 x 25 years = $5,500,000 worth of power in total

    “Of course we haven't included the labour to set up the system or the rental for the land it sits on. “

    Typically $0.50 per watt, so $1,500,000 total install cost, land is generally deserts, unstable land fill sites, nuclear contaminated land.

    $1,500,000 investment, $5,500,000 worth of power, based on those corrected calculations.
  • Wacher on December 23 2016 said:
    There is so much crap in that building these days. Starting from the top floor.
  • Joe on December 23 2016 said:
    John, yes, thanks, I meant to say $220,000 per year, which means about a 6.8 year payout. This is where things are for commercial installations if it's sunny everyday and the land is free. Lepercq, the gentleman who is being referred to, says we're headed to a situation that is even 10 times better. Let's regroup when we get there. Thanks. Joe.
  • Lee James on December 25 2016 said:
    The article points to the rather interesting fact that it is European oil companies that see a future beyond oil. Statoil, Total and Engi are becoming energy companies -- diversified, and forward looking.

    Still, I'll guess that oil will remain in demand for its energy intensity and dense energy storage. I'm thinking, for example, of most but not all aircraft.

    I'll guess that the market price of oil will go higher than today's price, but the volume demanded will drop off appreciably over the next 30 years.
  • Ajay on January 08 2017 said:
    EV buyers beware! The battery could be supplied by the same supplier for Note 7.
  • Jonathan Pulliam on January 11 2017 said:
    Untrue.

    It costs more energy to manufacture a photo-voltaic solar cell than it will ever return during it's entire service lifespan.

    That means fossil fuels alone has a smaller "carbon footprint" than fossil fuels plus solar.
  • Barbra on January 12 2017 said:
    I think few of us forgot the concept of Economies Of Scale.
    If current solar panel cost $1/Whr , it doesn't mean solar panel will cost $1000/kWhr.

    Similarly, if 10 workers build one home in 100 days then it doesn't mean 1000 workers build same home in 1 day.

    Also technological innovations are on the way and multiple factors influence demand and supply of any product or commodity.
  • Bharath on January 18 2017 said:
    many commentators here dont have knowledge on ground reality. Just look back into november before opec oil cut deal and assume if the deal doesn't take place, oil would have gone to low levels of $35. And what is the deal just to cut 1.2 million barrels???
    Now asume if we can replace a million buses which consumes 3-5 barrels per day is replaced with an EV , it will lessen the demand by 5 million barrels. now check how many new electric buses r running on road and how many will come by 2020.. and forget about cars
  • Chris Curro on January 19 2017 said:
    When prices shift so does demand and vice versa. Shift demand from energy source 1 (Oil) to energy source 2 (Nat Gas/Electricty/etc) and the cost of energy source 1 falls as the cost of energy source 2 rises. These types of demand/cost shifts are rarely taken into account and cost curves are unrealistically assumed to remain flat. None of this happens in a vacuum.

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