Royal Dutch Shell (NYSE: RDS.A) has just released new forecasts for its ‘New Lens Scenarios’ program, which aims to predict how current business decision and policies may unfold over time and affect the markets in the future.
Peter Voser, the CEO of Shell, explained that the scenarios “highlight the need for business and government to find ways to collaborate, fostering policies that promote the development and use of cleaner energy and improve energy efficiency.”
The scenarios take two different approaches: one considers the world with a high level of government involvement, and the other looks at the markets when they are given more freedom to develop naturally.
With high government involvement in dictating energy and policies, Shell believes that natural gas will flourish to become the number one energy source in the world over the next couple of decades, overtaking coal and helping to reduce carbon emissions.
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It also predicts that hydrogen and electric power cars would become the common methods of transportation and as a result oil prices will drop. This in turn will mean that high-cost unconventional fossil fuels would remain in the ground as it would be economically unfeasible to extract them.
The other scenario exists when the government has taken little interest in the markets and has instead allowed the economy to progress naturally. Fossil fuel demand, especially for coal, would grow around the world. High oil demand would lead to higher prices, which sustain drilling for unconventional reserves in harsh, expensive environments. High energy prices in general will lead to more investment in research of alternative sources of energy, which will eventually cause solar power to become the dominant source of energy on the planet in about 50 years time.
In neither scenario do we manage to reduce greenhouse gas emissions sufficiently to limit temperature rise to two degrees Celsius.
By. Charles Kennedy of Oilprice.com