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Nick Cunningham

Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

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Big Pivot In Energy Is Gaining Momentum

For years, the oil and gas industry has boasted about the longevity and durability of oil and gas reserves despite growing signs that peak oil demand is around the corner. Many companies shrugged off the threat. Suddenly, however, there appears to be a scramble underway by energy companies to begin preparing for the peak and to transition to cleaner forms of energy.

The tone at the IHS CERAWeek Conference in Houston was glaringly different than in years past, with one oil executive after another talking up the need to address climate change and prepare for a low-carbon world. To some degree, this is lip service. Very few, if any, companies are making proactive decisions to leave their reserves in the ground and unburned. 

But we seem to be in the midst of a major change in the industry, and one that is not just about a shift in rhetoric. Norway’s $1 trillion sovereign wealth fund recently recommended divesting from upstream oil and gas companies, a move that sent shockwaves through the industry.

Other signs of change abound. Many oil companies are suddenly backing methane regulations. Shareholders are pressuring companies to acknowledge their long-term risks to climate change. Royal Dutch Shell is aiming to reduce carbon emissions by 2 to 3 percent between 2016 and 2021, the first specific target laid out by the company. Importantly, executive pay will be linked to those goals.

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  • Mamdouh Salameh on March 22 2019 said:
    While nobody could argue against the need to address climate change issues, many of those who are doing the talking are trying to burnish their environmental credentials by cosying up to the environmental lobby exactly as Norway’s Sovereign Wealth Fund did when it decided to divest itself of $37 billion worth of its oil and gas stocks.

    The Fund’s decision is a huge misjudgement based on faulty assumptions, namely law return on oil and gas stocks and a dubious claim of a looming peak oil demand. It might have been receiving biased environmental advice rather than sound financial advice.

    The argument about declining return on oil and gas stocks is not only erroneous but it can’t be substantiated under any scenarios. Norway’s sovereign wealth fund has only to look at the huge profits the oil majors like Shell, ExxonMobil and Statoil are making to realize the absurdity of such a claim.

    If Norway’s sovereign fund was advised by oil experts like me rather than being influenced by the environmental lobby, it would have realized that there will never be a post-oil era or a peak oil demand throughout the 21st century and far beyond.

    Of recent times, many projections have been made about peak oil demand the latest of which comes from Vitol, the world’s largest oil trader, which is projecting that oil demand to reach a peak within 15 years.

    There could never be a post-oil era because it is very doubtful that an alternative as versatile and practicable as oil, particularly in transport, could totally replace oil in the next 100 years and beyond. Oil will continue to be used extensively in the global petrochemical industry and other industries and outlets from pharmaceuticals to plastics, aviation and computers to agriculture which can’t continue to feed 8 billion people without oil and also in transport in most of the developing countries. Oil will continue to reign supreme throughout the 21st century and far beyond.

    There will never be a peak oil demand either. Global oil demand will never peak throughout the 21st century and far beyond because electric vehicles (EVs) will never be able to replace oil in global transport. They will only decelerate the growth of global demand for oil. Even the introduction of 350 million EVs by 2040 which is an impossibility will only displace 9% of the oil used in global transport or 11 million barrels of oil a day (mbd) out of 120 mbd used by then.

    It is a valid economic principle that oil producers and investors should always aim to maximize the return on their assets and investments. If there will be neither a post-oil era nor a peak oil demand, it follows that investors will look for opportunities in the most profitable outlets in the world. The global oil industry is and will continue to be the most profitable industry for the foreseeable future.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Bill Simpson on March 22 2019 said:
    Young people had better hope that wind and solar can be developed fast enough to replace energy from oil and gas as they begin to run out, or become too expensive to use to power the world, as they do today. A barrel of oil that is bid up to $1,000 due to scarcity might as well be on the Moon because it is too expensive to use in the quantity needed to keep the economy functioning.
    Industrial civilization of all the developed countries is completely dependent on a vast amount of energy per person. Decrease the energy available for any reason, and the entire system will soon collapse due the tremendous level of debt throughout the financial system. If you doubt that will happen, study what happened in 2008, after people could no longer pay their mortgages. Watch the documentaries about it on YouTube. That was nothing compared to the bankruptcies that would occur with a global transportation shortage from not being able to get enough oil to move goods and people. And one airliner can burn more fuel that hundreds of cars. Air travel is projected to double in the next 15 years.
    As far as climate change, that battle was lost 50 years ago. Plan for rising seas and hotter summers. The risk from climate change is trivial compared to the risk from a financial meltdown. A banking system collapse could kill billions of people because little commerce can functions if the banks are all closed. Like former Treasury Secretary, Hank Paulson, said after the 2008 financial crisis, 'Nobody knew how to put a collapsed banking system back together and get it working again. We didn't know if it could ever be done, or where to start.'

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