We are witnessing a historic moment for oil and for the energy industry as a whole as the world moves toward a clean energy transition that has been catalyzed considerably by the COVID-19 pandemic. Even before the novel coronavirus disrupted the global economy and international industries and supply chains, there was already a lot of talk about peak oil coming up around the bend and renewable energies such as solar and wind power have been getting cheaper and more efficient by the year, outgrowing subsidies and becoming competitive with some fossil fuels. COVID-19 has only fast-tracked this energy transition as world leaders rush to create green stimulus packages for post-pandemic economic recovery at the urging of such experts as the World Economic Forum, which has advocated for a “new energy order” and a “great reset.” In fact, the tide has turned on emissions-heavy fossil fuels to the extent that Big Oil’s most profitable industry is no longer oil, and in Europe supermajor oil companies are looking to reinvest and rebrand themselves as Big Energy. “Over the past decade, the ‘oil’ companies, whose profits were mostly derived from pumping crude out of the oil fields they discovered, transformed themselves into ‘oil and gas’ companies,” oil strategist Julian Lee wrote for Bloomberg Opinion in August. “Now they are evolving once again to become ‘energy’ companies. Shell’s latest report shows that almost half of its production was natural gas, compared with less than 40 percent in 2005.” Today, this trend is continuing outside of Europe and across the globe as we witness some of the world’s biggest oil companies look to diversify in order to stay relevant and in the black.
In Turkey and Pakistan, this trend has manifested in a particularly surprising way. “If you live in Turkey or Pakistan and are looking to sell your car, the world’s biggest independent oil trader wants to make a deal,” Bloomberg reported this week. “Vitol Group, which traded more than 8 million barrels of oil and petroleum products a day in 2019, is getting into the used-car business.” The Dutch company Vitol Group’s newest venture is called Vava Cars, and it has lofty ambitions to take over the sector and become “the most trusted car transaction platform in the world,” according to the Vava Cars website.
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Vitol, a company whose “core business” consists of “buying, blending and transporting oil and refined hydrocarbon products” has openly pointed to peak oil as the reason that the company is branching out into such far-flung economic sectors as used car sales. What’s more, Vitol freely acknowledges that they believe peak oil to be right around the corner, just ten years from now in 2030. While a decade might seem like a considerable amount of time, it’s not a big window to redesign the entire basis of a business that’s been built entirely on oil for the last 50 years.
In addition to moving into used automobile markets, Vitol has also “made investments in wind, solar and battery storage while recently beefing up its power trading business” and has “invested in one company that converts plastic into diesel and another that uses coal to create hydrocarbon liquids. It’s also bankrolling a proposed carbon capture and hydrogen project in the U.K.,” according to Bloomberg’s reporting.
Vitol’s fractured and somewhat schizophrenic case of indecisive investment is illustrative of the state of the oil industry as a whole. With such an uncertain future, the only sure bet is diversification, and trying to corner any small part of the future green energy economy possible. Renewable energy technology is improving and evolving rapidly, and it’s hard to say whether the future global economy will run on solar-based energy communities, green hydrogen, blue ammonia, or whether nuclear fusion will swoop in and save us all from catastrophic climate change. In the meantime, Big Oil is doing what it can to weather the storm steadily gathering on the horizon.
By Haley Zaremba for Oilprice.com
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In the aftermath of the Cuban Missile crisis in 1961 when the former Soviet Union under Nikita Khrushchev had to withdraw Russian missiles from Cuba to avoid a nuclear war, he remarked that “long grass bends to the wind but stands again”. It transpired that in return for withdrawing his missiles from Cuba, Khrushchev extracted from President Kennedy a promise not to invade Cuba and to withdraw American Thor missiles from Turkey in return. Both promises were kept.
And yet, the American media portrayed the crisis as a straight win for Kennedy. So the author of this article should sift through news and reports to separate the chaff from the wheat before coming up with outlandish and misconceived conclusions.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London