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
More Top Reads From Oilprice.com:
- Why Oil Markets Don’t Have To Worry About Libya
- Musk’s Space X: Down But Not Out
- Oil Holds Steady On Holiday Trading
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.
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.
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.
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.
For the moment, gasoline demand there is shrinking and distillates are flat.
Sounds as though you may have some additional axes to grind.
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.
Where is this cheap hydrogen going to come from?
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.
As of September 2008, metallurgical grade silicon costs about US$1.45 per pound ($3.20/kg), up from $0.77 per pound ($1.70/kg) in 2005.
“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.”
25% capacity factor, OK
“Multiplying 6 hrs per day x 365 days per year yields about 2200 hrs.”
“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.”
“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.
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.
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.
If current solar panel cost $1/Whr , it doesn't mean solar panel will cost $1000/kWhr.
Similarly, if 10 workers build one home in 100 days then it doesn't mean 1000 workers build same home in 1 day.
Also technological innovations are on the way and multiple factors influence demand and supply of any product or commodity.
Now asume if we can replace a million buses which consumes 3-5 barrels per day is replaced with an EV , it will lessen the demand by 5 million barrels. now check how many new electric buses r running on road and how many will come by 2020.. and forget about cars
À robot taxi could easly replace 10 cars and on big cities this will become soon a reality... we will soon enter aera of taas in and arrond big cities due to restriction.
the cost of ev roboter taxi service could be less than owning a car specially in big cities and 1% of that car fleet would generate 10%fuel économy. This will happen in major oil net importing countries like japan india china korea France Spain leaving an exedent of oil and price drop. Somewhere someone will not find a buyer for his oil.... and this will then generate price drop... under 40$ is possible for short période of Time.
Most of the worldwide mercedes high cost diesel taxi fleet will be replaced by a 20 times bigger fleet of autonomus mini ev taxi fleet from Lyft uber grab tesla Google Apple Renault VW Mercedes etc etc.
Prof Tony Seba from Stanford University and his team have détailled how and when this will happen.