- In December the nations of the world agreed unanimously in Paris to leave most of the world fossil fuels in the ground.
- Oil demand has been declining in developed countries for over a decade.
- Electric vehicle sales are exploding around the world, especially China.
- Battery prices are continuing their unexpectedly rapid price drop.
- Tesla and Chevy now say their new 200-mile-range EV could cost Americans $30,000 — a game-changing price.
In November, a Bloomberg Business story, “The Oil Industry Has Been Put on Notice,” warned “the transformation of oil markets may be coming sooner than we think.” This recent Bloomberg New Energy Finance chart includes oil forecasts the International Energy Agency (IEA) has made since 1994:
Is it possible that the world is actually going to follow the path of the “Transport Transformation Scenario” and peak in oil demand by 2030 or so? At this point I think is not only possible, but likely.
It is increasingly clear that technology will be here to make that possible — indeed, the technology is almost here now (see this recent post, “Tesla And GM Announce Affordable, Long-Range Electric Cars”). Same with the renewables needed to power electric cars carbon-free (see “Why The Renewables Revolution Is Now Unstoppable“).
The core issue now is whether the nations of the world will embrace the policies needed to accelerate those technologies into the marketplace fast enough to cause demand to actually peak in one to two decades globally — much as oil demand in the industrialized countries appears to have peaked a decade ago.
The key reason for optimism is that in the historic Paris climate deal from December, some two hundred leading nations unanimously embraced a plan that will leave most of the world’s fossil fuels unburned. That plan is an ongoing effort of increasingly deeper reductions in carbon pollution aimed at keeping total warming “to well below 2°C [3.6°F] above preindustrial levels” — with the parties further agreeing “to pursue efforts to limit the temperature increase to 1.5°C above preindustrial levels.”
To keep warming below 2°C requires essentially every country to have zero net fossil fuel emissions by century’s end. The current pledges by 186 developed and developing countries — intended nationally determined contributions (INDCs) — only take us the first step of the way:
The INDCs flatten out carbon pollution emissions through 2030. Not coincidentally, global CO2 emissions have plateaued the last two years, which suggests the multi-trillion-dollar global shift in investment from high-carbon growth to low-carbon has already begun.
Humanity may already have a precedent for voluntarily leaving so much of a valuable fossil fuel in the ground: Global coal consumption appears to have peaked back in 2013.
That peak in coal use is being driven by a broad trend over the last decade of the industrialized countries reducing coal use coupled with the recent sharp reversal in Chinese coal consumption. We already have a similar trend over the last decade of the industrialized (OECD) countries reducing oil consumption:
CREDIT: BP Statistical Review, peakoil.com
The question then is whether the developing world’s recent rapid growth in oil consumption will slow over the next 15 years — and then ultimately reverse itself as the developed world has. After all, to stay anywhere near the 2°C pathway, global fossil fuel consumption has to start declining fairly rapidly after 2030.
As with the reversal of global coal trends, the reversal of global oil trends will depend a great deal on China, since China has been the key driver of the developing world’s growth in oil demand. Significantly, just as China’s recent coal policy has been more motivated by its desire to slash its horrendous urban air pollution than by its desire to avoid catastrophic climate change, so too is China’s oil and transportation policy. After all, it is both coal burning and dirty vehicles that give cities like Beijing its exceedingly unhealthy air quality.
That is one reason China has made such a massive investment in batteries and electric vehicles (EVs). The other reason is that China understands the future is low-carbon and then zero-carbon — so it plans to become the world leader in both the production and use of battery electric vehicles, just as it already has in both wind and solar power.
Here are China’s monthly EV sales for the past three years:
CREDIT: EV Volumes
BYD projects that China’s EV market will double in size this year, and again in 2017, and then again in 2018. That would mean China’s EV sales would blow past one million vehicles a year with three years.
“If China gets moving on electric cars then that would automatically lower prices and have a favorable ripple effect across the whole world,” as Ernst and Young auto expert Jean-Francois Belorgey has said. That is precisely what happened in the solar photovoltaics industry, which led to the exponential explosion in solar power worldwide this decade.
We appear near the same kind of inflection point in batteries and electric cars that we were in PV. Yes, oil prices are low, but even at these prices, EVs still have a much lower per-mile fueling cost than gasoline cars.
You might think that low oil prices would be fueling a boom in oil consumption in developing countries. But as the Wall Street Journal explained last week, low prices for oil (and other commodities) hurt the economies of many developing countries, stifling demand growth.
For the longer term, two things matter most. First, battery and EV trends are all but certain to continue as volume grows exponentially. Second, while the world is starting to get serious about avoiding catastrophic climate change, we haven’t gotten desperate yet, which is inevitable in the 2020s as the reality of accelerating climate change becomes increasingly obvious and the need to adopt increasingly strong policies to keep total warming below 2°C becomes increasingly urgent.
The idea of peak oil supply — the notion that our reach (demand) for oil would exceed our grasp (global supply) — is dead. It appears instead that homo sapiens might just be wise enough not to over-reach, that we may voluntarily let go of oil (and coal) before they destroy a livable climate for the next 50 generations. Let’s hope so.