Powering Along
Powering Along
Now I know some of you hate numbers but if you just grit your teeth and read on, you might find some sunlight to cheer you in this gloomy world of ours.....
In June BP released their 2016 Statistical Review of World Energy. As usual it is a veritable treasure trove of information. However, unlike in previous years, I will just highlight a couple of key numbers. Current global oil reserves (oil in the ground) are 1,698 billion barrels, enough to last more than 50 years at current consumption rates. Venezuela, Saudi Arabia, Canada, Iran and Iraq are the countries with the largest reserves. Meanwhile global coal reserves are 891 billion tonnes, enough to last 114 years. The USA, Russia, China and Australia are the countries with the largest coal reserves.
One of the criticisms levelled against the BP review is that the numbers are based on official numbers released by the various governments. This is understandable. After all, to survive, BP needs to be able to operate globally, especially in OPEC countries where member quotas are based on their respective reserves. The Norwegian consultancy Rystad Energy, which is not so constrained, has performed a field by field analysis which estimates world oil reserves at 2,092 billion barrels, or 70 times the current production rate. Their analysis shows that the largest reserves are held by the USA, Russia, Saudi Arabia and Canada, a very different list than that of BP.
Now while it’s fine to have oil in the ground, there’s a cost to getting it out of the ground and into your car’s fuel tank. Another consultancy, Wood Mackenzie, has conducted research which, unexpectedly, shows that some US shale projects are more viable than conventional oil projects while the crude price is below US$ 60. In fact only three major conventional oil development projects worldwide are seen as being feasible at these prices.
Now, faced with just that subset of information you are bound to conclude that oil prices just have to rise otherwise we are going to run out of fuel and the world is going to grind to a halt. However there’s a chance we could be about to witness a change comparable with Model T Fords replacing horse drawn vehicles just over 100 years ago.
According to Bloomberg New Energy Finance the unsubsidised cost of ownership of an electric vehicle will fall below a petrol driven car by 2022. Currently batteries make up a third of the cost of an electric car; the cost of lithium ion battery packs has reduced from US$ 1,000 per kWh in 2010 to US$ 350 in 2016, falling 35% in 2015 alone. Electric vehicles could displace oil demand of 2 million barrels a day as early as 2023. That would create a glut of oil equivalent to what triggered the 2014 oil crisis.
China is planning to have five million electric cars on the road by 2020. Already there are 70,000 electric cars in the UK and 96% of motorway service stations have fast charge points. Britain’s Go Low Ultra, a government and industry-supported scheme to boost ownership of green vehicles, predicts around 1.3 million electric cars will be bought in the UK in 2027, exceeding petrol and diesel car sales for the first time.
While improvements in battery technology address one of the shortcomings of electric cars, the other criticism is that so much electricity for charging the batteries is generated from burning carbon. However even on this front we are seeing new light. Since 2013 the world has been adding more electricity-generating capacity from wind and solar than from coal, natural gas, and oil combined. Again according to Bloomberg New Energy Finance, solar panels installations are showing around 50% growth each year, while energy reducing LED light-bulb sales are soaring by about 140% per annum. In fact, the price for solar could drop so much that almost all coal mining companies could be out of business by 2025.
We can already see it happening. Earlier this year the Chinese government cancelled more than 200 coal fired power station projects and is reducing thermal coal output by 280 million tonnes in 2016 as part of a reduction of 500 million tonnes. May was the first month since 1882, when the first power station was built, that the United Kingdom had a period when no electricity was being produced from coal. In the same month, Portugal operated for four days straight on renewable energy alone.
Incidentally, it’s not just the oil and coal sectors that are about to take a knock. The latest World Nuclear Industry status report paints a gloomy picture of nuclear plants being decommissioned and new builds being cancelled. Watch for France’s EDF using Brexit as an excuse to cancel Britain’s Hinckley Point rebuild.
If you go back to my earlier paragraphs you can quickly see which regions of the world – and, by extension, which companies – are going to be big time losers if this future comes about. Watch for them continuing to misinform and bribe the political powers that be to delay the inevitable for as long as possible. However at the end of the day economics - and not just a belief that greener is better - is going to win through.
Useful Links
BP 2016 Statistical Review of World Energy
Rystad Energy
Bloomberg Energy Report
Chinese Electric Cars
United Kingdom Electric Car Forecast
United Kingdom Ultra Low Campaign
China Power - Reuters
China Power – The Diplomat
China Power - Greenpeace
Energy Economics – The Guardian
Energy Economics – The Atlantic
Portuguese Power – The Guardian
World Nuclear Industry Status Report
Now I know some of you hate numbers but if you just grit your teeth and read on, you might find some sunlight to cheer you in this gloomy world of ours.....
In June BP released their 2016 Statistical Review of World Energy. As usual it is a veritable treasure trove of information. However, unlike in previous years, I will just highlight a couple of key numbers. Current global oil reserves (oil in the ground) are 1,698 billion barrels, enough to last more than 50 years at current consumption rates. Venezuela, Saudi Arabia, Canada, Iran and Iraq are the countries with the largest reserves. Meanwhile global coal reserves are 891 billion tonnes, enough to last 114 years. The USA, Russia, China and Australia are the countries with the largest coal reserves.
One of the criticisms levelled against the BP review is that the numbers are based on official numbers released by the various governments. This is understandable. After all, to survive, BP needs to be able to operate globally, especially in OPEC countries where member quotas are based on their respective reserves. The Norwegian consultancy Rystad Energy, which is not so constrained, has performed a field by field analysis which estimates world oil reserves at 2,092 billion barrels, or 70 times the current production rate. Their analysis shows that the largest reserves are held by the USA, Russia, Saudi Arabia and Canada, a very different list than that of BP.
Now while it’s fine to have oil in the ground, there’s a cost to getting it out of the ground and into your car’s fuel tank. Another consultancy, Wood Mackenzie, has conducted research which, unexpectedly, shows that some US shale projects are more viable than conventional oil projects while the crude price is below US$ 60. In fact only three major conventional oil development projects worldwide are seen as being feasible at these prices.
Now, faced with just that subset of information you are bound to conclude that oil prices just have to rise otherwise we are going to run out of fuel and the world is going to grind to a halt. However there’s a chance we could be about to witness a change comparable with Model T Fords replacing horse drawn vehicles just over 100 years ago.
According to Bloomberg New Energy Finance the unsubsidised cost of ownership of an electric vehicle will fall below a petrol driven car by 2022. Currently batteries make up a third of the cost of an electric car; the cost of lithium ion battery packs has reduced from US$ 1,000 per kWh in 2010 to US$ 350 in 2016, falling 35% in 2015 alone. Electric vehicles could displace oil demand of 2 million barrels a day as early as 2023. That would create a glut of oil equivalent to what triggered the 2014 oil crisis.
China is planning to have five million electric cars on the road by 2020. Already there are 70,000 electric cars in the UK and 96% of motorway service stations have fast charge points. Britain’s Go Low Ultra, a government and industry-supported scheme to boost ownership of green vehicles, predicts around 1.3 million electric cars will be bought in the UK in 2027, exceeding petrol and diesel car sales for the first time.
While improvements in battery technology address one of the shortcomings of electric cars, the other criticism is that so much electricity for charging the batteries is generated from burning carbon. However even on this front we are seeing new light. Since 2013 the world has been adding more electricity-generating capacity from wind and solar than from coal, natural gas, and oil combined. Again according to Bloomberg New Energy Finance, solar panels installations are showing around 50% growth each year, while energy reducing LED light-bulb sales are soaring by about 140% per annum. In fact, the price for solar could drop so much that almost all coal mining companies could be out of business by 2025.
We can already see it happening. Earlier this year the Chinese government cancelled more than 200 coal fired power station projects and is reducing thermal coal output by 280 million tonnes in 2016 as part of a reduction of 500 million tonnes. May was the first month since 1882, when the first power station was built, that the United Kingdom had a period when no electricity was being produced from coal. In the same month, Portugal operated for four days straight on renewable energy alone.
Incidentally, it’s not just the oil and coal sectors that are about to take a knock. The latest World Nuclear Industry status report paints a gloomy picture of nuclear plants being decommissioned and new builds being cancelled. Watch for France’s EDF using Brexit as an excuse to cancel Britain’s Hinckley Point rebuild.
If you go back to my earlier paragraphs you can quickly see which regions of the world – and, by extension, which companies – are going to be big time losers if this future comes about. Watch for them continuing to misinform and bribe the political powers that be to delay the inevitable for as long as possible. However at the end of the day economics - and not just a belief that greener is better - is going to win through.
Useful Links
BP 2016 Statistical Review of World Energy
Rystad Energy
Bloomberg Energy Report
Chinese Electric Cars
United Kingdom Electric Car Forecast
United Kingdom Ultra Low Campaign
China Power - Reuters
China Power – The Diplomat
China Power - Greenpeace
Energy Economics – The Guardian
Energy Economics – The Atlantic
Portuguese Power – The Guardian
World Nuclear Industry Status Report
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