Oil states and companies such as BP, Shell and ExxonMobil are intent on exploiting new oilfields despite the clear evidence that the world is rapidly cruising through its carbon budget.
However, investors should perhaps note that the International Energy Agency (IEA) is forecasting that peak oil is at hand. In other words, supply will soon outstrip demand, making investment in new oilfields unlikely to be profitable.
The IEA’s predictions are based on the take-up of electric vehicles, particularly in China. The main impetus behind the increasing market for oil over the past 15 years has been the demand for cars from the increasingly affluent Chinese public.
But now the majority of Chinese electric cars are cheaper than those powered by petrol or diesel.
This, coupled with the switch of heavy goods vehicles to liquified natural gas (LNG) and the country’s high-speed rail network (using hydrogen, electricity and coal) means Chinese demand for oil will drop, according to the agency.
This switch is taking place everywhere, though at a lower speed, the IEA says.
Last year 20% of cars sold globally were electric, a figure expected to rise to close to 50% by 2030, and continuing to grow thereafter.
Oil demand will therefore peak by the end of this decade and start to fall. New oilfields, especially with high development costs, may soon become stranded assets. Good news for the climate.
