Multiple Trends Turning Slowly Against Oil, Says Rocky Mountain Institute

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Oil well (photo by John Hill)

Oil well (photo by John Hill)

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The cost of a barrel of oil is now just a fraction of what it was several years ago, and fuel prices have mostly fallen across the globe as a result.

Oil prices rise and fall, but most industry analysts suggest that the emergence of North American production has loosened OPEC's ability to set prices unilaterally.

Still, we hear less about the supposed phenomenon of "Peak Oil" than we did a few years ago.

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And while energy investors have severely punished coal-company stocks, on widespread worries that much of their in-ground assets will never be mined, oil today remains a vital and necessary part of the global economy.

But a provocative new article by Amory Lovins, who heads the futurist Rocky Mountain Institute, suggests that economic forces may slowly be turning against the long-term prospects for oil's role as the dominant fuel for vehicles--and those of natural gas as the preferred fuel for electric generation.

The argument is that with new renewable sources continuing to fall in price even as installations of many kinds soar globally, natural gas is becoming uncompetitive--even without a price on its carbon emissions.

Vauxhall Ampera

Vauxhall Ampera

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The article is worth reading in full, and can be found here. We urge a full reading, so we're not going to recapitulate its points in this piece.

And it requires readers to consider a longer time horizon than the short-term, quarterly-driven analyses favored by financial commentary.

It's not about gas prices for your next  holiday road trip, but the arc of energy production over your lifetime (and perhaps beyond).

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We ran the piece past our occasional source in the oil and gas industry, who's worked in the field for 30 years now--and usually provides some realpolitik to our often optimistic futurism.

The responses to the article included the following points, among others:

  • Lovins' goals for reduction in the carbon footprint of energy generation by 2050 are reasonable for North America and parts of Europe, but he does not explain how the developing world--which will account for virtually all new energy usage--will get there as well.
  • Worldwide demand for oil is 90 million barrels a day today, and few analysts see the historic 1-percent annual growth rate changing.
  • Lovins suggests "frontier oil" is getting more costly, but in fact advances in extraction technology are steadily cutting the cost of previously unreachable and uneconomic deposits.

Natural gas flaring from oil well [licensed under Creative Commons from Flickr user Sirdle]

Natural gas flaring from oil well [licensed under Creative Commons from Flickr user Sirdle]

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The real-world response to Lovins' optimistic prediction was, in effect, "Yep, the oil business is hard, dirty, dangerous, very expensive, and very long-range--been that way since the start."

It's now been more than 100 years since Charles Kettering's invention of the electric self-starter made gasoline-powered vehicles practical for those who didn't want to run the risk of a car breaking their arm during crank-starting.

And the energy density of liquid hydrocarbons remains an order of magnitude better than that of the best batteries envisioned today, though electric cars use that energy far more efficiently.

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Lovins resurrects an interesting piece of history to show that demand for vital commodities can in fact vanish rapidly, as technology advances provide better solutions that supplant their main use.

"In the 1850s, whalers—America’s fifth-largest industry—were astounded to run out of customers before they ran out of whales," he writes.

Even before the 1859 discovery of crude oil in Pennsylvania, he writes, both oil and gas synthesized from coal swiftly erased the whale-oil market.

Photovoltaic solar power field at Volkswagen plant in Chattanooga, Tennessee

Photovoltaic solar power field at Volkswagen plant in Chattanooga, Tennessee

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And just two decades later, Edison invented electric lighting.

Agree with Lovins' hypothesis or not, it's a good perspective to keep in mind--even if it requires a point of view stretching past some of our lifetimes.


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