Are we running out of oil?

Summary

The video explores the shift in concerns from 'peak oil' due to supply shortages to a plateau in oil demand, driven by the rise of renewable energy and electric vehicles. While fossil fuels are still necessary, the demand for oil is expected to peak by 2030. This will affect prices, oil companies, and economies reliant on fossil fuel revenue. Renewables now offer cheaper energy alternatives, and major investments are transitioning towards cleaner technologies. However, oil companies are still heavily invested in fossil fuels, raising concerns about stranded assets and financial risks for individuals and nations.

Takeaways

• 🌍 A geoscientist from Shell predicted in 1956 that global oil production would peak around 2000, causing panic over potential financial crises and resource depletion.
• ⛽ Predictions about 'peak oil' have resurfaced over the years, with expectations of supply issues and rising prices that never materialized.
• 🔋 The conversation around fossil fuels has changed, with the growing influence of renewable energy and the rise of electric vehicles.
• ⚡ Renewables have become more cost-effective, and investment in solar, wind, and green technology has surged, especially in 2023.
• 📉 The International Energy Agency predicts that oil demand will peak around 2030, not supply, marking a significant shift in the energy landscape.
• 💼 Falling demand for oil could mean lower prices and profits, causing concern for the oil industry, which continues to expand despite declining demand projections.
• 🛢 Hydraulic fracturing (fracking) has allowed for significant oil production, particularly in the U.S., impacting global markets and oversupply concerns.
• 📊 Major oil companies, despite promoting a green agenda, still heavily invest in fossil fuels, with renewables making up a small portion of their budgets.
• 💰 Stranded assets from unprofitable oil projects could pose financial risks for countries heavily reliant on oil revenues and pension funds invested in fossil fuels.
• 🔄 The world is steadily transitioning to renewables, but fossil fuels will remain part of the energy mix for some time as backup power and transport infrastructure catch up.

Q & A

What was the key prediction made by the geoscientist in 1956?

In 1956, a geoscientist for Shell and professor at Stanford projected that global oil production would peak around the year 2000, which was a significant shock at a time when oil was driving much of the global economy.

What were some of the fears associated with the concept of 'peak oil'?

The fear was that if oil production peaked and started to decline, it would lead to a global financial crisis or even an apocalypse due to the world’s reliance on oil for economic growth.

Why didn't the predicted oil supply problems occur in the early 2010s?

Despite predictions that oil supply issues would begin around 2011, the anticipated problems never happened, likely due to technological advancements like fracking and the growing shift toward renewable energy sources.

How have renewables changed the conversation about oil supply?

With the rise of renewable energy and greater awareness of climate change, the conversation has shifted from concerns about running out of oil to managing a plateau in oil demand, as renewables have become cheaper and more widely adopted.

What was the significant event regarding renewable investments in 2023?

In 2023, global investments in renewables far exceeded investments in fossil fuels for the first time, marking a turning point in the energy sector.

What does the term 'peak demand' mean in the context of oil?

'Peak demand' refers to the point where global demand for oil will plateau and eventually decline, which the International Energy Agency predicts will occur by 2030, as opposed to the past fears of running out of oil.

What impact could declining oil demand have on fossil fuel prices and companies?

Declining oil demand could lead to falling prices for fossil fuels, affecting profits for oil companies, which are still largely banking on rising demand despite the shift towards renewables.

How has hydraulic fracturing (fracking) impacted global oil production?

Fracking, which involves injecting water and chemicals into rocks to release oil, has significantly boosted oil production in countries like the United States, making it the largest oil producer and affecting global oil markets.

What risks do state-owned oil companies face in the transition to renewables?

State-owned oil companies, such as Russia’s Rosneft and Saudi Aramco, face the risk of investing in fossil fuel projects that may become stranded assets if demand for oil declines, potentially leading to economic and fiscal crises in their home countries.

What is the broader implication of continuing fossil fuel use despite the growth of renewables?

While renewables are growing rapidly, fossil fuels will still be needed for backup power and other infrastructure. However, the continued use of fossil fuels poses a risk to the environment and is becoming less financially viable.

Outlines

00:00

🔍 The Changing Landscape of Oil Supply and Demand

In 1956, a geoscientist predicted that global oil production would peak around 2000, causing widespread alarm about potential crises. Over time, similar predictions about peak oil have arisen, but none have materialized. In the early 2000s, the idea of depleting fossil fuel reserves was seen as catastrophic, but today, with the rise of renewable energy and electric vehicles, the conversation has shifted. Renewables now play a significant role in energy production, and major investments are being made in green technologies, particularly by countries like the United States and China. This evolution has transformed the meaning of the 'end of oil' from a supply crisis to a shift in demand patterns.

05:01

📉 The Rise of Renewables and the Decline of Oil Demand

The concern surrounding oil has shifted from supply issues to a plateau in demand, predicted to peak by 2030, according to the International Energy Agency. This poses a problem for the fossil fuel industry, as lower demand and steady supply could drive down prices, reducing profitability. Historically, oil demand has consistently increased, except during the 2020 pandemic, making the current situation a significant change. Although oil supplies are abundant, the focus on renewables and the decline in demand make it harder to justify new fossil fuel projects. Fracking, a technology that boosted U.S. oil production, has contributed to oversupply, further complicating the industry's future prospects.

Keywords

💡Peak Oil

Peak oil refers to the point in time when the maximum rate of global petroleum extraction is reached, after which production will enter terminal decline. This concept was central to the video's historical context, illustrating the fears and predictions of oil scarcity in the past. The script mentioned that in 1956, a projection was made that global oil production would peak around the year 2000, which was a significant concern at the time.

💡Renewables

Renewables are energy sources that are naturally replenished on a human timescale, such as solar, wind, and hydroelectric power. The video highlights the growing role of renewables in the global energy mix, contrasting with the declining importance of fossil fuels. The script notes that in 2023, investment in renewables exceeded that in fossil fuels, indicating a significant shift in energy production.

💡Electric Vehicles (EVs)

Electric vehicles are vehicles that use electric motors for propulsion, typically powered by batteries or fuel cells. The video discusses the rise of electric vehicles as a symbol of the transition away from fossil fuels. It provides statistics showing a significant increase in the sale of electric vehicles from 5% in 2020 to 14% in 2022.

💡Fracking

Fracking, or hydraulic fracturing, is a technique used to extract oil and gas from shale rock formations by injecting a high-pressure fluid. The video mentions fracking as a technology that has contributed to an oversupply of oil, particularly in the United States, which has become the world's largest oil producer as a result.

💡Stranded Assets

Stranded assets are investments that have suffered from unanticipated or premature write-downs, depreciation, or devaluation, often due to changes in market conditions or regulation. The video discusses the risk of future oil projects becoming stranded assets as demand for oil plateaus and the world shifts towards renewables.

💡Demand Peak

A demand peak refers to the point at which the demand for a resource reaches its maximum and then begins to decline. The video contrasts the concept of peak oil with a peak in demand, suggesting that the latter is a more pressing concern. The International Energy Agency's report predicts a peak in oil demand by 2030, not a peak in supply.

💡Investment

Investment in the context of the video refers to the allocation of capital towards ventures expected to generate profit or value in the future. The script discusses how investment is shifting from fossil fuels to renewables, reflecting a market response to changing energy dynamics and the potential obsolescence of fossil fuel infrastructure.

💡Climate Change

Climate change is a long-term change in the statistical distribution of weather patterns, including temperature, precipitation, and wind patterns. The video implies that growing awareness of climate change has driven the increased adoption of renewable energy sources and the decline in reliance on fossil fuels.

💡Fossil Fuels

Fossil fuels are hydrocarbon-based energy sources, such as coal, oil, and natural gas, formed from the remains of ancient plants and animals. The video discusses the historical dominance of fossil fuels in the global energy mix and the challenges of transitioning away from them due to their economic and political significance.

💡Energy Storage

Energy storage involves the capture of energy produced at one time for use at a later time. The video suggests that improvements in energy storage are necessary for a complete transition away from fossil fuels, as they are currently used as backup power when renewable sources like wind and solar are not available.

💡Pension Funds

Pension funds are long-term savings invested to provide retirement income. The video points out that many pension funds are invested in oil and gas companies, which could lead to financial insecurity for retirees if these companies face significant declines in value due to the transition away from fossil fuels.

Highlights

In 1956, a geoscientist projected global oil production would peak around the year 2000, causing concerns about a global financial crisis or apocalypse.

Predictions about peak oil emerged again in 2011, with fears of high prices for food, fuel, and impacts on agriculture and electricity, none of which materialized.

The shift in focus from oil supply issues to the rise of renewable energy, electric vehicles, and a global investment boom in green technologies has reshaped the conversation.

In 2022, investments in renewables matched those in fossil fuels, and by 2023, renewable energy investments exceeded fossil fuels for the first time.

The International Energy Agency (IEA) predicted in October 2023 that the peak in demand for oil and fossil fuels would come by 2030, not due to supply constraints but because of declining demand.

Hydraulic fracturing (fracking) technology has boosted oil supplies, particularly in the United States, making the country the largest oil producer.

Major oil-producing countries, like Saudi Arabia and Kuwait, have reduced output due to oversupply in the market, creating a shift in global oil dynamics.

Oil companies like Shell, Exxon, and Total Energies continue to invest in fossil fuels, despite public claims of shifting to renewables, banking on future demand.

Fracking and new oil extraction technologies have extended oil reserves, suggesting there’s enough oil to last about 40 years with current reserves.

State-owned companies like Rosneft and Saudi Aramco continue to invest in fossil fuel projects, even as they may become stranded assets due to falling demand.

Countries reliant on oil exports face significant economic risks as the transition to renewables accelerates, threatening up to 40% of their fiscal budgets.

Pension funds heavily invested in oil and gas could face serious financial risks if oil companies underperform due to the energy transition.

Renewables are becoming a smarter financial investment, with cheaper costs and less risk of future unprofitability compared to fossil fuel projects.

Despite growth in renewables, fossil fuels will still be necessary for backup power and energy storage, particularly as nuclear energy remains underdeveloped.

The transition from fossil fuels to renewables is inevitable, with a shift in focus from fearing an end to oil supply to concerns about overconsumption and climate impact.

Transcripts

In 1956,

a geoscientist for Shell and professor at Stanford

projected that global oil production

would peak around the year 2000.

This came as a huge shock at a time

when oil was driving

more and more of the economy.

Some people thought

it would mean a global financial crisis,

and others, a full-on apocalypse.

Since then,

predictions about peak oil

have popped up again and again.

Supply problems were supposed to start in 2011,

with effects noticeable by 2015.

There was talk of high prices for food and fuel,

supposed to impact agriculture and electricity.

But none of this ever happened.

The supply problems

that everyone freaked out about never came.

So what did happen?

And should we be worried about running out of oil?

First, looking at this question now

is completely different from decades ago,

because there have been huge changes in our lives.

In the early 2000s,

we weren't really thinking about life

without fossil fuels.

Electric vehicles were nearly unheard of.

So an end of our oil supplies seemed

like an existential crisis for the planet.

With growing awareness of climate change,

renewables have taken off,

and the amount of them

in the mix has grown hugely.

It's now cheaper to generate electricity

from solar and wind

than from fossil fuels.

There's also way more attention on electric vehicles -

14% of new vehicles sold globally in 2022

were electric,

compared to just 5% in 2020.

Even the United States and China, two huge polluters,

are making hefty investments into green technology.

And something pretty special happened in 2023.

"We're looking at renewables investment,

which clearly has been growing rapidly,

in 2022 to match that from fossil fuels

and in 2023 far exceeded it."

Mike Coffin used to work for BP

and now researches

how markets align with climate policy.

"And clearly that gap is only set to widen."

While not much would move without fossil fuels,

and oil in particular,

the future of renewables

is looking brighter and brighter.

And that has made 'the end of oil' take

on a whole new meaning.

"If you go back to, say, about 15 to 20 years back,

there was a concern that the oil supply is going to peak.

We're going to run out of oil."

Atul Arya is an engineer

and Standard & Poor's Chief Energy Strategist.

"Now, the concern is somewhat different,

which is that we're going to hit a peak

or a plateau in demand."

This is a really huge shift.

In October 2023,

the International Energy Agency

published a report predicting the end of oil

and other fossil fuels.

Only this time,

the end is a peak in demand, not supply.

And it is predicted to come in 2030.

High demand and low supply means a high price.

Low demand and high supply means a low price.

Oil executives around the world

were up in arms over the report.

Because less demand

with the same amount of supply

would mean falling prices for fossil fuels,

and less profit for the industry.

This is a big deal,

since demand for oil has been growing every year

except 2020, when COVID hit.

This wouldn't mean

that we won't use fossil fuels anymore,

rather that it would become much harder

to justify new fossil fuel projects.

Because our supply of fossil fuels is doing great.

"We're not running out of oil

and probably not going to run out of oil.

Based on the current reserves,

we have about 40 years of oil."

And that doesn't even count

all the new planned projects.

This is mostly thanks to a newish technology

called hydraulic fracturing or fracking.

Fracking is a process

that involves injecting a slushie of water

and chemicals into rock,

creating tons of tiny cracks.

This allows oil and gas

to escape and be collected at the surface.

The wastewater is then often injected

deep underground,

which can contaminate the local environment

and cause earthquakes.

Fracking took off in the United States

in the early 2000s,

and the country now produces more oil per year

than any other nation in the world.

So much that it's affecting other countries.

"Take Saudi Arabia or UAE or Kuwait.

And actually right now,

because of so much oversupply in the market,

they are producing a lot less

than what they can produce."

So on the one hand

we might have an oversupply of oil,

And on the other, plateauing demand.

Also, investors turning away from fossil fuels.

But oil companies are used to expanding,

And major oil producers

like Shell, Exxon and Total energies

are all still betting on rising demand.

"The data suggested that all companies,

except maybe BP,

were increasing oil production."

Faye Holder is the lead researcher on a report

that investigated oil companies'

communication and claims.

"Total Energies stated it was forecast

to spend 25% of its CapEx for 2022

in renewables, in electricity.

But when you look at what that includes,

it also includes some kind of gas fired power."

They may seem

like they're shifting towards renewables,

but they are actually still banking on

a fossil fuel future.

"The business operations aren't changing

particularly or at the pace needed.

They're also lobbying against policies

that would force that change

or bring it about quicker.

But at the same time,

promoting this very public narrative

that they are doing all they can."

State-owned oil companies

like Russian Rosneft and Saudi Aramco

are also betting on future money

from fossil fuels,

even though projects approved now

may never be profitable.

New sites take years to build up infrastructure

and to get ready for drilling.

In financial terms,

they might become stranded assets -

something that was invested in

but became obsolete.

"For some countries,

30 to 40% of entire fiscal budget could be at risk

as the transition unfolds or an oil prices fall.

So that's going to have a massive impact

on the economies of these countries and

crucially on living standards of those

in these countries."

And that impact

could also hit individual citizens directly.

Many pension funds around the world

are invested in oil and gas.

If these companies fail spectacularly,

millions of people could be plunged

into financial insecurity in their old age.

So faced with the end of oil,

it seems like investing in renewables

is the smart financial decision.

They're cheaper,

and there is less risk of new projects

becoming stranded

and unprofitable in the future.

"All of that is going to help us move away from oil.

But it's not going to be overnight."

Because according to all predictions,

we're going to continue to need

fossil fuels for a while.

They're used as backup power

when wind and solar aren't running,

and widespread nuclear isn't likely

to come online in time.

Transport and energy storage also need to improve

for us to be able to quit them entirely.

But the more investment goes in,

the more renewables improve.

And we desperately need that

to keep existing on this planet.

But we are on the way.

It's no longer a question of if, but when.

Instead of being concerned about

an end to our oil supply,

we should be worried about

pumping too much of it.

With falling demand

and a world shifting to renewables,

it's not a smart decision,

either financially or for our life on this planet.

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