After a terrible couple of years, this looks like a good time for the fossil fuels sector. Oil prices are on the up again, President Donald Trump promises to sweep away many of the restrictions the industry had imposed upon it during the Obama Administration, the former head of ExxonMobil is Secretary of State and there is even talk of watering down fuel economy requirements.
Trump has pushed through executive orders to revive the Keystone XL and Dakota Access pipelines and he has even promised to revive the moribund US coal industry, causing shares in coal miners to soar. But a new report suggests that demand for coal and oil could peak thanks to dramatic falls in the cost of solar power and electric vehicles.
The report, Expect the Unexpected: The Disruptive Power of Low-Carbon Technology, co-authored by the Grantham Institute for the study of Climate Change and the Environment at Imperial College, London and the Carbon Tracker Initiative, says that the big energy companies are seriously under-estimating the speed at which low-carbon technologies are advancing and they could be left with stranded assets unless they change their approach.
The growth in sales of electric vehicles could cut demand for oil by 2 million barrels per day as soon as 2025, the report says – the same amount that caused the oil price to collapse in 2014-15. The market for EVs is currently growing by 60% year-on-year and there are already more than 1 million on the roads. Battery costs fell by 73% to $268/kWh in the seven years to 2015 according to the US Department of Energy, and Tesla, the electric car maker, predicts they will reach $100/kWh.
Carbon Tracker says that EVs will be cheaper than conventional internal combustion engines from 2024 and could have a fifth of the road transport market by 2030. Add in growth in hydrogen cars and petrol/electric hybrids, and conventional ICEs could account for less than half the market. By 2050 EVs sales could hit 1.7 billion (69% of the market) while ICEs would make up just 12%.
This could displace 25m bpd of oil by 2050, in stark contrast to the continuous growth in oil demand the industry expects. BP’s 2017 outlook expects EVs to make up just 6% of the market in 2035.