Opec puts head in sand over clean cars
Opec remains defiant. Global reliance on oil and gas will continue unchanged for another quarter century. Fossil fuels will make up 78 per cent of the world’s energy in 2040, barely less than today.
There will be no meaningful advances in technology. Rivals will sputter and mostly waste money. The old energy order is preserved in aspic.
Emissions of CO2 will carry on rising as if nothing significant had been agreed in a solemn and binding accord by 190 countries at the Paris climate summit.
Opec’s World Oil Outlook released this month is a remarkable document, the apologia of a pre-modern vested interest that refuses to see the writing on the wall.
The underlying message is that the COP21 deal is of no relevance to the oil industry. Pledges by world leaders to drastically alter the trajectory of greenhouse gas emissions before 2040 — let alone to reach total “decarbonisation’’ by 2070 — are simply ignored.
Global demand for crude oil will rise by 18 million barrels a day (b/d) to 110 million by 2040. The cartel has shaved its long-term forecast slightly by 1 million b/d, but this is in part because of weaker economic growth.
The 407-page report swats aside electric vehicles with impatience. The fleet of cars in the world will rise from 1 billion to 2.1 billion over the next 25 years and 94 per cent will still run on petrol and diesel.
“Without a technology breakthrough, battery electric vehicles are not expected to gain significant market share in the foreseeable future,” it said.
Electric cars cost too much. Their range is too short. The batteries are defective in hot or cold conditions.
Opec says battery costs may fall by 30 to 50 per cent over the next quarter century but doubts this will be enough to make much difference, the result of “consumer resistance”.
This is a brave call given that Apple and Google have thrown their vast resources into the race for plug-in vehicles, and Tesla’s Model 3s will be on the market by 2017 for around US$35,000.
Ford has just announced it will invest US$4.5 billion in electric and hybrid cars, with 13 models for sale by 2020.
Volkswagen is to unveil its “completely new concept car” next month, promising a new era of “affordable long-distance electromobility”.
The Opec report is equally dismissive of Toyota’s decision to bet its future on hydrogen fuel cars, starting with the Mirai as a loss-leader. One should have thought that a decision by the world’s biggest car company to end all production of petrol and diesel cars by 2050 might be a wake-up call.
Goldman Sachs expects ‘‘gridconnected vehicles’’ to capture 22 per cent of the global market within a decade, with sales of 25 million a year, and by then — it says — the car giants will think twice before investing any more money in the internal combustion engine. Once critical mass is reached, it is not hard to imagine a wholesale shift to electrification in the 2030s.
Goldman is betting that battery costs will fall by 60 per cent over the next five years, driven by economies of scale as much as by technology. The driving range will increase by 70 per cent.
This is another world from Opec’s forecast. Even this may well be overtaken soon by further leaps in science. A team of Cambridge chemists says it has cracked the technology of a lithium-air battery with 90 per cent efficiency, able to power a car from London to Edinburgh on a single charge. It promises to cut costs by four-fifths, and could be on the road in a decade.
There is now a global race to win the battery prize. The US Department of Energy is funding a project by the Universities of Michigan, Stanford, and Chicago, in concert with the Argonne and Lawrence Berkeley national laboratories. The Japan Science and Technology Agency has its own project in Osaka. South Korea and China are mobilising their research centres.
Opec does not deny that the Paris accords change the energy landscape, but they view this as a problem strictly for the coal industry. There will be a partial switch from coal to gas, with a little nuclear thrown in, along with a risible contribution from wind and solar.
Saudi Arabia’s belief that it can carry on with business as usual into the mid-21st century is what informs the current Opec strategy of flooding the crude market to eliminate rivals.
There is now a global race to win the
battery prize.
The report admits this is proving to be a costly undertaking. Tight oil and shale in North America has not buckled and Opec now expects it to keep rising slightly next year to 4.5 million b/d, and again to 4.7 million in 2017. In the meantime, Opec revenues have crashed from US$1.2 trillion in 2012 to nearer US$400 billion.
This policy has eroded global spare capacity to a wafer-thin 1.5 million b/d, leaving the world vulnerable to a future shock.
Sheikh Ahmed Zaki Yamani, the former Saudi oil minister, warned in an interview with the Telegraph 15 years ago that this moment of reckoning was coming.
“Thirty years from now there will be a huge amount of oil — and no buyers. Oil will be left in the ground. The Stone Age came to an end, not because we had a lack of stones.”
They did not listen to him then, and they are not listening now.