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Hitherto, power generation has been the energy sector most amenable to decarbonisation. As the global economy grows by 3-3.5 per cent over the coming decade, electricity will take an increasing share of the overall energy mix. This will be driven by rapidly increasing urbanisation, especially in Africa and Asia, with 2 billion more people living in cities by 2040. But even with renewables taking an increasing share of generation, rising by 7 per cent a year, gas use will continue to grow strongly for some decades. Coal is expected to maintain its current production as its share of the overall cake declines.

But other sectors, especially transport and industry, are likely to remain strongholds of fossil fuel use — though there will be a gradual shift from oil to natural gas (again reducing carbon intensity). BP’s most recent Energy Outlook shows oil demand rising until 2035 before reaching a plateau. Natural gas use will almost equal oil’s by 2040, while the dramatic increase in renewables may still leave it in fourth place behind coal.

Transport is the big one. While humans continue to drive diesel and petrol vehicles, and to fly in airplanes that burn jet kerosene, the oil industry has little to fear. BP’s forecast, even if taken with a pinch of salt, dramatically illustrates oil’s transport market dominance. The forecasts for electricity are based on a rapid increase in electric vehicles, but from a low base.

One area where that might change is in shipping. Although statistics for fuel consumption in this sector are notoriously unreliable, it is safe to say that they account for about 7 per cent of global oil demand. Three quarters of this is heavy fuel oil, the dirtiest end of the oil barrel, and the rest marine diesel. The International Maritime Organization (IMO) pledged recently to reduce greenhouse gas emissions at least 50 per cent by 2050, compared to 2008 levels. One way of doing that would be to switch from oil fuel to liquefied natural gas (LNG), of which there is a rapidly growing supply, thanks in part to US shale. That of course would be an enormous job, a process lasting many years, involving the complete replacement of the current world cargo fleet. LNG emits about 30 per cent less CO2 than oil fuels, and to get to the 50 per cent figure some calculate that it would be necessary to blend in biogas to the LNG. The bottom line is that none of this will happen in a hurry.

Should the fossil fuel industries be concerned about divestment? And should investors be concerned about the value of their oil, gas and coal holdings? In both cases, the answer is a cautious “no”. It is argued that oil companies should begin to scale back investment in new production, and return more cash to shareholders. But barring a technological silver bullet — cheap, easy and large-scale battery storage, for instance — the realities of global economic growth combined with the relatively low cost of oil, gas and coal, mean that the old dinosaurs have a few decades to flourish yet before they too become fossils. Although they will be grazing alongside the renewable energy mammals of the future.

And John D. Rockefeller? A ruthless capitalist, he was also a devout Baptist who used his immense wealth largely for philanthropic purposes. He might not entirely disapprove of his descendants’ turn away from fossil fuel. As he once said: “If you want to succeed you should strike out on new paths, rather than travel the worn paths of accepted success.”
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June 29th, 2018
11:06 AM
Excellent informed points. Energy does not equal tobacco. It is essential to life and to modern life. Mr. Rockefeller would agree to divesting only after his billions were safe and secure. That is in fact the background of the decision of his pious descendants

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