Fossil Fuels Go the Way of the Dinosaur

processing whale oil

We see Oil Companies starting to relinquish their 'drill baby drill' grip on the more expensive-to- extract oil fields.  With high inventories and low prices for an extended period of months, it has become cost-ineffective to extract that oil, which SHOULD be left in the ground, particularly given the fragile eco-systems surrounding them.  We are beginning to see the key phrase 'stranded asset' appear, for example, in the context of Arctic oil drilling.
We see oil economy nations like Saudi Arabia announcing their plans to get out of the oil business over the next twenty years (or less).  They clearly see the writing on the wall, that fossil fuels are done, over, finished, obsolete - and dangerous.  As noted Middle East observer and expert Juan Cole wrote recently:

Saudi crown prince Muhammad bin Salman announced Friday that Saudi Arabia would use its oil assets to back a $2 trillion sovereign wealth fund. The move suggested to many observers that the kingdom is preparing for a likely end of the petroleum business and transitioning to being primarily an investor. While it is true that the money for the sovereign wealth fund is expected to come from petroleum sales, it also seems clear that the kingdom recognizes that it has a stranded asset that won’t be nearly as valuable in a decade or two as it is now. It could even end up, like coal, being regulated out of existence in many countries.
Here are 3 reasons Saudi Arabia is likely making this massive change in economic strategy:
1. Climate change denial, which the Saudis pushed and helped fund, has failed. A majority of Americans now accepts that humans burning fossil fuels is causing global warming. And that’s in anti-science, capitalist-ridden America. Everywhere else in the world it goes without saying. Since the impact of global warming will become increasingly apparent in the coming decades, likely pressure to abandon burning fossil fuels will grow. Already, most new investment in power plants is in renewables, not coal and gas.
2. Another fossil fuel, coal, is being quickly phased out and will likely be illegal in fifteen or twenty years. It is being phased out by the Environmental Protection Agency because it puts out pollutants, including CO2. The writing is on the wall for coal and petroleum.
3. More affordable, longer-range electric cars are now coming on the market, with the Chevy Bolt due next December and Tesla 3 the following year. Most petroleum is used for transportation, so electric vehicles are deadly to that market. The new generation of electric cars is less than $30,000 in the US after tax rebates. And it typically can go 200 miles on a charge. Tesla is putting fast recharging stations everywhere it can, and people have already gone across the country in a Tesla. Battery costs are falling and batteries are becoming more efficient, so the writing is on the wall for the combustion engine. Consumers are combining electric cars with solar panels on their houses, getting free fuel. Low gasoline prices won’t impede solar car sales because prices would have to fall another dollar US before EVs would not be worth it.
In as little as fifteen to twenty years, petroleum may be illegal in some places; and will be in retreat everywhere. Saudi oil is a stranded asset. So they are attempting to create a revenue stream from investments. As for fossil fuels, their business model is under severe pressure.

And we see economic reports like this one, which for those international oil companies that aren't being open about their awareness of the obsolescence of oil, that their days are numbered if they don't get out of oil, and instead get into something else.  From Climate News Network:

Oil majors told to adapt or die

As profits and prices plummet, the oil conglomerates – some of the world’s biggest companies – have been warned they must change their ways or face extinction.

By Kieran Cooke
LONDON, 9 May, 2016 – At best, big oil companies such as ExxonMobil, Shell, Chevron and BP face a period of gentle decline, but will ultimately survive. At worst, if they do not adapt and change direction, “what remains of their existence will be nasty, brutish and short”. That’s the core message of a research paper on the oil corporates by one of the UK’s leading energy experts, Paul Stevens, a senior research fellow at the London-based Chatham House thinktank, the Royal Institute of International Affairs. Present management strategies within the oil majors have failed to deliver value to shareholders, and profits are declining sharply, Stevens says.

There are parallels in the coal industry, and in natural gas. Like the 'olden days' of the 19th century, when whale oil became obsolete (and harder to come by) and was replaced by petroleum products, beginning with kerosene and progressing to other petroleum distillates like gasoline and fuel oil.  Coal is dead; while there appear to be die-hards who cannot accept that change is inevitable, it does not change the reality that we have always evolved new forms of energy - including steam and gas in their heyday, which were then replaced by electricity.
This has been a key issue in the 2016 election cycle, the capacity to acknowledge the dead end of fossil fuel and the need to move forward with new infrastructure, new job training, towards cleaner renewable more modern energy.  Conservatives can't or won't make that change; but if they don't do so voluntarily, it will be thrust upon them.  Their only choice is how they respond to change, not IF the change will occur, or when.