Oil will need to be traded at $ 9-10 a barrel in the long run if gasoline wants to compete with electric cars and renewable energy, which will be much cheaper.
In an article published on Oil Price, Nick Cunningham said that the French international banking group BNP Paribas warned in a new report that crude oil is likely to face an existential threat from renewable energy and electric vehicles.
Mark Lewis, head of sustainability research at Asset Management at BNP Paribas, said that "oil economies are now declining continuously after comparing gasoline and diesel vehicles with wind and solar electric vehicles. This will have far-reaching implications." Policy makers and big oil companies. "
Oil sector growth
The critical problem for crude oil is the possibility of a decline in the growth of the entire sector.
In this context, Lewis said that oil has a low energy return on invested capital when comparing a certain amount of energy that comes from the same volume of capital spent. How much useful energy is produced when the dollar is spent buying different forms of energy?
BNP Paribas said the oil price should be between $ 9 and $ 10 a barrel if gasoline wants to compete with renewable energy sources as well as electric vehicles. For diesel, the long-term break-even price is between $ 17 and $ 19.
He noted that oil has a huge flow rate, but that will last for a limited time.
Oil can provide a huge boost of energy because its production rates are huge and its global supply chain is too large, making its consumption easy and convenient. But over 25 years of operation, wind and solar will be much cheaper.
Renewable Energy Economics
"We believe that it is impossible for oil to compete with the economics of renewable energy sources when viewed during the economic cycle," Lewis wrote in the French World Banking Group report. Oil Price Report.
The world will need to spend $ 25 trillion on gasoline needs over the next 25 years.
`` We estimate that the cost of completed new renewable energy projects with the improved network infrastructure needed for the 2018 level of mobility provided by gasoline each year over the next 25 years is only $ 4.6 to $ 5.2 trillion, '' Lewis wrote in his report. ".
"The oil industry in its history has never faced the kind of threat that renewable energy and electric vehicles pose to its business model," Lewis said.
The reasons for the decline
The writer touched on the reasons that reveal how the value of oil will decline
First, the cost of renewable energy is short-term at zero, indicating the fact that once the solar and wind energy infrastructure is established, the energy it produces will be free.
Second, renewable energy plays an important role in protecting the environment.
Third, the transmission of electricity is easier than liquid fuel.
Fourth, renewable energy sources are likely to offset about 40% of global oil demand.
The major challenge facing the renewable energy sector is the amount of jobs created by fossil fuel companies.
In conclusion, it will be difficult for the sector to overcome the global oil and gas supply chain in the short term.