Rising oil prices: an inevitable transition to renewable energies

CSP energy oil barrel price

It's mathematical: it's only a matter of time before there is an oil shortage. The transition to a less hydrocarbon-dependent economy is thus inevitable, as the remaining oil will become too expensive. According to experts, this day is fast approaching, as world hydrocarbon demand continues to increase, but oil resources remain limited.

The price of oil is established in relation to supply and demand. When the price of a barrel is high, demand decreases and the world economy is affected. Meanwhile, a decrease in the price of oil tends to stimulate demand and thus the economy. A decline in voluntary or non-voluntary production capacity may also lead to an increase in oil prices, as was the case with the oil shocks of 1973 and 1979. Western economies were then highly dependent on black gold and the surge of prices resulting from this shortage immediately triggered a recession in the global economy.

History of oil prices since 1973 :

  • 1973: following the defeat of the Arab countries in the war against Israel, the producer countries decided to increase their price by 70% in retaliation. The price of a barrel went from about $ 3 US to $ 11.65 (the equivalent of $ 60 US today); this was the first oil shock.
  • 1979: the Iran-Iraq war greatly affected the production capacity of the two countries. Crude oil prices peaked at $ 40 US (the equivalent of $ 126.8 US today)
  • 1986: OPEP producing countries imposed a price war on non-aligned competitors: they flooded the market and raised the price per barrel to $ 8 ($ 17.2 today), but in 1990 , just prior to the Gulf War, the barrel passed briefly above $ 40 ($ 71.4 today)
  • 1997: OPEP committed an error which increased its production by 10% without taking into account the economic crisis that then struck Asia. Prices collapsed to less than $ 10 a barrel ($ 14.5 today). After cutting production, OPEP countries reduced this to $ 32 two years later (the equivalent of $ 43.7 today).
  • 2005: Hurricane Katrina hit the coast of the Gulf of Mexico and reduced US production. The price of a barrel exceeded the $ 70 mark (84.3 today). This was the third oil shock.
  • 2008: an absolute record of US $ 147 ($ 157.5 today) per barrel, following a sharp increase in Chinese demand and a drop in US stocks. In 2009, the subprime crisis would plunge the global economy and demand for oil. The barrel would then rise to $ 32 ($ 35 today).
  • 2011: Conflict in Libya, the barrel reached a peak of $ 127 US (134.7 today).
  • 2014-2016: China's demand falls and a new price war was being waged by the OPEP countries and more particularly by Saudi Arabia to counter the production of shale hydrocarbon in the United States. The barrel fell below $ 30 US.
  • November 22, 2016: the price of a barrel was of about $ 48 US

Historically, the price of oil has always fluctuated, but there has been an increase in the price of hydrocarbons over the long term since the beginning of the modern economy. Well beyond the geopolitical uncertainties that affect the price of black gold, the pace of discovery of new deposits is slowing down and will not support the global consumption of oil that only continues to grow. Today, world oil consumption is about 96.7 million barrels per day, while experts estimate that the world's oil production capacity should reach a production ceiling of 100 million barrels per day in the near future.

Some, like Ron Patterson, are predicting several possible scenarios; the most optimistic predict to a slowdown and a peak in production in 2040, while others predict such a downturn to occur no later than in 2020.

From this relatively close point on the horizon, and given the projections of global energy growth, there will be a shortage of energy and the price of oil will only continue to increase. Therefore, according to the various predictions, we will be forced into a more or less brutal transition towards an economy less dependent on fossil fuels.

This energy transition will thus favour companies and countries less dependent on hydrocarbons that will have already invested in renewable energies in a preventive way, prior to suffering the full impact. A major indicator of this trend occurred on March 10th; a UN report mentioned that investments in renewable energy had reached a record of 286 billion, compared to 130 billion US dollars of investment in fossil fuels. Moreover, the report mentioned that for the first time, developing countries had invested more ($ 156 billion) than developed countries ($ 130 billion) in renewable energies.

A new world is emerging, with new opportunities for renewable energy technologies.