Hydrocarbon producers which are already under the pressure of environmental concerns are facing a fresh threat of reduced demand for their crude arising from plans by industrial nations to cut oil consumption in the transport sector.
The plans were outlined in a project white paper released early this month by the
World Economic Forum (WEF) in collaboration with Booz & Company under the title “Repowering Transport”, according to a key Arab oil investment group.
The white paper is intended to provide a comprehensive and well‐articulated framework of key enablers that are critical for deploying the technologies needed to drive diversification and energy efficiency in the transport sector and reduce transport‐related emissions, said the Arab Petroleum Investment Corporation (Apicorp), an affiliate of the Organization of Arab Petroleum Exporting Countries.
The paper identifies the policy measures, types of partnerships and financing mechanisms required to overcome the challenges at each stage of
the technology lifecycle, Apicorp said in a three-page study authored by Ali Aissaoui, Senior Consultant at the Dammam-based group.
“Repowering the transport system may be characterized as a megatrend likely to have a significant and enduring impact on oil markets in the coming decades. By reviewing WEF‐Booz’s study we aim to further our understanding of this megatrend and raise awareness of the challenges facing petroleum producing countries whose economic prospects are closely bound to the extent oil will continue fueling global transport,” said the study, sent to Emirates 24/7.
Aissaoui said the WEF‐Booz collaborative study can be seen as an expression of the energy security/environment nexus.
The study observes that, currently, more than 60 per cent of oil consumed every day powers the world’s transportation system and more than 96 per cent of current energy supply to the transport sector is from liquid fossil fuels.
Under a “business as usual” scenario, global transport will use 41 per cent more energy in 2030 than it does today, with little change to the mix of sources.
As a result, vulnerability to potential energy supply risks would increase and transport‐related emissions (CO2 emissions and local air pollution) would rise in step with energy consumption, according to Aissaoui.
Given global concerns regarding these issues, such a trajectory is deemed “neither desirable nor socially, economically, or environmentally sustainable.” “Therefore, reducing oil use and emissions is seen as a vital goal that can be achieved through the deployment of the full range of existing and new technologies. In this context, the study breaks new ground by transcending the discussion of these technologies and going beyond the policy measures usually advocated in the field,” said Aissaoui, an Algerian.
“Indeed, it provides a broader analytical framework whose rationale is explained in terms of cross‐effect of policy, partnerships and financing on alternative fuels, energy efficiency and grid‐enabled vehicles.”
Aissaoui said he believes the energy security/environment “nexus” stands as the foremost economic challenge for petroleum producing countries, whose long term fiscal sustainability is expected to continue to be overwhelmingly dependent on future hydrocarbon export revenues.
“The impact of mitigation policies, particularly in the transport sector, which is the mainstay of oil demand, would have far‐reaching implications for many of them…. the WEF‐Booz study convincingly demonstrates that, with better articulated policies, well‐adapted cross‐partnerships and collaborative financing, this sector can undergo a radical transformation,” he said.
“In this regard, we consider it worth reiterating that the study’s ‘rapid deployment’ scenario would lead to a significant shift in the energy source mix….in such a case, even though oil will continue to be the dominant fuel for transport over the next 20 years, consumption could well be reduced below today’s level.”
Aissaoui said the impact would be even greater for the period beyond 2030, which the study did not attempt to measure, as more reductions are likely to occur when grid‐enabled vehicles would have moved beyond niche markets.
“Not to mention the likelihood that hydrogen‐powered vehicles (fuel cell type) might emerge as potent successors to these vehicles,” he said.
“To conclude, we may observe that a structural shift away from oil has already taken place in industry and power generation.
As a result, transport remains the sole potential driver of petroleum demand growth.
The WEFBooz study can serve as a timely reminder of the need to factor more forceful trends into their strategic planning.
Realigning their long term vision is a priority the implication of which is to give more impetus to their current economic diversification effort.”
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