So Big Oil is Losing the Energy War? – In this article and several related articles, we will discuss the Tesla revolution. Namely a revolution in the field of vehicles from the mainstream using fossil fuels with its ICE engine into electric vehicles. So, to understand the overall course of the Tesla revolution, please refer to the following article links;
So Big Oil is Losing the Energy War?
In the aftermath of the oil price spike of 2008, a remarkable development is changing the face of the oil industry. Nearly all the oil and gas majors have started to have severe difficulties replenishing their oil reserves, and production for several is declining. The eight international majors from North America and Europe, which have traditionally dominated oil markets, saw their production drop by 10% to 20%, except for ExxonMobil and Chevron, and reserves for the future were barely maintained. Their share in world oil production is now a mere 12%, down from 17% just 10 years ago. At the same time, exploration and development costs have increased for these majors from below $10 per barrel to at least $30 per barrel. Investment in the oil majors is increasingly less attractive, with return on capital invested dropping from 10%+ to about 5%. 2015, Total, Shell, and Statoil even had stunning negative capital returns to stockholders.
In a bid to prolong fossil fuel growth in the face of their limited long-term prospects for oil, the eight corporations have embarked on a gas-driven strategy. In the UK, Statoil launched a multimillion-dollar campaign called ‘Fueling the Future’ to boost the image of natural gas. ExxonMobil sent the message that the company produced more electricity from natural gas than ever before as part of its ‘Energy Lives Here’ campaign. And Total is ‘committed to better energy’ as a global campaign, of which natural gas is a key part. In the last three years, ConocoPhillips, Eni, Shell, Total, and ExxonMobil also produced equal or more gas than oil.
The strategy is unlikely to be sufficient, except if natural gas becomes the dominant source of energy. Car companies and governments are now investing heavily in alternative vehicles. Once phase 2 in our energy revolution is reached in the 2020s, in which growth in car use is met predominantly by electric cars, growth in oil consumption will slow down, and we may even reach ‘peak oil demand.’ And while lots of electricity will be needed in the future, it is more likely that natural gas will be used increasingly to complement solar and wind and to balance out daily fluctuations, as opposed to being the major power source.
That the eight oil majors are not planning for much other than natural gas becomes quite clear from their investments in research. Between 2010 and 2015, a record $500 billion of the high oil price profits were spent on share buy-backs and dividend payouts to investors. Total research spending, in comparison, was only $33 billion, or about 1.5% of gross profits, of which the majority was spent on oil and gas. Just a doubling of spending on clean energy research would make a vast difference. The rapid reduction in solar electricity costs in the last five years came on the back of total global corporate and government research spending of $29 billion.