Whatever the evolution of the prices of a barrel in the next decade investors would do well to begin to shift their investments right now from oil to renewable energy sources. The risk that assets will lose value oil is very high in a scenario with low prices is well known, but by investing in new wells, the danger of making holes in the water is real even in a scenario with oil at high prices. While extracting hydrocarbons always costs more, in fact, renewables are becoming more competitive and prices per barrel salt in the medium term will only accelerate the deployment of renewable and alternative technologies.
The battle will be fought mostly on the road : is the road transport and especially since its growth in light vehicles in emerging countries is that much of the increase in crude oil demand in the coming decades. This demand for mobility, however, could be met in large part by electric vehicles powered by renewable energies : the market share of this technology will grow more rapidly the longer the barrel will cost dearly.
Even now investing in new oil has a return in terms of net energy for use in transport, lower than in the case of investment of the same amount of money in wind or solar. And over time the balance of power will be increasingly tilted in favor of clean energy. In proposing this analysis is a new report titled Toil for Oil of the investment bank Kepler Chevreux, written by analyst Mark Lewis former Global Head of Energy Research of Deutsche Bank.
As mentioned, one of the stranded asset , ie investments stranded for fossil fuels is a risk we are talking about for a long time. The oil industry is investing large amounts of capital to develop reserves often very expensive to extract - as in the case of the tar sands and deepwater drilling and, according to several analysts, these jobs do not pay off in a scenario of relatively low prices per barrel possibly linked to policies for the containment of emissions.
The new analysis of Kepler Chevreux differs from the others in the context of predictable oil prices - which are estimated to rise in the medium term - but comes to the same conclusion: a lot of investment in oil extraction does not pay off in the course of their life cycle, with its economic consequences.
In the absence of a meaningful and binding agreement on climate change or a prolonged recession in the world economy both cases are considered unlikely by the report, the forecast of the investment bank is that the price of a barrel will continue to grow over the next two decades even in a higher than projected by the International Energy Agency. But as I said, this does not at all safe the money of those who are investing in oil.
High prices of a barrel in the next decade essential condition to maintain constant levels of oil production increasingly expensive would only accelerate the development of alternative energy sources, so that in 2025 the economic viability of mining projects would be put in doubt.
It will be especially the transport sector to be crucial one-third of the increase in oil demand expected by the IEA for 2035 comes from the diffusion of the light vehicle diesel and gasoline, especially in emerging markets. But this estimate look at the report it does not take into account the increasing competitiveness of renewables and electric vehicles such as the lot is pointing to China, the market is expected to contribute more to the anticipated growth.
While the capital intensity of new oil projects, that is, the amount of investment needed to extract a barrel from a new field, is growing for a decade and already in 2011 is higher than the selling price , the price of energy from renewable electricity is decline. Speak better than words the calculations put forward by the report
If we look at the net energy used in transport, taking into account both network losses for electric vehicles that heat loss to the combustion engine, already $ 100 billion invested in solar or wind damage , in the life cycle of the investment, more energy than the same money spent on projects to extract oil relatively expensive with break-even at around 100 $ / barrel.
In the future accounts will be even more favorable to renewable sources in its life cycle investment in renewable done in 2020 will give 2 to 6.5 times more energy than one in the new oil. In short, there is no story. Those who invest now in energy infrastructure that have huge cost and a useful life of decades would do well to be forward-looking with regard to the transition taking place in the world of energy.