- With peak oil around the corner, and fading tax cuts and subsidies, expect a reshaping of the sector, along with a reshuffling of risk. Oil demand is likely to peak by around 2030 in a “business-as-usual” scenario, taking into account global demographic projections and demand factors such as the fleet of electric vehicles (as transport is the most oil-intensive sector). In a “net zero” scenario, or if regulatory pressures grow rapidly, this peak could happen even sooner.
- Moreover, subsidies and tax breaks for fossil fuels are very likely to decrease in the future, amid intensifying political, social and investor pressure to tackle climate change. This will eliminate a sizable source of support for the sector. The new Biden administration in the US has already signaled its intention to go big on renewables (USD2trn investment plan) and to stop supporting the oil & gas (O&G) industry (pause of exploration, halting subsidies etc.). China has also signaled that change might be on the agenda: recent development plans laid out by state-owned PetroChina, Sinopec and CNOOC are tilted towards clean energy.
- Against this backdrop, European companies have increasingly committed to renewable energy, but US firms have rather focused on cleaner technologies close to their traditional activities (e.g. LNG, hydrogen), on R&D spending to develop carbon-capture technologies and on other actions (e.g. reforestation) that could offset their footprints. Even companies with large proven reserves or in emerging markets appear to be preparing for a future without or at least with less oil consumption.