Page 28 - European Energy Innovation - Spring 2016 publication
P. 28
28 Spring 2016 European Energy Innovation
ENERGY SECURITY
Impact of transition to low carbon
vehicles on oil prices and energy security
By Nicolò Gasparin is chair of the Automotive Battery Committee (ABC) of Eurobat (pictured)
Behind every story there While few would argue that the mitigation underway globally,
is a subtle and intriguing expansion of US shale oil and OPEC’s demand for oil would likely peak
back-story. The story of last subsequent reaction did not play a some time around 2025, and reduce
year’s plummeting oil prices role, it is also simplistic to exclude the thereafter, with profound impacts on
is not exception. On the face of it, role played by vehicle efficiency. The oil prices. This has several important
this development was dominated VW scandal has demonstrated the implications:
by the expansion of US oil shale, difficulty with relying on official fuel-
which eroded OPEC’s monopoly economy data, but regardless of that, it • The economies of oil-importing
advantage. In November 2014, the is clear that without vehicle standards regions, such as Europe, would be
cartel abandoned its historic role in place, several billion barrels more boosted by lower energy costs and
of constraining supply to maximise oil would have been needed during less volatility
prices, and instead started competing the last decade. This would have
for market share. Add to that Iran’s pushed the market to a slightly higher • By using policies to reduce oil
re-entry into the market after nuclear equilibrium than today, most likely demand, European governments
sanctions were lifted; and we arrived at resulting in slightly higher oil prices. now have a powerful new card to
where we are today. play in setting global prices
It is when we look into the future that
It is natural that discussions of oil this dynamic becomes particularly • High-cost oil extraction, for example
prices have previously focused largely interesting. Forged last December, the in the Arctic and ultra-deep water,
on changes to supply. They are Paris Agreement pledges to confront would become uneconomical
usually dramatic and accompanied by the threat to our planet from climate
conflict and geo-political upheaval. change. To maintain global average Low-carbon vehicle technologies also
They make for interesting news. temperatures within 1.5-2 degrees deliver numerous other co-benefits
Changes to demand are occasionally Celsius of pre-industrial temperatures, beyond reducing CO2 and helping
mentioned, but then it is only in carbon emissions will need to be lower oil prices. Europe is heavily
passing: broad changes to economic radically reduced from all sectors. The dependent on imports to service its
growth, for example. What is rarely transport sector is no exception. It is oil needs, with 87% imported during
mentioned is the gradual and steady the world’s second-largest source of 2014. By shifting away from imported
decline in the energy-intensity of carbon emissions, and it is on track to petroleum and towards domestically
developed economies. Yet this factor become the largest. produced electricity or hydrogen,
– driven primarily by vehicle standards Europe could reduce the absolute
around the world -- is increasingly Much more needs to be done. Existing volume of energy imported for its
important. efficiency standards have forced transport sector and improve its
cost-effective technologies, such as energy trade balance.
start-stop and hybrid engine systems,
onto the market. New models of Admittedly, the technologies to
shared vehicle ownership promise drive this change come at a cost.
more efficient utilisation of assets. However, consumers should be
And electrification of vehicles offers able to handle these costs, because
the chance to replace petroleum fuels the money invested in fuel-saving
in transport with a growing share of technology is usually recouped in 2-3
renewable electricity. years via reduced spending at the
pump. Meanwhile, expenditure on
In a business-as-usual scenario, fuel-saving technology feeds through
demand for oil could be expected to technology suppliers: several
to return to growth, outstripping successful European companies,
supply some time around 2020 and such as members of EUROBAT, the
causing prices to return to growth. European Association of Automotive
But in a post-Paris world, with carbon and Industrial Battery Manufacturers.
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