During the eleven plus years I have been writing this blog, the subject of energy, energy costs, and the transformation taking place in the area has been a frequent topic.
Energy certainly affects the global economy. It also profoundly affects Climate Change. The major transformation under way from fossil fuels to alternative and renewable energy will cause both incredible wealth opportunities and massive economic disruptions.
Here are some past forecasts about energy and a look at why I made them and whether they are coming to pass.
[NOTE: as stated in the last two columns here and here, I am the only futurist I know who has posted forecasts and when I made them.]
“Oil would surpass $125 a barrel in 2008”
This of course became true as oil reached $147 in the summer of 2008. At the time I made this forecast, oil was trading at roughly $55 barrel of oil and Wall Street oil analysts were forecasting $50-65 barrel pricing for the next few years.
I made the forecast knowing that the cost of extracting oil was getting ever more expensive, that the American economy was robust, that the Chinese economy was growing at 12-15% and the Iraq war would cause disruption of production. All of which was true.
Given past columns, I have been clear that we may never see $100 oil again.
“Alternative and renewable energy will be the greatest wealth opportunity in human history”
The logic on this was very simple. When coal became the first fossil fuel to be widely used there were 1 billion people on Earth. When oil scaled up there were 1.5 billion people. Now we have 7.5 billion people alive and at least 5-6 billion of them use fossil fuels. This means that with the beginning of the end of the fossil fuel era, 5-6 billion people will be replacing a product they all use. That has never occurred in human history.
“We have entered a new era of lower cost energy. This could last for a number of years”
When I made this forecast, the price of oil had dropped by 60%, and the cost of solar and wind as an energy source had fallen some 100% in the prior seven years, making it comparable to fossil fuels. The only question at the time was whether there would be another run-up in the price of oil and how fast the install rate would be with renewables.
Since then, the price of oil as written here has stayed in the range of $40-60 a barrel and the growth of wind and solar globally and in the U.S. has been growing at double-digit rates.
The only thing I might revise is to say that this trend might last for at least a decade if not forever.
“There will be great geo-political changes in the next 24 months due to a new lower level of oil prices”
This has obviously occurred. Every oil exporting country with high production costs – above the price of a barrel of oil- has undergone significant economic disruption. Venezuela has fallen into chaos, Nigeria has completely stalled economically, Russia had two consecutive years of 6% GDP contraction in 2015-2016, and there have been numerous bankruptcies in the U.S. fracking industry. In the U.S., some of the major coal companies have declared bankruptcy.
The forecast now is that the growth of the major petroleum companies in the world will slow dramatically and that will lead them to invest in renewable energy –the only energy sector experiencing double digit growth- to maintain stock prices. If companies such as Shell and Exxon Mobil do not do this, the financial markets will begin to look at them as short-term investments.The direction of all of this is clear. The clarity of seeing it is still clouded by the legacy thinking created by the vested interests that the past reality is still in place. Exhibit A is the language coming out of the White House and the Republican Congress. Folks, the world is rapidly moving to a new reality. You are looking in the rear view mirror, not at the road ahead.
“2015-2017 is the beginning of the end of the fossil fuel era. It has begun and will go into increasing decline in the next two decades.”
Another way of saying this is that by 2025 it will have become clear that the decline of the fossil fuel era began during this two-year period.
Renewable energy is now cheaper than oil, natural gas and close to coal. So the economics have changed.
The awareness that it is the use of fossil fuels more than anything else that is causing Climate Change will increasingly influence the move away from fossil fuels. As someone who has committed a significant part of my life to facing Climate Change with my global non-profit This Spaceship Earth, the goal is to accelerate the move away for fossil fuel use ASAP. We all live in the Carbon Combustion Complex economy and increasing numbers of us want to be able to step outside it as much and as soon as possible.
To sum up this forecast, by 2040, fossil fuels will less than 50% of energy used on the planet. Fossil fuels will be in the low double digits by 2050.
I will look at how this transition will be one of the most significant economic disruptions in history in future columns. Moving from high cost energy to low cost energy.