The era of oil is coming to an end with global oil production set to halve in the next five to six years. To avoid a global economic slump, the transition to 100% renewables worldwide needs to be accelerated. It is feasible and cheaper than the current system, research shows.
2018 was a year of bold ambition and remarkable achievements for renewable energy, according to the International Renewable Energy Agency. Indeed, the production costs of renewables fell to record lows, undercutting the costs of existing coal-fired power plants. Investment in renewables kept rising with most investment coming from emerging and developing countries. And even in places where politicians try to block the energy transition, for instance in the USA and Australia, numerous private actors, companies and entire communities increasingly commit to go 100% renewable.
Yet, one important news on the global energy transformation went unnoticed, despite the fact that it came from one of the most influential organisations — the International Energy Agency (IEA). The dramatic message was hidden in a graph on page 159 of the 2018 World Energy Outlook (WEO), the annual edition of the most significant report on global energy developments.
It shows that with no new investment, global oil production -including all unconventional sources- will drop by 50% by 2025 (Figure 1). That means that the global oil supply crunch is likely to happen already in the next five to six years and not in decades, as many fossil fuel companies hope. The global annual oil production is set to decline by approximately six million barrels per day starting in 2020. That means in the coming years the provision of energy related to oil will reduce annually by an amount equal to the total energy demand of Germany in 2014.
Currently, 81% of global energy demand is met by fossil fuels with a large share of oil. Reduction by 50% means that oil will become a luxury resource, and with it, driving and heating in large parts of the world.
Peak oil has been constantly underestimated by media, politics and companies alike. Energy Watch Group was among the first to warn already back in 2008 in its study that the global oil supply is likely to dramatically decrease by 2020.
Instead of offering solutions in line with the Paris Climate Agreement, the IEA recommends “continued investment in oil and gas supply” in line with its policy, constantly overestimating the growth potential of fossil fuels (see the EWG analyses of the IEAs misleading scenarios on Energy Watch Group website).
New investments would be needed due to declining availability of oil at current price levels. But, the immense investments, undertaken since the early 2000s to find new oilfields, have been unsuccessful (Figure 2). On the contrary, the number of oil discoveries have fallen to a historic low.
By 2014, the oil industry started to roll back investments and rebought their own shares on a large scale. Ever since, the industry has been unwilling to scale up investments again.
The expected expansion of unconventional oil production in the USA will not be able to close the growing gap. Furthermore, within the last years, over six billion US dollars were divested from fossil fuel energy industry. With an increasing number of investment funds, banks, countries and companies divesting from fossil fuels, this number is expected to further grow within the next years.
The global community has all the tools at hand to prevent this economic crash and to tackle dangerous climate change at the same time: the transition to 100% renewable energy. However, the current pace of deployment of renewable energies is by far insufficient to compensate for the drop in expected oil supply. The growth of renewable energy sources worldwide provided about 70 million tonnes of oil equivalent (MTOE) in 2017, which is only 22% of the expected oil gap. To close the gap and to stop dependence on fossil fuels, the transition to 100% renewable energy should significantly accelerate.
The recent scientific study by the Energy Watch Group (EWG) together with Lappeenranta University of Technology (LUT) in Finland has showed such transition in Europe across all energy sectors is feasible and more cost-efficient. It would bring millions of jobs and reduce greenhouse gas emissions to zero.
Stay tuned as EWG and LUT will soon release their first-of-its-kind global simulation study, covering the entire world and showing the pathway to 100% renewable energy across all sectors: electricity, heating, transport and desalination. It shows that the energy transition is not more a question of technical feasibility or economic viability, but only of political will.
Hans-Josef Fell was a member of the German parliament from 1998 to 2013 in the Alliance 90/the Greens group and he was co-author of the German Renewable Energy Sources Act 2000. He created Energy Watch Group, an independent, non-profit global network of scientists and parliamentarians, to commissions research, independent studies and analyses on global energy developments.