The Future of the Oil Industry

In order to combat climate change, the UK has made moves aiming to fully decarbonise their energy system. Recently, changes in legislation have enabled greater investment in battery storage projects by developers. More relaxed laws and a reduction in red tape will greatly benefit the rise of renewable energy initiatives.

Jake Dunn, renewable development manager at Vattenfall explains how “The UK will never be free from fossil-fuels until electricity storage is part of our energy system, but the volumes of power we need to be able to store are huge.” Across the globe, one of the most traded commodities is crude oil and its value is being impacted by pressing issues such as the increasing adoption of alternative energy sources including wind, hydro-electric and solar energy. Ongoing uncertainty concerning the demand means that the future of the oil industry remains relatively fragile.

According to a recent article by The Guardian, the global demand for oil is expected to drop by a significant amount. From 2020 to 2021, the International Energy Agency predicts that the number of barrels produced per day will be reduced by 240,000 bpd from its previous forecasts to an average of approximately 97.1m bpd in 2021. This is primarily due to the sluggish recovery of the global aviation industry. The rising number of coronavirus cases means that there is less demand for transport fuel. On an economic level, many of the world’s largest oil producers have played a key role in keeping oil prices stable by slowing down oil production over the summer.

In the UK, statistics on oil use are generally aligned with global trends. However, the demand for oil in the domestic sector actually increased in the first quarter of 2020, possibly due to lower prices.

Statistics also show that there has been a near-record decrease in demand for aviation fuel at 14%. In addition, the demand for transport services has decreased by 5.3% more compared to 2019’s numbers, impacting the consumption of fossil fuels. It’s worth noting that even as the UK is moving towards renewable energy sources, the transport sector is now the largest carbon emitter, producing approximately one-third of all carbon dioxide emissions in the country.

To help combat this, plug-in hybrid and all-electric vehicles should be promoted with additional infrastructure. Potentially speaking, vehicle-to-grid storage systems could be a more financially feasible alternative to large stationary battery systems. For this to become a reality, more research needs to be conducted into this relatively new technology.

Due to the unstable future of the oil industry, local job safety has been affected as well. Oil and Gas UK reports how up to 30,000 UK oil industry jobs may be lost in the coming months if the government fails to provide additional support. Many oil companies have to make difficult decisions that have growing time constraints given the planned move to energy transition and diversification. Because of this, governments need to consider how to help oil companies and their workers reskill as they move to more sustainable energy-related sectors. On the other hand, it remains to be seen what the future of the oil industry has in store. It is equally possible that the economic recovery from the post-pandemic recession may favour cheaper and more strongly established fuels like oil. As a result, greater global cooperation and more affordable methods of providing sustainable energy should be promoted to move the green agenda forward.