According to Dieter Helm, an Oxford University economics
professor with a track-record of correctly predicting oil prices, the oil
market downturn has got a long way to run (cited by Jillian Ambrose in the Telegraph 17 April
2017).
The main reason, he argues, is concern over climate change and the renewable
energy revolution, in particular, electric cars. He says that the burgeoning
market for electric vehicles is underestimated and 'could radically change' the
outlook for oil demand.
Even BP admits that electric car use could halve the
demand of drivers for oil and that the number of electric vehicles could double
from previous estimates of 57 million to 100 million in 2035. Even this is
probably a vast under-estimation, considering the rate at which car companies
are turning out new electric vehicles, Tesla being just one. BMW is planning to
bring out several EV models and Chevy's Bolt offers a cheaper alternative with range of 400km on a single charge, comparable with Tesla and gas-powered engines.
Helm argues that industry shifts to a low carbon future
means prices may continue to fall ‘forever’ and so far only BP and Royal Dutch
Shell are adjusting, albeit very slowly, away from oil to gas and towards
low-carbon energy. He advises oil companies, with total assets of $1 trillion
and $300 billion in gas assets to follow a 'ruthless harvest-and-exit
strategy', slashing capital expenditure, pumping remaining reserves, cutting
cost and paying out very high dividends.(c) Johann van Rooyen, 20 April 2017
