Greener planet could slash oil companies' income by $19trln by 2040

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The global transition to electric vehicles and renewable sources of power will see oil company revenue plummet with the rollout of 540 million electric vehicles by 2040. Oil demand is likely to peak in the mid-2020s, slashing income by $19 trillion, according to Oxford, England-based Aurora Energy Research Ltd. Gas and power will provide more than half of final energy consumption, up from 39 per cent currently, Bloomberg reported.

The report’s analysis points to a possible energy future of mass electrification, digitisation, and new technologies, in which the rise in electric vehicles and continued improvements in fuel efficiency lead to peak oil demand occurring in the mid-2020. “This flips the very idea of ‘peak oil’—previously hypothesised for the supply side—as electricity grows in importance as a transport energy source,” said Richard Howard, head of research at Aurora.

Oil companies are struggling to find an identity for themselves in a greener, more environmentally-aware world, but they concede they need to change to survive.

Bloomberg New Energy Finance estimates global power demand will surge 58 per cent by 2040 from 2016 levels, with $10.2 trillion of investment needed in the sector. The growth of electric vehicles is seen displacing about eight million barrels of oil a day, an equivalent to the current total production of Iran and Iraq, during the same period.

Total fossil fuel revenue is likely to fall to $21 trillion, 10 per cent of which is due to coal, as that fuel loses favor in power generation, and prices are expected to collapse to $28 a ton by 2040, said Bloomberg.

Natural gas will probably emerge as the main fossil fuel “winner” as it balances renewables in power generation and is used as a substitute for oil in petrochemicals. Long-term gas demand is set to increase by 15 per cent, or by 750 billion cubic meters, compared to business as usual, Aurora said.