Oil prices are a weird thing. On the one hand, we environmentalists often advocate for carbon taxes and other fees that would drive oil prices through the roof—thus limiting consumption and reducing the terrible economic and environmental consequences of pollution. On the other hand, when oil prices drop, exploration and extraction become economically unviable—reducing the absolute amount of oil that will be taken out of the ground and consumed.
Ultimately, the dream scenario is this: Renewables and efficiency become so competitive that oil prices drop precipitously, this reduces oil company profits and (by extension) oil company political clout. Governments of this world then do what's been needed for a very long time: They adjust subsidy and taxation structures to fully account for the negative external costs of oil consumption.
A headline from Bloomberg before the holiday suggests the first and second pieces of that puzzle might be coming to fruition sooner than we'd think:Big utility sees pathway to $10 [a barrel] oil
The story centers around comments by Thierry Lepercq, head of research, technology and innovation at French energy giant Engie SA. Lepercq sees Solar, battery storage, electric vehicles, and connected devices all in a 'J' curve in terms of growth, meaning that even though they may seem like a small fraction of the market now, we could soon see them displacing significant quantities of fossil fuel consumption. Among the paradigm-shifting results of these changes, he says, is a strong likelihood that oil hits $10 a barrel within a decade. Crucially—and this is a point many of us often miss—this oil price slump could happen even as oil consumption continues to grow for the time being, as investors factor in the inevitability of future drops in consumption.
Engie, for one, is already making such moves in terms of its exposure to fossil fuels in general, says Bloomberg. It's selling coal plants, divesting from oil exploration and spending 1.5 billion euros ($1.57 billion) by 2018 on technologies ranging from hydrogen to smart buildings.
Taken in conjunction with stories like UBS predicting the demise of the diesel car by 2025, India halting coal plant production by 2025, the Dutch planning for only zero-emission cars by 2035 and the rapid growth of the fossil fuel divestment movement, there is a sense of inevitability building around a low carbon transition which—while not yet fully baked in to business and investing strategies—could become a self fulfilling prophecy of sorts.
Let's hope it picks up pace.