Oil has sustained its energy dominance largely due to its convenience for supplying transportation fuels. Petroleum is largest source of CO2 emissions in the United States and second largest globally. Addressing this part of the climate problem means confronting both the market factors and market actors that determine petroleum supply and demand.
My recent discussion paper examines this intersection of transportation, oil and climate. It traces recent trends affecting petroleum supply and demand, providing a perspective on the industry's interests and how the sector might be affected by potential demand disruptions due to policy changes and innovations in mobility systems. The pertinent aspects of energy policy reflect an ever-evolving political process that attempts to balance competing forces, including the oil industry's desire to maximize income and minimize costs, popular pressures to keep prices low, public sector needs for tax revenue and environmental concerns.
These forces are now amplified by the pace of innovation. Impacts were seen first on the supply side through developments such as fracking. Next up are changes on the demand side, including new mobility options such as ridehailing, vehicle electrification and rising levels of vehicle automation. Although it is unclear whether such changes will be evolutionary or revolutionary, their net long-run effect is likely to be increased demand for mobility. Policies to address the climate concern seek to decouple transportation from oil, creating a petroleum demand destruction risk that the industry can be expected to resist.
Read the full analysis at:
DeCicco, J.M. 2019. Market Factors Related to Transportation, Oil and Climate. Discussion Paper. Ann Arbor: University of Michigan Energy Institute. January. https://bit.ly/mktftoc19