Is it an End of an Era for the oil sector?

By Our Reporter

Global oil prices have fallen sharply over the past seven months, leading to significant revenue shortfalls in many energy exporting nations, while consumers in many importing countries are likely to have to pay less to heat their homes or drive their cars.

From 2010 until mid-2014, world oil prices had been fairly stable, at around US$110 a barrel. But since June 2014, prices have more than halved. As of Jan 26, Brent Crude had dipped below US$50 a barrel for the first time since May 2009 and US crude is down to below US$48 a barrel.

The reasons for this change are twofold – weak demand in many countries due to insipid economic growth, coupled with surging US production.

Additionally, oil cartel Opec (Organization of Petroleum Exporting Countries) is determined not to cut production as a way to prop up prices.

While reports indicate that prices may recover in two to three years time, they also argue that the future of oil remains grim given the growing switch away from oil to other more efficient fuels.
Additionally, there are growing concerns about carbon emissions emanating from use of oil and its related products.

This means, going forward, countries are more likely to increasingly shift to other energy alternatives than oil. Already, hybrid/electric and solar powered cars are being manufactured, a development that is likely to cut demand for oil in the next 10-20 years given the fact that a bigger percentage of oil and fuels are used by motorists.

For example, 70% of all oil consumed in the US is used for transportation.
The US transportation sector consumes about 220 billion gallons of liquid hydrocarbon fuel per year and has approximately 250 million personal vehicles, which amounts to about 25% of all personal vehicles in the world. The US consumes 14 million barrels per day for transportation.
The US is now mulling plans of replacing gasoline with non-petroleum American made fuels to completely eliminate dependence on OPEC oil—and set an example for the world to follow.

Despite new oil discoveries across the globe, experts argue that the world’s biggest source of future energy production will come from technology that improves efficiency-not oil and gas.
Energy-efficiency technology will save 500 quadrillion British thermal units over the next three decades, Exxon analyst Ted Pirog said last year, as reported by the Dallas Business Journal.

“That’s the amount of energy that the world uses today. Our greatest source of energy in the future is our ability to use it more efficiently,