GS Paper - III

The term “peak oil” used to mean the point when global production would top out, before entirely running out. But as the world begins a shift to renewables, will the end of oil production come sooner than we think? In 1956, M. King Hubbert, a US geoscientist working for fossil fuel giant Shell, projected — based on statistical modeling of known oil reserves at the time — that global crude oil production would peak around the year 2000, before diminishing and eventually stopping altogether.

Renewable energy starts overtaking oil, gas

• Demand for renewables is beginning to outpace traditional fuel sources. In 2023, the global increase in green energy capacity — power from solar, wind and other renewables — hit a new record, marking the fastest growth rate in the past two decades, according to the International Energy Agency (IEA).
• Much of that was down to explosive growth in the solar panel industry, especially in China.
• Since 2000, renewables have grown from 19% to more than 30% of the global electricity mix, said energy think tank Ember in a May 2024 report, which predicted that fossil fuel power generation would likely peak this year.
• This is a critical turning point: Last century’s outdated technologies can no longer compete with the exponential innovations and declining cost curves in renewable energy and storage.
• Investment in renewables is trending upward, with green electricity costs falling and electric vehicle sales steadily growing each year. Experts have predicted EVs will make up between half and two-thirds of all car sales by 2030.
• The IEA’s 2024 World Energy Investment report showed funding for clean technologies — which surpassed fossil fuel investment for the first time in 2023 — was set to hit $2 trillion (€1.8 trillion) this year, with slightly over $1 trillion going toward coal, gas and oil.

Beginning of the end for fossil fuels?

• To have any hope of curbing emissions and keeping global heating to a minimum, climate experts have said we must stop exploiting fossil fuels — the sooner, the better.
• A 2015 study published in the journal Nature estimated that between 2010 and 2050 a third of the world’s oil reserves, half of gas reserves and more than 80% of raw coal reserves needed to stay in the ground to keep warming under 2 degrees Celsius (3.6 degrees Fahrenheit).
• And the financial bottom line may end up making the case for some industry players to stop drilling.
• In October 2024, the IEA said the “clean energy momentum remains strong enough to bring a peak in demand for each of the fossil fuels by 2030, even in a scenario with minimal climate action.
• After 2030, the IEA report suggested it would be much harder to justify costly new fossil fuel projects.
• In its World Energy Outlook report, the IEA said climate targets won’t be the only driver of a rise in clean energy, highlighting motivators such as cost and “intense competition for leadership in clean energy sectors that are major sources of innovation, economic growth and employment.”
• And indeed, some investors — including major pension funds in the US and Europe — have started turning away from fossil fuels, due in part to public pressure to meet climate targets but also because of increased financial risk.