TY - JOUR AU - Gault,, John AB - Abstract The energy transition, even if it meets ambitions submitted by governments subscribing to the Paris Agreement (2015), will fail to reduce greenhouse gas emissions sufficiently to limit global warming to 1.5°C. Rather than solving this long-term challenge, energy-sector participants, including oil exporting countries, major oil and gas corporations, governments and consumers, continue to behave in traditional manners. Oil exporters focus on short-term revenue maximization rather than on diversifying their economies to reduce excessive dependence on hydrocarbon exports. Oil and gas companies, despite claiming to be concerned about climate change, devote relatively small investments to non-fossil energy sources and ambivalently support climate change mitigation policies. Governments, often at the behest of special interests, construct systems of subsidies, fuel-efficiency targets and regulatory exemptions that distort markets and fail to achieve stated emissions goals. Consumers resist proposed climate policies when these are perceived to place the burden of energy transition unfairly on consumers' shoulders, both individually and collectively. All energy market participants are threatened by climate change, and all can do more to advocate and support mitigation policies that are equitable, effective and efficient. A global transition towards sustainable energy is under way. The ultimate goal of this transition is clear and the need to internalize environmental externalities is widely recognized, but despite decades of effort, there remains no broad consensus concerning timing, methods, coordination, or equitable sharing of costs and benefits. Markets have yielded unreliable signals, and advances towards the transition are haphazard and inadequate. The latest report from the United Nations (UN) Intergovernmental Panel on Climate Change (IPCC) IPCC warns that time is running out: Estimates of the global emissions outcome of current nationally stated mitigation ambitions as submitted under the Paris Agreement would lead to global greenhouse gas emissions in 2030 of 52–58 GtCO2eq yr−1 (medium confidence). Pathways reflecting these ambitions would not limit global warming to 1.5°C, even if supplemented by very challenging increases in the scale and ambition of emissions reductions after 2030 (high confidence). Avoiding overshoot and reliance on future large-scale deployment of carbon dioxide removal (CDR) can only be achieved if global CO2 emissions start to decline well before 2030 (high confidence).1 To date, energy-sector actors, each attempting to protect its own near-term special interests using traditional methods, have been following a meandering pathway: OPEC and other oil-exporting countries have sought, without much success, to regulate oil prices at a level that maximizes short-term revenue, and appear insouciant about other urgent challenges, as though business-as-usual can continue indefinitely. Major oil and gas companies have pursued inconsistent policies towards putting a price on carbon emissions, and most have made only token investments in non-hydrocarbon energy sources. Governments have introduced policies intended to accelerate the transition, but many policies created price distortions, sent inconsistent signals to investors, and omitted to constrain major greenhouse gas (GHG) emissions sources. Voters and energy consumers have resisted new taxes and other policies intended to induce behavioural changes needed to spur the transition. All of these actions are understandable but inadequate. All energy-sector actors share responsibility for facilitating the transition. Everyone can do better. In this article, the authors propose actions each party can take that could contribute to a smooth and timely transition. 1. EFFORTS BY MAJOR OIL-EXPORTING COUNTRIES TO REGULATE PRICES FAIL TO ADDRESS THE REAL CHALLENGES In recent years, Saudi Arabia has led efforts by major oil-exporting countries to discover and maintain a price level that would maximize exporters’ revenues while simultaneously limiting the development of competing energy sources. Exporters’ principal focus has been on how to slow the rapid expansion of US non-conventional oil output, but the ever-declining costs of renewable energies constitutes a similar challenge.2 The Saudi-led efforts have contributed to wide oil price swings. Over the past five years, oil prices declined from over $100/bl to about $30/bl, then gradually climbed back to around $80/bl before falling to the $60–$70/bl range. Saudi-imposed OPEC policy shifts were introduced without adequate explanation or consensus building among members. The policy experiments only briefly stalled US production growth, now soaring to record levels. High oil prices prior to mid-2014 encouraged a rapid increase in US oil output, primarily of light, tight oil (LTO) from shale formations. Although the increase in US production brought oil prices down by half during June–December 2014, Saudi Arabia announced in November 2014 [point (1) on the graph] that it would pursue a ‘market share’ strategy to try to recover a portion of the market already lost to US crude oil. By expanding its own output to well over 10 mmbd and leading its OPEC partners to expand supply, the Kingdom did push prices down further during 2015, and temporarily reversed the steady rise in US production. After flooding the market, holding prices below $50/bl and observing the slide in US output, Saudi Arabia reversed course and hinted, in August 2016, that it would cooperate with other OPEC members to ‘rebalance’ the market by drawing down bloated global oil inventories. In November 2016 [point (2) on the graph], OPEC members agreed with selected non-OPEC oil producers to cut production with effect from 1 January 2017. Meanwhile, however, US producers had been compelled by the 2014–16 lower price environment to reduce costs and enhance fracking methods, so that before the end of 2016, US crude oil supply had already resumed its upwards trend. In effect, OPEC had forced US producers of LTO to become more competitive. ‘Market rebalancing’, as measured by the drawdown of Organization for Economic Cooperation and Development (OECD) commercial oil inventories, took longer than expected, and could not be achieved until mid-2018. Saudi Arabia, which had held its output steady at about 10 mmbd from January 2017 to May 2018, then abruptly expanded production [point (3) on the graph] and bulldozed its OPEC partners to do the same. Despite the supply upswing, oil prices continued to rise during the summer of 2018, until late September, and US oil output climbed continuously to new record levels. The intentional output boost by Saudi Arabia and its partners, the continued rise in US supply, ballooning inventories and signs of a deceleration in global economic growth finally induced plunging prices from October onwards. The price slide was accentuated in early November by the Trump administration’s surprise announcement that it would waive sanctions on imports of Iranian oil for the largest importers (after threatening for months that the USA would enforce sanctions to reduce Iranian exports to zero). In mid-November, a month during which Saudi production reached a record 11.1 mmbd, the Kingdom announced yet another reversal of policy [point (4) on the graph], calling for renewed production restraint. In December, Russia and Saudi Arabia concluded an agreement to cut production with effect from 1 January 2019. Other members of the OPEC—non-OPEC group consented, although not all felt that their views had been taken into consideration. The efforts to slow the expansion of US oil production through price manipulation ultimately failed. Nor did the oil price gyrations appear to have any impact on investment in renewable energies, whose costs continue to tumble. OPEC and its partners face a steadily declining global requirement for their oil supplies, with no guarantee that this requirement will ever expand again. The Saudi Oil Minister is not worried: ‘We are going to see 1 million-plus b/d incremental demand growth [annually] for many, many years to come … We are going to see over 120 million b/d demand.’3 More cautiously, the director of crude oil and gas marketing at Iraq’s State Oil Marketing Organization (SOMO) was quoted in the press as saying ‘OPEC reaches a point when we cannot do more … What OPEC is doing now is basically just a postponement of the problem [of oversupply].’4 2. OPEC MUST FACE THE CHALLENGE OF DECELERATING OIL DEMAND GROWTH AND DECLINING PRICES Global oil demand has expanded rapidly in recent years: by +1.5 mmbd in 2016, +1.6 mmbd in 2017 and +1.3 mmbd in 2018; similar growth of +1.3 mmbd is widely expected for 2019. Over the longer term, however, oil companies and oil-producing countries must prepare for a time when global oil demand will cease to expand. Published projections put this ‘peak oil demand’ moment as far into the future as the 2040s, or as soon as the early 2020s.5 The range of projections is wide due to differing assumptions about governmental policies on the local, national and international level, about technological developments, and about public acceptance of behavioural changes. The pace at which electric vehicles enter the transportation fleet is one critical variable. Another important factor will be the means by which governments seek to reduce their carbon footprints through carbon taxes, cap-and-trade systems or regulatory impositions, such as fuel efficiency standards. Public acceptance of any of these measures will require policies perceived to affect all segments of society in a fair and equitable manner. The likelihood that oil demand will, sooner or later, enter a long secular decline has been difficult for some in the oil industry to grasp. For more than a century, it was widely assumed that a depletable resource must eventually be supply-constrained. Hence, oil prices would rise as resource exhaustion approached, compelling consumers to shift away from oil towards the next-least-expensive substitute energies.6 This anticipation of endlessly rising prices over the long term was strengthened by ‘peak oil supply’ theories prevalent towards the end of the 20th century. According to some geologists, global oil supply, constrained by finite oil resources in the Earth, was subject to a foreseeable production peak, after which output would inevitably decline. Assuming ever-rising oil demand, prices would rise.7 Peak oil theories were welcomed by environmentalists, hoping that higher prices would eventually cut into petroleum demand and CO2 emissions. Thanks in part to technological developments, including especially horizontal well completions and the ability to fracture tight formations economically, projections of peak oil supply have now been superseded by projections of peak oil demand. While forecasts of peak oil supply involved only a mathematical transformation of estimates of the ultimate resource base, projections of peak oil demand require assumptions about many parameters difficult to quantify, such as government policies and human behavioural reactions. Projections of oil demand growth continuing into the 2040s are inconsistent with the stated ambition of constraining global warming to no more than 1.5°C. If this ambition is to be achieved, measures must be adopted that will slow and then reverse oil demand growth much sooner. The Saudi Oil Minister’s assertion that oil demand will continue to expand implies a belief that such measures will not be taken. Growing global awareness of the consequences of global warming, however, suggest that business-as-usual cannot continue.8 The timing and pace of the demand growth deceleration and the consequential oil price downtrend are uncertain, but falling prices represent a formidable challenge to oil-producing countries and companies. High-cost producers who fail to take remedial action should see long-term price erosion as an existential threat that cannot be prevented by agreements to restrain supply. 3. OPEC MUST FOCUS ON THE NEW CHALLENGES Countries heavily dependent on oil export revenue created OPEC with the ultimate goals of (i) asserting control over their own natural resources, exploited until then primarily by foreign oil companies, and (ii) moderating price volatility in order to facilitate exporting countries’ budget planning and to guarantee sufficient revenue for investment in economic diversification. At times, OPEC succeeded in influencing oil prices, but under present circumstances cannot do so alone. Even the larger group of OPEC plus selected non-OPEC partners (‘OPEC+’) is discovering that the interests of members sometimes diverge. Divergences will become only more acute in a world of declining revenues. It has been clear for many decades that OPEC members and other major oil exporters must work to diversify their economies away from overdependence on export revenue generated by a depletable natural resource. Few exporters have achieved significant diversification.9 Some oil-exporting countries in the Mideast Gulf, with low oil production costs, may believe they will be able to cope with declining prices longer than others. For most producing countries, however, policies to encourage economic diversification are now more urgent than ever. The obstacles to diversification are deeply embedded in many oil-exporting countries. They include elitist governments fearing they will lose power if they allow greater freedoms; paternalistic social structures that prize loyalty over individual initiative; educational systems that fail to prepare students for actual private sector jobs; and embedded governance practices that effectively tolerate widespread corruption and nepotism. The principal obstacle has not been inadequate financial resources: if that were the case, then diversification would have advanced rapidly during years when oil prices were high. Recognizing the urgency of economic diversification, the OPEC Secretariat could do more to facilitate the process for its members.10 The oil industry itself is capital- and technology-intensive, offering too few jobs for the younger generation. Member countries could mandate the Secretariat to collect and disseminate case studies of successful diversification efforts. OPEC could advise members, based on their individual situations, on business opportunities not based on oil but offering greater employment potential.11 It is not sufficient to consider only manufacturing ventures when evaluating diversification opportunities. Manufacturing everywhere is increasingly mechanized and robotized, employing less labour than in the past. Service industries have become larger employers. Education, research and the arts deserve attention. Providing individual citizens with a guaranteed basic income will free individuals to choose their own paths and even to try entrepreneurship. The Saudi Vision 2030, announced in April 2016, is an example of a diversification programme that, although ambitious and well intentioned, has to date failed to meet expectations. The programme was intended ‘to reinforce and diversify the capabilities of our economy, turning our key strengths into enabling tools for a fully diversified future’.12 Among the goals of Vision 2030 were ‘building an education system aligned with market needs and creating economic opportunities for the entrepreneur, the small enterprise as well as the large corporation’.13 The programme provided for a wide range of privatizations, and was accompanied by the announcement of the partial privatization of Saudi Aramco. The Aramco privatization has been repeatedly postponed, although a recent press report suggested that it may now take place in late 2020 or 2021.14 One cannot help wondering whether reported domestic opposition would have been moderated had the Kingdom distributed Aramco shares free to citizens, as we earlier proposed.15 In some non-OPEC countries, employment in renewable energies now exceeds employment in the hydrocarbon sector. Some OPEC countries enjoy abundant solar power potential, but lag in the exploitation of that potential. Domestic natural gas prices held well below international levels, and state monopolies in the energy sector discourage private investment in renewables. Private investors from abroad will be attracted to invest in countries where the labor pool is appropriately trained, where private enterprise is encouraged, where corruption is absent and where the rule of law is applied consistently and predictably. As a first step in fighting corruption, more oil exporters could join the Extractive Industries Transparency Initiative (EITI) and seek certification as compliant with the EITI Standard.16 Much more must be done, but this first step would symbolize a determination to work towards more complete transparency, both domestically and internationally. In the 1970s, many newly independent countries viewed OPEC as a champion for asserting control over national resources and as a model for how other countries may accelerate economic development. Today, OPEC members’ continuing high dependence on oil export revenues has tarnished that positive image. If OPEC remains focused exclusively on short-term revenue goals and ignores the implications of climate change, developing countries will begin to see OPEC in an even worse light. Global warming will have devastating effects on developing countries—droughts, water shortages, coastal flooding and weather extremes—which may lead some to conclude that OPEC represents more of a problem than a solution.17 OPEC, of course, is not the only participant in the energy sector that has been slow to acknowledge and act on the challenge of climate change and the energy transition. Many international oil companies, governments and energy consumers likewise are responding inadequately to the challenge. 4. THE OIL AND GAS COMPANIES’ RESPONSES ARE INCONSISTENT AND AMBIVALENT International oil companies have long planning horizons. Investments sanctioned today are expected to earn returns for many years, and typically decades. A desire to continue earning profits from past investments understandably weighs on industry decision makers, and also on shareholders. The industry, overall, projects a defensive stance regarding climate change. The timing of the eventual downturn in oil demand and prices is difficult to foresee. Shell, with its extensive experience evaluating scenarios, is one of the more sophisticated planners. Yet, even Shell acknowledges that the wide uncertainties now surrounding potential outcomes make planning and investment decisions difficult. Shell’s CEO has been quoted as saying ‘What is a challenge at the moment is that we don’t know anymore where the future will go’, and Shell’s scenario team leader says that a planning objective is to make decisions that will, in the long run, ‘minimize the maximum regret’.18 Some companies—ExxonMobil and Chevron are often cited—are acting as though they can preserve their business longest by focusing on lowering the average cost of the oil they produce. Others have embraced the transition towards low-carbon and carbon-free energies as a business opportunity. Equinor (formerly Statoil) and Orsted (formerly Dong), which began their lives as oil and gas companies, are today leaders in backing renewable energy. Among the majors, Shell and Total continue to expand their non-petroleum activities, invest in electric power generation and make public commitments to reduce not only their own carbon footprints but also the carbon emissions attributable to their products. Oil and gas companies have been inconsistent in their support for putting a price on carbon. Six major European oil and gas companies jointly addressed a letter to the UN in June 2015 calling on governments, at the United Nations Framework Convention on Climate Change (UNFCCC) negotiations in Paris and beyond, to introduce carbon pricing systems, where they do not yet exist at the national or regional levels and create an international framework that could eventually connect national systems. The same European companies were founders of the Oil and Gas Climate Initiative (OGCI). In October 2015, the OGCI (including two additional members) made a public declaration that the industry must assist in reaching UN climate change goals, but their declaration did not mention a price on carbon. The OGCI today lists 13 members, including several NOCs (CNPC, Pemex, Petrobras and Saudi Aramco) and, with effect from September 2018, three US-based companies (ExxonMobil, Chevron and Occidental). The OGCI focuses on reducing methane emissions and on carbon capture and underground storage. However, the OGCI annual report for 2018 makes no mention of a carbon price.19 Major oil companies in general do not itemize separately (in their annual reports) their investments in renewable energy technologies. The OGCI claims that eight of its members in 2017 invested a collective total of $6.3 bn in ‘low carbon technologies and R&D’.20 Divided among eight companies, this amount is dwarfed by the 2017 total capital investments of individual members (eg Shell, $24 bn; BP, $16.5 bn; Total, $16.9 bn; ENI, $9.7 bn). InfluenceMap recently estimated that 2019 capital investments of the five largest publicly traded oil and gas companies (ExxonMobil, Shell, Chevron, BP and Total) will reach $115 bn, of which only 3 per cent will be ‘low carbon’ investments.21 In November 2018, one of the signers of the original June 2015 letter (advocating putting a price on carbon) contributed financially to the political campaign in Washington (USA) against a popular initiative to introduce a carbon tax. The company’s seemingly inconsistent stance assured the defeat of the initiative, and allowed critics to highlight the industry’s ambiguous posturing. Shareholders, lenders, insurers, employees and the general public press companies todemonstrate their long-term viability. These pressures will increase as extreme weather events continue to occur.22 A recent loan facility arranged by ING Bank for the trader Gunvor was conditioned by sustainability criteria.23 Nevertheless, to date individual companies have been forthcoming with promises, but fall short in their actions. As some oil and gas companies are already doing, others could diversify their investments to include more non-fossil-fuel energy sources. Companies could also be more consistent in their advocacy of putting a price on carbon. In the face of popular resistance to carbon pricing, companies could support creative government policies that combine the gradual introduction of a carbon tax with direct income subsidies, tax rebates or other compensations to consumers. Companies could also apply their powerful lobbying influence to encourage governments to adopt stronger, more efficient and more equitable climate policies. Above all, companies could look for opportunities to profit from the inevitable energy transition and, indeed, to become leaders of the transformation. 5. GOVERNMENT POLICIES ARE INADEQUATE, AND CONSUMERS RESIST NECESSARY CHANGES For many decades, a primary concern of oil-importing countries was oil supply security. This concern led to the creation of the International Energy Agency in 1974 and to individual countries’ accumulation of strategic petroleum reserves. Oil-importing countries have benefitted from OPEC members’ maintenance of idle oil production capacity, primarily in Saudi Arabia and its neighboring countries. From time to time, in crises, this idle capacity was called upon to mitigate sharp oil price upswings. Now, however, most OPEC members are producing at or near capacity. Even Saudi Arabia, during some months in 2018, produced closer to its stated capacity than ever before. Facing widely divergent projected timings of a global oil demand peak, individual oil exporters calculate a lower expected value of retaining oil in the ground, and feel an incentive to produce more rapidly. Maintaining oil reserves for future generations no longer motivates major producers. As for the governments of oil-importing countries, their traditional concern to assure oil supply security and prevent oil price spikes is being eclipsed by their citizens’ complaints about urban air pollution and expressions of anxiety about the growing impacts of global warming. Rather than assuring ample oil supplies at reasonable prices, governments must now act to reduce consumption and, hence, emissions. Governments have responded in various ways. They have subsidized renewable energies and instructed electricity transmission grids to prioritize wind and solar energy, whenever available, in their dispatching hierarchy. Some have introduced emissions taxes and/or have participated in emissions cap-and-trade schemes. Most have made collective statements about long-term goals and intentions, such as the Paris Agreement. A few have, on occasion, made firm commitments.24 Certain policies have backfired. Initial high subsidies and feed-in tariffs for electricity from non-fossil sources have subsequently been reduced or even eliminated. Some benefits prevailed for limited periods, not sufficiently long to attract investors. The rapid expansion of wind and solar power generators in some locations, combined with feed-in preference and subsidies or price guarantees, has occasionally driven wholesale electricity prices negative. Meanwhile, individual electricity consumers have had to pay for the subsidies, while industrial consumers have been exempted, driving residential retail power prices upwards. And, as if these unanticipated and undesired consequences were not sufficient, gas-fired backup generators, essential to compensate for intermittent wind and solar sources, have been rendered uneconomic by low wholesale prices and declining hours of operation. Many governments have hesitated to introduce carbon taxes or cap-and-trade schemes, fearing that their own export industries would be rendered non-competitive with products exported by countries lacking similar emissions penalties. Where cap-and-trade schemes have been introduced, the exemption or grandfathering of fossil-fuel power generation or other high-emission activities has rendered the scheme ineffective. The 2008 recession cut emissions, thereby reducing the traded price of issued licences to levels too low to have an impact. Thus, government policies intended to advance the energy transition have had mixed effects.25 Policies are being re-evaluated and redesigned. Time is growing short for further experimentation. Meanwhile, consumers and the general public have shown themselves to have diverse opinions. On the one hand, some polls show that concern about climate change is growing.26 Other polls show little change since the beginning of the millennium.27 Shareholders may be more concerned than the general public. Writing in Harvard Business Review in 2016, George Serafeim reported that ‘the largest number of shareholder resolutions filed by investors … now concern social and environmental issues. This is a recent phenomenon, according to my research: The number of these resolutions has increased dramatically over the past five years.’28 Consumers are understandably upset when it appears that the burdens of mitigating climate change are placed entirely on their shoulders, and especially so when the burdens are borne disproportionately by a subset of consumers. Nearby residents have protested against wind farms and in opposition to the additional electricity transmission lines and towers needed to bring renewable power to consumers. Recent protests by the ‘yellow vests’ movement in France have revealed limits to imposing fuel tax increases as an incentive for change on consumers who have limited budgets and no realistic alternatives to relying on private vehicles. 6. WE ALL MUST DO MORE TO ADVANCE THE ENERGY TRANSITION The IPCC Report cited at the beginning of this article warns that we are not on a path to limit global warming to the desired target of 1.5°C. All participants in the energy sector, including oil-producing countries, major oil companies, governments and consumers, must do more if we are to achieve a sustainable global economy. Continuing to defend individual interests, to act in comfortable, familiar ways and to rely on traditional business practices will not solve this collective challenge. European oil and gas companies were correct when they courageously urged the UN to adopt a universal price on carbon emissions in 2015, but from time to time since then, they and others appear to have retreated from this position.29 The alternative—imposing fuel efficiency targets and subsidizing selected energy sources while penalizing others—only assures that policies favoured by the most powerful lobbies will be imposed. It is far from a guarantee of a level playing field or of an equitable burden sharing. Recently, some major oil companies have begun—or in some cases have resumed—advocating a price on carbon emissions. BP, ExxonMobil, Royal Dutch Shell, Total and ConocoPhillips are members of the Climate Leadership Council, who argue for a tax on carbon emissions combined with a dividend returned to taxpayers. The Council solicited and received the endorsement of more than 3500 economists, including former Chairs of the US Federal Reserve and Nobel laureates.30 To stand any chance of popular acceptance, such a tax must be introduced at a low level and increased gradually, and the dividends must be returned sufficiently rapidly that individual taxpayers can live until the next paycheck. If such a tax were introduced in any individual country alone, a border tax adjustment would be a necessary compliment. The carbon tax would be refunded on products exported, while an appropriate tax would be imposed on imported products from countries not applying such a tax. Ideally, however, such a tax could be part of a multilateral climate agreement. We are living in a period of radical uncertainty.31 A failure to respond now to the challenge of global warming would mean that most oil export-dependent economies would become ghost economies. Oil and gas companies would provide diminishing value to their shareholders. Governments would face revolts from citizens experiencing ever greater weather extremes and climate-induced catastrophes. The option of continuing on the present path is not a serious option. We must all do better. Nordine Ait-Laoussine is a former Algerian oil minister and president of the Geneva-based consulting firm NALCOSA. John Gault is an energy economist and a member of the JWELB Executive Committee. Together, they advise governments and corporate clients, and produce a quarterly report on oil and gas markets. Footnotes 1 UN IPCC, ‘Summary for Policymakers’ in V Masson-Delmotte and others (eds), Global Warming of 1.5°C. An IPCC Special Report on the impacts of global warming of 1.5°C above pre-industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty (World Meteorological Organization 2018) 32, 20, para D.1. 2 The International Energy Agency reports historic declining auction prices for solar and wind power and anticipates further declines of 45%– 50% for solar photovoltaic and onshore wind, and an even greater decline for offshore wind from 2017 to 2023. IEA, Renewables 2018: Analysis and Forecasts to 2023 (2018) 165. Many caveats must be applied when relying on auction prices or on another widely reported indicator, Levelized Cost of Energy (LCOE), but there is a wide consensus that the trend has been and will continue to be downwards. 3 Petroleum Intelligence Weekly, 22 March 2019. 4 International Oil Daily, 15 March 2019. 5 The International Energy Agency’s World Energy Outlook 2018 projects (in its New Policies Scenario) continued growth of world oil demand at least until 2040 (136ff). DNV-GL, in its Energy Transition Outlook 2018 – Oil and Gas, projects global oil demand will peak in 2023 (23–24). In March 2018, Shell CEO Ben van Beurden stated that oil demand could peak as early as 2025 if all countries abide by their 2015 Paris Climate Agreement pledges. The BP Energy Outlook 2019 shows demand for liquid fuels peaking in 2035 (83). McKinsey’s Global Energy Perspectives 2019 (Reference Case, Summary, 10) projects oil demand peaking in the early 2030s. 6 See, for example, Harold Hotelling, ‘The Economics of Exhaustible Resources’ (1931) 39(2) Journal of Political Economy. 7 Peak oil supply theories frequently referred to Shell geologist M King Hubbert’s correct 1956 prediction that crude oil production (onshore) in the contiguous US states would peak between 1965 and 1970. M King Hubbert, ‘Nuclear Energy and the Fossil Fuels’ downloaded on 8 March 2019 . Monthly US crude oil output did not exceed the October 1970 peak until November 2017. 8 The World Meteorological Organization’s ‘Statement on the State of the Global Climate 2018’ (April 2019) added more recent data on global warming, updating and reinforcing the data relied upon by the IPCC report cited at the beginning of this article. The International Energy Agency’s ‘Global Energy & CO2 Status Report’ (April 2019) concluded that ‘Global energy consumption in 2018 increased at nearly twice the average rate of growth since 2010 …. As a result of higher energy consumption, CO2 emissions rose 1.7% last year and hit a new record.’ 9 Nordine Ait-Laoussine and John Gault, ‘Nationalization, Privatization, and Diversification’ (2017) 10 Journal of World Energy Law and Business 43, 48. 10 In 2015, the OPEC Secretariat invited co-author John Gault to contribute to a seminar on OPEC long-term planning. Suggestions included here are selected from his unpublished paper, ‘Shaping OPEC’s image as an active partner in the global energy community’, Vienna, 2 February 2015. 11 Lacking opportunities at home, young graduates often emigrate. ‘Speaking at the New Members Induction of the Institute of Directors in Lagos, the Chief Economist [of] PricewaterhouseCoopers, Dr Andrew Nevin, said research had shown that the biggest contributor to Nigeria’s Gross Domestic Product in 2018 was not the oil sector but remittances from Nigerians in the Diaspora.’ Ife Ogunfuwa writing in Punch, 3 March 2019 accessed 31 May 2019. 12 Kingdom of Saudi Arabia, ‘Vision 2030’ document, 7 accessed 29 April 2019. 13 ibid 13. 14 Financial Times, ‘Saudis Set for $11bn Asset-Sale Blitz after Slow Start’ Financial Times (London, 13 January 2019). 15 Laoussine and Gault (n 9) 54. See also Financial Times, ‘Saudi Aramco IPO Sparks Fears of Loss of Cash Cow’ Financial Times (London, 20 May 2018). 16 OPEC members Nigeria and the Democratic Republic of Congo joined EITI in 2007 and Iraq joined in 2010. The EITI Standard can be found: accessed 31 May 2019. 17 In April 2019, Cyclone Idai in Mozambique caused an estimated $700 bn in economic losses for the country accessed 31 May 2019. 18 Quoted by Jeffrey Ball, ‘Inside Oil Giant Shell’s Race to Remake Itself for a Low-Price World’ Fortune (24 January 2018). 19 ‘OGCI At Work’ September 2018. Downloaded on 12 April 2019 . 20 ibid, inside cover page. 21 InfluenceMap, ‘Big Oil’s Real Agenda on Climate Change’ March 2019, 2. Downloaded on 13 April 2019 . 22 The attention of the entire energy industry has been drawn to the bankruptcy of Pacific Gas & Electric (PG&E) in California following the company’s unpreparedness to cope with liabilities due to enormous wildfires in 2017 and 2018, widely seen as consequences of climate change. 23 Gunvor press release, 15 October 2018 accessed 13 April 2019. 24 The Kyoto Protocol (1997) committed only Annex I (relatively high-income) countries . 25 In some countries, policies have been reversed, the most notorious examples being the US withdrawal from the Kyoto Protocol in 2001 and, in 2017, the announcement of its withdrawal from the Paris Agreement, after having participated in the design and negotiation of both agreements. Domestic US policy reversals include relaxations of power plant emissions regulations and vehicle fuel efficiency targets. 26 Umair Ifran, ‘Americans Are Worried about Climate Change — But Don’t Want to Pay Much to Fix It’ (Vox, 28 January 2019) . 27 Earl J Ritchie, ‘Fact Checking the Claim of a Major Shift in Climate Change Opinion’ (Forbes, 30 January 2019) accessed 31 May 2019. 28 George Serafeim, ‘The Fastest-Growing Cause for Shareholders Is Sustainability’ Harvard Business Review (Cambridge, 12 July 2016). accessed 31 May 2019. 29 David Leonhardt, ‘The Problem with Putting a Price on the End of the World’ The New York Times (New York, 9 April 2019). 30 ‘Economists Statement on Carbon Dividends’, Wall Street Journal (New York, 16 January 2019); Timothy Cama, ‘Former Federal Reserve Chairs, Economists, Back Carbon Tax’ The Hill (Washington, 17 January 2019); the statement may be found: accessed 31 May 2019. 31 Radical uncertainty applies not only to the energy sector, but to the financial sector and to the economy more broadly. Mervyn King, The End of Alchemy: Money, Banking, and the Future of the Global Economy (W.W. Norton & Company 2016). © The Author(s) 2019. Published by Oxford University Press on behalf of the AIPN. All rights reserved. This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/open_access/funder_policies/chorus/standard_publication_model) TI - Managing the energy transition: we can all do better JF - Journal of World Energy Law and Business DO - 10.1093/jwelb/jwz015 DA - 2019-08-01 UR - https://www.deepdyve.com/lp/oxford-university-press/managing-the-energy-transition-we-can-all-do-better-GPea6jOi4E SP - 277 VL - 12 IS - 4 DP - DeepDyve ER -