In an effort to placate the folks that helped fund his campaign, Donald Trump is doubling down on his love for oil.
Last week, the Trump administration announced that it would be taking the appropriate steps to expand drilling in the Arctic and Atlantic Oceans.
As reported by the Associated Press, the Interior Department is rewriting a five-year drilling plan established by the Obama administration, with an eye toward opening areas in the Arctic and Atlantic oceans that now are off-limits to drilling. Trump commented on the initiative saying, “The golden era of American Energy is now underway.”
If that were true, the president would not be wasting his time on drilling for oil, as the “golden age of American Energy,” will be facilitated by renewable energy and electrified transportation.
Of course, Trump’s hard-on for antiquated energy sources doesn’t actually mean the oil companies will be rushing out to drill. The truth is …
Oil’s Days are Numbered
As I recently reported, we are at the very beginning of a major transition when it comes to personal transportation.
You see, oil is used primarily as a transportation fuel. It’s been that way for a very long time. So long, in fact, that the product life cycle of oil has already gone beyond the introduction, growth, and maturity stages. It is now in decline, and there’s no looking back.
The truth is, global demand for gasoline is set to peak as early as 2021, and perhaps as soon as next year in the U.S.
According to analysts at Wood Mackenzie, demand for gasoline in the U.S. – the market which makes up one-tenth of global oil consumption – is seen rising to 9.45 million bpd this year and stay basically unchanged next year, before heading down to 9.28 million bpd in 2019.
Some of this is the result of the large-scale integration of electric vehicles, and some of this is the result of efficiency gains in internal combustion vehicles, but make no mistake, the “golden age” of oil is coming to an end.
Because China, Because India
Beyond the rapid growth of the electric vehicle market in the U.S., two of the most populous countries in the world – China and India – are also moving towards electric vehicle integration.
According to Germany’s University of Duisberg-Essen’s Center for Automotive Research, in just eight years, 30 percent of China’s auto market will be electric with automakers selling 10.6 million a year. And in India, the country’s energy minister recently announced that India is committing to selling only electric cars by 2030.
The point is, opening up new opportunities for drilling doesn’t necessarily mean the oil industry cares. Particularly in the Arctic, where drilling has become a fool’s errand. Just ask Shell, which abandoned its exploration project in the Chuchki Sea after burning through more than $7 billion trying to tap a location that proved to be quite difficult – particularly with oil falling below $100.
While it’s true that the world will still rely heavily on crude for the foreseeable future, we are now at the beginning of the end for the internal combustion engine, which is a fabulous technology, but has also become antiquated.
The future is undoubtedly electric, and any attempts to prime the pump for Big Oil will be an exercise in futility.