Electric Vehicles and Clean Energy Could Slash $19 Trillion from Fossil Fuel Revenues by 2040

According to a new report released by United Kingdom based energy market analytics firm Aurora Energy Research the rise of green technologies such as electric vehicles and clean energy will see fossil fuel demands slashed. The cumulative revenues from these polluting energy sources will be an estimated $21 trillion lower from 2018 to 2040 than in a business as usual scenario.

Peak oil predicted

“Our new analysis points to a possible energy future of mass electrification, digitalisation, and new technologies, in which the rise in electric vehicles and continued improvements in fuel efficiency lead to peak oil demand occurring in the mid-2020s, and oil prices falling to less than half their current level by 2040. Indeed, this flips the very idea of “peak oil” – previously hypothesised for the supply side – as electricity grows in importance as a transport energy source,” said Richard Howard, head of research at Aurora Energy Research.

The rollout of 540 million electric vehicles by 2040 combined with fuel efficiency advancements will cause oil demand to peak in the mid-2020s, cutting oil income by $19 trillion from 2018 to 2040. With this decrease in demand continuing into the 2030s, the report estimates that oil prices could fall as low as $32 per barrel in 2040.

Gas emerges a winner

However, one fossil fuel will emerge as a “winner” as it balances renewables in power generation and acts as a substitute for oil within the petrochemicals sector: gas. The report predicts long-term gas demand will increase by 15% compared to business as usual. 

“Gas and power will become increasingly important energy vectors in the future, whilst the shift away from coal power generation in many nation states leads to a collapse in coal demand and prices,” added Howard. Prices for coal are predicted to drop to $28 a ton by 2040 from about $90 now, barely enough to cover the cost of production and transport.

In further good news, technological advancements and consumer engagement will likely be more effective than the Paris Agreement in reducing carbon emissions. The report predicts these changes will result in the total CO2 emissions from fuels becoming almost 25% lower than business as usual.

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The report advises governments to steer their climate policies toward promoting technology innovation and consumer engagement as much as enforcing carbon reduction targets. In the meantime, oil majors and power providers need to take notice.

As Professor Dieter Helm’s says in the book that inspired Aurora's research Burnout: the Endgame for Fossil Fuels: “Oil companies and energy utilities must begin to adapt their existing business models or face future irrelevancy. Oil-exporting nations, particularly in the Middle East, will be negatively impacted, whereas the United States and European countries that are investing in new technologies may find themselves leaders in the geopolitical game.”