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Oil prices may have made headlines on Monday – closing above $50 a barrel for the first time since late May – but the economic outlook for fossil fuels remains uncertain. The International Energy Agency (IEA) reports that global energy investment fell by 12% in 2016, a second year of decline experts attribute to reduced spending on upstream oil and gas investments. Meanwhile, clean energy spending reached 43% of total global energy supply investment in 2016, a record high. While the IEA and large oil companies predict a greater than 10% rise in oil demand by 2040, a recent report by Bloomberg suggests that shifts in the energy economy could dampen such estimates.
This week’s Chart of the Week illustrates the hypothetical effects of technological advances, electric cars, and alternative energy sources on the IEA and oil industry’s demand predictions. Transportation – which alone accounts for about 60% of oil use – has enjoyed technological advances which have led to increasingly efficient engines, less fuel waste, and shorter trips due to better navigation systems. Concurrently, Bloomberg predicts more than 20 million sales of electric cars by 2030 due to shifting consumer preferences and aggressive policies in China, India, and Europe. Lastly, alternative energy sources such as biofuels and natural gas could supplant oil demand as clean energy investments continue to gain traction and popularity. These variables combined could drastically impact the economics of oil over the next several decades.
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