President Joe Biden’s immediate response to address climate change and begin the transition to steer the US economy away from the oil industry has commenced, signaling government priority and intent. Most countries are shifting towards a zero-emission strategy with the EU aiming to be climate-neutral by 2050 (Lowry, 2021).
It is therefore relevant and pertinent to understand and highlight the reasons and justification behind such a trending worldwide strategy.
According to New Energy Finance (Bloomberg, 2020), the demand for electric vehicles (EV) is expected to account for 58% of vehicle sales by 2040. This rapid increase indicates the growing demand for electricity, which compels global economies to avoid using fossil fuels and to instead follow the lead of large organisations by implementing and investing in newer ‘green’ technologies (Woerter, Stucki, Arvanitis, Rammer & Peneder, 2017).
“EVs across all segments are already displacing 1 million barrels of oil demand per day” — Electric Vehicle Outlook (Bloomberg, 2020).
Two-thirds of oil consumption is currently due to travel within the transportation sector (Energy Information Administration, 2018). Combined with an increasing global population, emerging economies should expect demand in oil to increase accordingly, until such demand can no longer be met using fossil fuels alone.
The expected plateau in oil and decline in adopting other fossil fuels should result in reduced carbon emissions that further allow countries to meet their zero emission targets as outlined in the Paris Agreement or other voluntary standards.
Looking at the future, it is apparent that a dramatic shift to adopt renewables is to be expected, leading to a best-case plateau or worst-case decline in oil demand between 2030 and 2040 (Perkins, 2020). However, the urgency has been indicated by US President Biden, providing evidence that the energy investment climate is ripe and the suitable time to adopt renewable energy solutions is now.