In 2003, George W. Bush was accused of taking the world to war in Iraq to acquire its oil. There might have been some truth to the accusations; Iraq’s previously nationalised oil industry was rapidly opened up to a host of multinationals in the aftermath of the invasion.
But the idea that anybody would go to war over oil in 2020 is ludicrous. Part of that is due to the fact that the US now produces three times as much oil as it did in 2008 – 13 million barrels a day on 5 million in 2008.
It’s also because nobody needs it anymore.
The global economy has increasingly moved away from oil, so much so that oil giant Saudi Aramco’s fabled $2 billion IPO landed with a thud. Major international banks were leery of the company’s extremely optimistic valuation for a number of reasons – including the cost of doing business with the Saudi Royal Family and the prospect that Iran might bomb their investment – but mostly because nobody wanted to invest in a horse and buggy company.
For the first time in history, the ability of an oil giant to provide long-term return on investment was in question. Even SA’s prospectus foretold peak oil demand by the late 2030s – not really something you want when you’re trying to sell it.
2019 also saw the flop of Brazil’s auction of offshore drilling rights. Two of the four oil fields being offered for exploration received no bids, while the state-owned Petrobras bought one and 90 per cent of another. Two Chinese firms shared the remaining stake.
According to Roy Morgan, gasoline and other energy goods accounted for roughly 4 per cent of personal consumption expenditures at the time of the oil price shocks in the 1970s. In 2019, they accounted for just 2 per cent.
Oil will no doubt continue to be useful for several decades more. Rapidly industrialising countries will continue to burn fossil fuels to sustain their high rates of growth, just like every developed country. And until somebody figures out how to build a solar-powered tank, oil will continue to play a key role in global military operations.
But as electric vehicles become more widely available – and the infrastructure to support them becomes a part of any clear-minded nation-building project – oil will see less and less use. And fears about climate change and how it can impact a state’s ability to function are driving the rapid uptake of renewable energy.
The oil age is rapidly approaching its end; the electricity age is just beginning.
