Activists believe that sustained high ($110-120 per barrel) prices will lead to lower carbon emissions because it will make solar and wind seem viable by comparison, but a new study finds that is not true. Why abandon something where the same margin on an expensive product would lead to incredible profit?
Controlling supply leads to people paying thousands of dollars for diamonds, as an example.
But that doesn't mean low prices ($40-55 per barrel) on oil will lead to higher carbon dioxide emissions. If oil prices were to remain low for decades, a country like China, which bullied the United States into allowing them unlimited CO2 emissions until 2030 while getting America to reduce, would have resulting emissions increases of the same magnitude as the reductions expected from the countries obeying numbers agreed to at the Paris climate conference last year.
Instead, a new paper in Nature Energy finds that either extreme could mean emissions differences resulting from vastly diverging oil price paths could be on the order of 5- 20% of the total budget for staying below the desired 2°C target.
The new estimate relies on the IIASA energy system model MESSAGE in order to explore a variety of long-term scenarios for the development of oil prices up to 2050. "Oil prices have a history of rising and falling. They are currently pretty low, but the question is where they go from here. Our aim was to explore the longer-term impacts of completely different oil price futures, in terms of the future energy mix and carbon emissions," says IIASA energy researcher David McCollum, who led the study. "What we find is that sustained low or high oil prices could have a major impact on the global energy system over the next several decades; and depending on how the fuel substitution dynamics play out, the carbon dioxide consequences could be significant."
They believe the future fuel mix will depend in large part on whether oil and natural gas prices decouple at globally over the next several decades. IIASA Energy Deputy Program Director Volker Krey, who also worked on the study, says, "It was surprising to see how much the future energy picture depends on the link between oil and gas prices. Crude oil and natural gas prices have historically risen and fallen in concert. But this situation has changed in the US, thanks in part to the boom in shale gas production. If such developments were to occur elsewhere, either because of shale gas or the advent of a truly global natural gas market, then, according to our analysis, this could have a major impact on the use of different fuels - oil, gas, coal, renewables, and nuclear."
Other critical uncertainties identified by the authors include whether sustainable biofuels can replace oil and offset the load on existing power plants related to the growth of the electric vehicle market.
Because oil and gas are so intertwined with the rest of the energy system and global economy, measuring the net impacts of different price futures presents a challenge.