Although oil experienced an extraordinary price increase over the past 4 decades, a turning point has been reached where scarcity, uncertain supply, and high prices will be replaced by abundance, undisturbed availability, and suppressed price levels in the decades to come.
In our new book, The Price of Oil, we conclude that the shale revolution will yield an increased output of oil in the world totaling nearly 20 million B/D by 2035. We also assert that a “conventional oil revolution”—the application of horizontal drilling and hydraulic fracturing to conventional oil formations in the world—will yield a further addition of almost 20 million B/D in the same period. This extra 40 million B/D is nearly twice as much as the global increase in oil production in the 20-year period from 1994 to 2014.
As these new production revolutions develop and expand internationally, they are bound to have a strong price-depressing impact, either by preventing price rises from the levels observed in 2015 (the Brent spot price averaged USD 53/bbl), or by pushing prices back to these levels if an early upward reaction takes place. Our optimistic scenario sees a price of USD 40/bbl by 2035.
Without serious climate policy restrictions, the use of cheaper oil will likely grow and extend its life expectancy throughout the global energy system....
Guest Editorial: Climate Policy with Low Oil Prices
Roberto F. Aguilera, Martin Radetzki
01 February 2016