The economic significance of this is monumental. We have seen a collapse in the price of oil. Short of a major catastrophe in Saudi Arabia -- a possibility -- we will never see $100/barrel oil again. I have forecast this and been saying this for the last year. The supply of oil is far outstripping demand. OPEC has lost its power to control price because there is a surplus of oil. Countries that have been relying on petroleum exports for their economy will have economic disruption. Many of these countries -- think the Middle East, Africa and Latin America -- all have an abundance of sun and wind and will turn to them for their own energy rather than spending money on gas subsidies for their citizens.
This is occurring because of a convergence of short and long-term trends. The transportation and building sectors have become vastly more energy efficient than in 2000, or even 2010. The price of alternative and renewable energy has dropped dramatically in the last ten years and is now comparable in cost to fossil fuels as a source of electricity. There is a rapidly growing critical mass of people who fully see and understand the magnitude of climate change. This affects everything they do and buy. Climate change is directly tied to fossil fuel use.
This significant event will trigger a massive amount of change and perceptual change. Once it is clear that fossil fuel usage is in decline, the financial sector will look at all fossil fuel companies differently. They will no longer be a good long-term investment. Unless they greatly increase dividend payments they will begin to be dropped from investment funds over the next decade. The key question for fossil fuel companies is how they think of themselves. If they think of themselves as coal, petroleum or gas companies they will enter into a long slow decline.
This of course harkens back to a century ago when the railroad companies thought they were in the railroad rather than the transportation business. This thinking kept them from entering the automotive or airline industries. If they had thought otherwise they might have funded the Wright Brothers or partnered with emerging automotive companies in Detroit.
The massive fossil fuel companies that dominate the Fortune Global 100 will soon have to make a choice. Do they move into the rapidly growing alternative and renewable energy sectors to keep growth rates up, or do they stay with the product mix they have and maintain profits through ever-greater efficiencies? With the price of oil down, probably permanently, the higher cost of deep ocean exploration strategies will not be economically feasible to foster top line growth.
So 2015 will be an extremely significant year in the history of energy. Money will flow to solar and wind companies. Companies such as Tesla Motors and Tesla Energy will both have all the financial support they need and will spawn many other companies to enter the space. The transformative reality of new battery technology being able to store variable energy is the game changer. Optimism will begin to creep into thinking about climate change, that humanity can turn the corner and actually work to lessen the catastrophes rushing towards us.
Since 2010 I have been saying that 2010-20 will be the first decade of 21st century thought. This is the decade when legacy thinking falls away and the space is filled with new thinking of this century. Whatever you think when I say “20th century” -- century of science, the century of world war, the American century -- it began 1914-1918, which brought us WWI, the Russian Revolution, the General Theory of Relativity, the map of Europe as we know it and very unfortunately the map of the Middle East as defined by Europeans at that time. So all of the story lines of the 20th century began in its second decade. This is now happening for the 21st century.
So 2015, the middle of the Transformation Decade, will mark the beginning of the 21st century era of energy. The fossil fuel era of the last 200 years will give way to the new era of alternative and renewable energy. Of course there will be fossil fuel use for decades to come, but both in total output and usage and in share of total energy consumption it will steadily decline. Just in time to face the stark and unprecedented realities of this new century.
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