March 22, 2019

Energy Price Jet’s Downward: Opportunity to Wane from Fossil Fuel Dependence

Get ready for Day 4 of Energy Futures Week! 

This blog aims to set the context for the main event of the day, we by this event seek to share with you the latest international research and thinking from our leading academics and have arranged an expert panel of industry professionals, leading thinkers and a former Oil & Gas Management student to discuss key issues affecting your employability, entitled The Energy Dialogue – ‘Volatility of the Global Oil Market – causes and cures’.  This question time style event will be held at our Greenford campus and is not to be missed.

The oil and gas industry remains a considerably risky sector both in terms of overall returns on investment, exploration, and health and safety concerns. The volatility in the energy sector is greatly influenced by any changes occurring in the oil and gas subsector of the energy sector. In recent times, low prices of both oil and gas (in particular oil) have taken over the headlines and have further accentuated the potential risk associated with overproduction and supply of oil and gas to the market. The dip in oil and gas price over the past few months as a result of the oversupply of oil by producing nations and global decline in demand is having negative impacts on governments and companies that are dependent on the sale of the resource for revenues but beneficial to customers (individuals and countries) who now can possibly pay less per unit cost for this energy resource.

The price volatility in the current global energy market is not new neither will it result in the apocalyptic end of the world; however, the impact could be far-reaching and recovery from the slump is something all investor stakeholders can’t wait to see happen. While companies and governments await the upturn in the per barrel price of oil (and per cubic feet price of natural gas), it is important that the different stakeholders (i.e. those currently benefitting and losing from the price dip) consider the inherent opportunities to walk the path of other cleaner energy sources that would not only save the planet for future generations but also contribute significant investment savings to their expenditure on energy in the long term.

The price of oil since last summer has dropped significantly from about $100 per barrel to about $50.99 per barrel (current going rate as I write). This drop has significantly affected both individuals and collectives (corporate and governments) decisions on investment, job creation and other determinants across different sectors. The unit price of fuel at the pump has dropped to a record low since the early 2000 and this has informed increase in the usage and purchase of inefficient fuel consumption cars (“big engine cars” as sometimes referred to) by individuals around the world. This could leave consumers saddled with inefficient vehicles and high running cost in the long term when there is a bounce back in oil and gas prices. The drop in prices has also increased the dependence on natural gas for power and heat generation. Unfortunately, the resultant response to this drop from the consumers’ perspective has been to use more energy due to the cheaper cost hence spending the accrued savings resulting from the drop in price on less efficient means of transportation, electricity and heat generation with grimmer environmental consequences.

In my opinion, the current trend and response to the drop in oil and gas prices have a significant impact on the long-term energy and environmental outlook for the world in general and the United Kingdom in particular. The opportunity to invest current energy savings in more energy efficient appliances, vehicles and building accommodations that are energy efficient and eco-friendly should be at the forefront of government policies and as the most adequate response to future energy price increase.

It is also important to note that investment in non-fossil fuel based energy sources could be a strategic hedge against fossil fuel price volatility. In as much as the impact of the downturn in the oil and gas sector of the energy sector is experiencing the greatest hit vis-à-vis job cuts and underinvestment; the renewable industry such as the solar industry is currently experiencing unabated growth in employment especially in the United States. The current downturn in the oil and gas sector should be seen as an opportunity to effectively integrate and establish other energy sources in the energy mix and avoid the over-dependence and dominance of fossil fuel over the rest much cleaner and environmentally friendly sources of energy.

Kenneth Aidelojie
Kenneth Aidelojie

Oil and gas will maintain its leading place in the immediate and medium term as the dominant energy source; however, customers should consider the current savings made from the reduced energy bills and pump price of oil as the opportunity to start the waning process from fossil fuel by diverting the savings to more energy efficient sources like solar for lighting and geothermal for heating pumps.

Finally, it is important that the government understand that with the current global crisis vis-à-vis geopolitical tensions between producer and transit states, the decline in United Kingdom’s major source of oil and gas (i.e. North Sea), and the characteristic unpredictability of major producer/supply States and organisations; the need to give strategic importance to other energy sources that are less predisposed to uncertainty and unpredictable supply chain is to the best interest of national stability vis-à-vis energy security, economic growth and environmental sustainability.

Come along and attend The Energy Dialogue at the Greenford campus, starting at 5pm.  Ask, probe, share and challenge our expert panel to identify potential solutions for our current global energy concerns and ensure you are equipped with the latest knowledge for your next career move, either at interview or during the application process.

Dr Kenneth A. Aidelojie is an expert in International Environmental and Energy Law and is currently a Senior Lecturer in International Energy Policies at GSM London. He is also the Principal Consultant at EnviNergy UK Consult

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