The End of the Age of Oil Akito Matsumoto Acting Chief of Commodities Unit Research Department, IMF Disclaimer: The views expressed in this presentation are those of the author and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Oil occupied dominant share of primary energy supply, but Oil’s share of primary energy supply continues to decline Coal is expected to lose most as renewables getting cheaper Natural gas supply is expected to grow faster than total energy demand growth The share of natural gas is expected to increase

Oil demand and supply continues to grow Oil demand “level” is expected to continue to grow at the rate slower than economic growth or total energy demand growth Efficiency and energy transition (shift to natural gas and renewable) plays a key role

The source of oil demand growth OECD: Peak Demand – reduction in oil demand (aging and slower economic growth) Non-OECD Emerging Market Economies Rise of middle income class leads to increasing automobile demand and other transportation demand. (e.g. jet fuel) Developing countries Switching from coal or biomass

Peak oil supply? Technological progress U.S. tight oil (shale oil) Ultra Deepwater, Heavy Oil U.S. tight oil (shale oil) Reducing cost to survive with lower oil prices “stranded assets” Not all currently proven reserve may not be tapped

Technology Higher oil prices stimulated energy saving technology (Efficiency Gain) Concerns regarding CO2 and other pollutant emission will play an additional role going forward Carbon Capture and Utilization (CCU) might be able to save fossil fuels

Energy Transitions Renewables grow faster than fossil fuels as it becomes cheaper Obstacles: battery technologies and intermittency (causes net load fluctuation) Natural gas : compete or complement?

Climate Change Without major technological progress, CO2 level is expected to increase. Policy and technologies are two key areas Policy (negative for coal and oil, less so for natural gas) Fossil fuel subsidies Carbon tax Pollutant regulations Technologies Renewables + Batteries Efficiencies Carbon Capture

Oil’s future depends on Economic growth (population growth) Policy (Subsidy, Carbon Tax, Regulations) Technology New type of energy supply (renewables, fuel cell, hydro methane and more) Efficiency gains Energy Transitions (to natural gas, renewables) Carbon Capture Economists tend to think of “technological” progress as exogenous shocks with a few exceptions. But we should at least keep an eye on technological progress even if we cannot explain well (yet) how technology evolves

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