RIYADH: World will not need oil, admits Ali Naimi, the veteran Saudi oil minister while addressing the Business and Climate Summit last Thursday in Paris.

He said: “In Saudi Arabia, we recognise that eventually, one of these days, we are not going to need fossil fuels. I don’t know when, in 2040, 2050 or thereafter.”

However, Mr Naimi also clarified that calls to leave the bulk of the world’s known fossil fuels in the ground, to avoid risky levels of climate change, needed to be put “in the back of our heads for a while”.

“Can you afford that today?.. Where would the western civilisation be today if it was not for fossil fuels yesterday?” he counter asked the delegates underlining it wouldn’t make economic sense to make a dramatic move now.

“You say decarbonise (the industry). Are you willing to have me go back home and shut all the oil wells? Can you afford that today?” he counter asked.

“What will happen to the [oil] price if today I remove 10 million barrels per day of the market.”

The talk of the ultimate end of the oil era is not new. Shaikh Ahmed Zaki Yamani, the grand old man of the industry, too has been reminding for decades; ‘coal didn’t end, coal era came to an end.’

And thus when Saudi Aramco opted to use its immense resources to produce chemicals with projects such as Sadara, many including this scribe strongly felt that instead of offering only crude to its buyers’ in a ‘buyers’ market, the Saudi state oil giant was endeavouring to add value to its resources, offering a portfolio of products to its customers that went beyond simple crude.

And the evidence of crude losing some of its grip is getting to the fore — slowly and gradually. Transport sector, has traditionally been overly dependent on crude supplies.

Not anymore.

The situation is changing — slowly but surely. The simultaneous rise of alternate fuels and the growing efficiency of America’s vehicle fleet seem impacting gasoline consumption growth rates.

The US Energy Information Agency is now reporting that the US transport system required about 6 per cent fewer BTUs of energy in 2014 than it did in 2007. And it used nearly 10pc less oil than it did then. In fact, oil consumption was lower in 2014 than in 2000.

And as a proportion of transportation fuel, petroleum hasn’t been this low since 1954, when coal was still a significant transportation fuel, the EIA report highlighted.

Despite low oil prices, other fuels — especially bio-fuels, chiefly ethanol — are slowly gaining traction. From a tiny base, 135 trillion BTUs in 2000, ethanol consumption rose eightfold to 1.092 quadrillion BTUs in 2014. Add in the small amount of bio-diesel, and these renewable biomass fuels in 2014 accounted for 4.7pc of the transport sector’s energy consumption up from 0.5pc in 2000.

They have increased their market share tenfold in 14 years. At the same time, the fracking revolution has made natural gas cheap and plentiful. As a result, it is increasingly being used as a transportation fuel, especially for buses and trucks.

Companies like Clean Fuel Energy are building filling stations and inking supply deals with big users — which in turn would make it still easier for more companies to adapt.

According to the EIA, natural gas in 2014 accounted for 946 trillion BTUs, or about 3.5pc of the transport sector’s energy consumption, up from 2.2pc in 2004. Combined, natural gas and bio-fuels account for 8.2pc of the energy used by the sector.

And this data set doesn’t include electricity used to power cars. Every month, several thousand cars are sold that run exclusively or partially on electricity — combined sales of plug-in hybrids and all-electrics were about 9,000 in April. There are also a few buses that run entirely on electricity.

And in the meantime, vehicles using petroleum have been getting much more fuel-efficient. The typical car sold in April 2015 in the US gets 25.2 miles per gallon, compared with 20.1 in October 2007 — an increase of 25pc.

Petroleum is still the dominant fuel, yet with each passing day, a slightly smaller proportion of America’s vehicles run on petroleum.

Naimi has a point to make.

Published in Dawn, May 24th, 2015

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