Riding the Energy Transition: Oil Beyond 2040

IMF Working Papers, May 22, 2017

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Recent technological developments and past technology transitions suggest that the world could be on the verge of a profound shift in transportation technology.
The return of the electric car and its adoption, like that of the motor vehicle in place of horses in early 20th century, could cut oil consumption substantially in the coming decades.
The analysis suggests that oil as the main fuel for transportation could have a much shorter life span left than commonly assumed.
In the fast adoption scenario, oil prices could converge to the level of coal prices, about $15 per barrel in 2015 prices by the early 2040s.
"In this possible future, oil could become the new coal."

Electric vehicle adoption could substantially reduce oil consumption for transportation.
Fast adoption scenario projection:
- Oil prices could converge to about $15 per barrel in 2015 prices by the early 2040s.
The study frames the return of the electric car as analogous to historical motor-vehicle adoption that displaced horses.

The potential for rapid EV adoption implies significant impacts on oil demand and oil prices.
Policymakers and stakeholders in energy and transportation should consider scenarios where oil's role as the primary transportation fuel declines sharply within the coming decades.
Planning for infrastructure, fiscal, and macroeconomic adjustments may be warranted given the possibility that "oil could become the new coal."

Source: Riding the Energy Transition: Oil Beyond 2040, IMF Working Papers (2017).

Riding the Energy Transition: Oil Beyond 2040
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