Disruptive Oil and Energy Futures

December 04, 2015
GL102
1300

Dr. Amory Lovins

CEO, Rocky Mountain Institute

Abstract

As it confronts troubling fundamentals, the global oil industry’s most basic challenge is not lowered prices but weakening demand, as customers find powerful new ways to save or displace oil. Oil suppliers are more at risk from competition with those new technologies than from climate regulation. Every significant global market for oil, and increasingly for natural gas too, is challenged by disruptive competitors—especially on the demand side —that hydrocarbon suppliers scarcely track, from radically efficient vehicles to superior ways to get around without them (or, through smart urban design, not need to). The pace of transformation may exceed what oil companies' culture can manage. As the world begins to embrace a low-carbon future and the prospect of profitably getting off oil by 2050, what are the strategic implications—and opportunities—for oil companies and resource owners?

Meanwhile, the electricity industry's basic assumptions since the days of Samuel Insull—ever-rising demand, ever-bigger and hence -cheaper power plants, hence falling prices—have reversed. Electricity providers face at least eight simultaneous disruptors, on both the demand and supply sides, that will transform their technologies, institutions, finances, and business models beyond recognition. These forces include severalfold more efficient use of electricity, expanding returns to efficiency investments via integrative design (so bigger savings cost less), highly competitive distributed renewables, ubiquitous flexible loads, cost-effective storage (including competitive electric vehicles), major regulatory shifts, new customer preferences and societal values, and gamechanging business models. Such transformations don't add; they multiply and exponentiate. Incumbents’ efforts to fight disruptors may actually strengthen them. Navigating these rapids presents an exciting opportunity for agile entrepreneurs, an extraordinary test of the industry's leadership skills, and an opportunity to start turning power supplies from brittle to resilient.

Together, these two emergent stories of profound disruption bring into question everything we thought we knew about energy—and its strategic implications for military missions.

POC

Dr. Daniel A. Nussbaum
Naval Postgraduate School 
Principal, Energy Academic Group
Monterey CA 93943
Phone: 831-656-2387
Mobile: 831-324-3228
Email: dnussbaum@nps.edu