When you hear the word fuel, the word “oil” probably immediately comes to mind. For years, oil has been the dominant transportation fuel, but according to a new report by the firm Lux Research, the market is beginning to shift away from the commodity. Dependent on the transportation sector for 80 percent of revenues, Big Oil faces challenges from a shift toward alternative fuels, and a growing need to combat air pollution.
The new report found that the transportation sector is the number one source of emissions, and breaking the oil monopoly could go a long way toward reducing air pollution. With much of the world facing deadly air pollution, many countries have begun to prioritize reducing emissions, as seen in the Paris Climate Change Agreement. At the conference in December, 195 countries pledged to prevent global temperatures from rising more than 2 degrees Celsius this century. That will require a shift toward alternative fuels.
Brent Giles, author of the Lux report, said:
“Oil’s dominant position in transportation fuels has proved impregnable for more than a century, but real threats abound now.”
The report examined future adoption scenarios of alternative fuels and predicted that by 2030, 31 percent of vehicles would run on an alternative fuels. Based on this market trend, oil will become much less profitable, allowing alternatives to take center stage.
So why is oil suddenly being pushed aside now? Mainly because of emissions goals set out in the Paris Climate Change Agreement, and emission goals established by individual countries. Norway, Germany, and India recently come forward with promises to shift their economies to low- or zero-emissions vehicles (you can read all about those efforts here). And this shift in thinking is weakening the oil industry’s hold on the transportation sector, creating potential benefits for consumers such as cleaner air, and fuel choice.
With the market shifting towards alternative fuels, the time of Big Oil’s dominance over the transportation sector could be over sooner than we thought.
Learn more about alternative fuels here.