I recently met with LinkedIn Executive Editor Dan Roth to talk about the current state of the oil and natural gas industry, which he noted has seen almost 70 bankruptcies this year, lower profits and a large number of layoffs. Dan wondered how Chevron could continue to attract employees – particularly millennials.
It’s a fair question – for those outside the oil and natural gas industry. Those of us in the industry know the products we develop are indispensable to the economies of the world. And so, even as we work our way through this low-price environment, we’re confident in the future.
During my 36 years with Chevron, oil prices have dropped 50 percent or more five times. In the most recent fall, oil went from a high of just over $115 a barrel to under $50 a barrel in just six months. When prices fall, industry pulls back on investment and scales back the workforce in line with activities. Ours is a long-term business, so we know that eventually supply and demand will come back into balance and prices will stabilize. The global economy depends on it.
The energy we produce enables light, heat, mobility, mechanized agriculture, modern communications, the health system that keeps us well, and the many electronic devices that keep us connected and entertained. It’s also the feedstock for everything from crayons to contact lenses, not to mention the basis of our roads and runways.
More than 50 percent of the world’s energy currently comes from oil and natural gas – and another nearly 30 percent from coal. {see Figure 1} Fossil fuels have enabled the greatest advancements in living standards over the last 150 years. They’re abundant; reliable; energy-dense; can be stored; provide multiple, high-value consumer products beyond power and fuel; and have a global infrastructure of refineries, pipelines, ships, and distribution systems that’s been more than a century in the making.
And yet, despite the depth and breadth of today’s energy market, there are still 1.2 billion people in the world without electricity and more than 2.7 billion people who still burn solid fuels, such as wood, crop residue and dung, to cook their food. Enabling affordable and reliable energy for these people, even as we maintain our modern lifestyles, is critical to global economic growth and stability.
Fossil fuels have enabled the greatest advancements in living standards over the last 150 years.
This will require more energy in the years ahead than we can possibly produce by renewable sources given today’s technology. Most forecasts call for global energy demand to rise by around one third or more by 2040 as populations grow, incomes rise and people all over the world strive for the standard of life we enjoy today. It’s clear that to meet those needs we’ll need all forms of energy – renewables, oil, natural gas, coal and nuclear.
Although the use of renewables will grow, under the International Energy Agency’s New Policies Scenario (with calculations based on current and projected emissions policies) we see oil and natural gas are forecast to account for 50 percent of global energy demand by 2040. Even in its 450 Scenario (which accounts for a greater reduction in emissions), oil and natural gas will still account for 44 percent, with coal providing an additional 16 percent.
Despite rapid growth in installed capacity, the share of total primary energy demand supplied by wind and solar generation is expected to still be about 3 percent in 2040. While that’s a big jump from the less than 1 percent of the energy supplied by these renewables today, those forecasts make clear that, without a game-changing energy technology breakthrough, renewables will be insufficient to independently provide enough affordable and reliable energy to meet the needs of the developed world while also raising the living standards of developing countries.
Bill Gates notes that energy is critical to lifting people out of poverty. “If I could have just one wish to help the poorest people, it would be to find a cheap, clean source of energy to power our world,’’ he said in his 2016 annual letter. “You might be wondering, `Aren’t people just trying to stay healthy and find enough to eat? Isn’t that important too?’ Yes, of course it is…But energy makes all those things easier. It means you can run hospitals, light up schools, and use tractors to grow more food.”
Gates predicts the world will uncover a clean-energy breakthrough within the next 15 years. Chevron supports continued research into early-stage technologies to find that breakthrough. And while this search is underway, the world will continue to need energy from the mix of sources that we have today. That doesn’t mean we won’t see efficiency and environmental improvements along the way. Industry, in partnership with governments and universities, has a good track record of advancing technology to make energy more efficient while addressing environmental priorities.
Since I was a kid, automotive tailpipe emissions have been reduced 98 percent, and electric vehicles have moved from an innovative idea into an integral – although still small – part of our nation’s roadways.
At the same time, the oil and natural gas industry has continued to find more resources and ways to recover more of them efficiently, economically and safely. In the past decade alone, we’ve used innovation and technology to transform the U.S. energy story from one of scarcity to one of abundance.
This can’t be done without always maintaining the right people in the right jobs at the right time. Even in today’s business environment, we’ve continued to hire, develop and train our employees. Demographics indicate a large retirement wave in the next 5-10 years, and we have to ensure we have the necessary talent in place to continue to advance our industry.
The energy sector has been, and will continue to be, transformed over a long sweep of time. But this transformation must be compatible with meeting our economic and environmental priorities, and that means oil and natural gas will remain critical. These fuels remain for the foreseeable future the foundation of the energy economy, keeping the world’s lights on, its factories running, and the transportation system moving. People want to work for us because our products make life better.
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