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  • It's a resource that has started wars and caused global market turmoil.

  • Oil fuels more than half of the world's transportation like cars, planes, and trucks.

  • But in the age of electric vehicles and renewable energy - is the oil era over?

  • Well, it all depends who you ask.

  • This chart from the International Energy Agency lays out the debate.

  • One scenario has oil peaking in the mid-2020s.

  • And the other shows oil demand growing until 2040.

  • So, why the difference?

  • Well, on one hand, climate policies are getting stricter.

  • So, here in the EU, renewable energy sources account for 80% of new capacity

  • and wind will become the number one source of electricity soon after 2030.

  • China, the world's largest polluter, is now leading the way in the push for clean power.

  • Just take a look at the streets

  • It's predicted one out of every four vehicles on the road in China will be electric by 2040.

  • And the total number of electric vehicles on the road worldwide

  • is expected to reach nearly 300 million in just over two decades -

  • there's only around 2 million today.

  • More electric cars equals less gas guzzling.

  • Okay, but let's not get ahead of ourselves.

  • The International Energy Agency says it's too soon to write oil's obituary.

  • Oil and gas still received two-fifths of global energy supply investment in 2016.

  • That was less than electricity got for the first time ever

  • but still much higher than investment in energy efficiency,

  • and renewables in transportation and heating.

  • Experts say it will be a long time before the infrastructure is in place

  • for electric cars to overtake the streets.

  • And even then, there will still be demand for oil.

  • Oil will be a dominant energy source for emerging markets like India,

  • and for industries like trucking, petrochemicals, shipping, and aviation.

  • One reason why these industries haven't backed off oil yet?

  • Well, prices are pretty low historically.

  • Back in 2014, the price for a barrel of crude oil traded above $100.

  • Today it's around $60 - where it's expected to stay for a while.

  • So how did this happen?

  • Put very simply, too much supply and not enough demand.

  • In 2014, economic growth slowed in countries like China and Brazil -

  • which made oil demand go down.

  • At the same time, global oil supply was going up, fast.

  • The U.S. experienced an oil boom thanks to new technology -- shale drilling.

  • Meanwhile OPEC, which is a cartel of oil-producing countries,

  • decided not to cut their own supply.

  • And despite geopolitical tensions in countries like Iraq and Russia,

  • oil production didn't go down in those regions either.

  • It was good for consumers who pay less at the pump.

  • But low prices hit oil producers and exporters hard.

  • Big oil companies like Shell and BP have responded to low oil prices

  • and increased regulations by trying todiversifytheir businesses.

  • That's a fancy way of saying they're investing in other things besides oil.

  • Some of that investment is going toward solar or wind

  • but most of it is going toward gas.

  • Exxon predicts demand for natural gas will grown more than any other energy source

  • and by 2040, will make up a quarter of the global energy mix.

  • Some analysts say it'll take a long time for us to switch to alternative power sources,

  • especially when oil prices are so low.

  • But whether the oil era comes to an end or not,

  • a new era of alternative energy has already begun.

  • Hey everyone, it's Elizabeth. Thanks so much for watching!

  • Be sure to check out more of our videos over here.

  • We're also always taking your suggestions for future CNBC Explains

  • so leave any of those ideas in the comments section.

  • And while you're at it, subscribe to our channel.

  • Bye for now!

It's a resource that has started wars and caused global market turmoil.

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What's next for oil? | CNBC Explains

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    Arissa Wang posted on 2018/07/20
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