Oliver Chapman, from supply chain procurement specialist, OCI Group, believes recent data supports the narrative that an acceleration in the ‘renewable revolution’ can create a more resilient supply chain.
Over reliance on oil
But Mr Chapman says for more than a century, oil has been the ‘base upon which economic growth is built’ and warned the world has become ‘over-reliant’ on it, which may impact trade due to lack of available petroleum as countries look to reach net zero by 2050.
“The motion of the oil cycle is often correlated with the economic cycle — with spikes in the oil price often occurring before economic recessions,” said Chapman. “Oil has been essential for economic growth, but our reliance on it has created vulnerabilities.
“Recent data points to change ahead. The International Energy Association predicts that electricity usage will likely grow at its fastest rate in 14 years, while BP predicts that oil demand will peak later this decade and then fall.
Transition to electricity
“The transition to electricity is important for two reasons. Firstly, electricity is more efficient than gas for many applications including motor transport and heat pumps. The process of switching to electricity from oil automatically leads to lower C02 emissions. This is why it is important when looking at the green transition to look at energy sources as a proportion of final demand rather than primary production, as when using electricity, less production is required to meet that demand.
“Secondly, an ever-increasing amount of electricity is now generated from renewables. According to the IEA, the amount of electricity generated by wind and solar has trebled since 2014, and 2025 is likely to be the first year ever in which more electricity is generated from renewables than coal.
“The switch to both electricity and renewables helps support a more resilient energy supply chain as energy is generated closer to the point of use and in any case less energy needs to be generated to meet final demand.
“Critics say that the intermittent nature of wind and sun means renewables are unreliable, but innumerable studies show that 100 per cent renewables are viable, and at a cost which will eventually lead to lower electricity prices.”
Non-energy use of oil applications
However, Mr Chapman points out that non-energy use of oil applications such as asphalt or bitumen used for road paving, roofing and construction, for example, lubricants used in transportation and industry engines, waxes for candles, adhesives and food packaging and turpentine and kerosene used in paints, resins and plastics mean the supply chain for these products may diminish as there are no sustainable alternatives.
Mr Chapman continued: “The non-energy applications of oil pose our greatest challenge as the use of oil to make such products is far more economic when it is also used as energy. The elephant in the living room is the other applications for oil such as in plastic asphalt, paraffin wax fertilizer and pesticides. It’s clear that the supply chain for such products will be impaired as, at the moment, the emergence of alternative sustainable products is not sufficiently advanced.”
Image credit: OCI Group