Top 6 highlights from Flame webinar: Fossil fuel prices – where next?
Low prices
Dieter Helm: “The new oil prices are the new ‘normal’, and there won’t be any return to the prices we knew in the last 5 years.”
Howard Rogers: LNG and gas producers have been over-reacting to a set of remarkable and unforecastable circumstances. In 2011 and 2012, it was assumed that the Chinese LNG demand would be infinite and no one foresaw the scope for LNG exports in the US.
Cameron Hepburn: “We’ve got the possibility of the fortunes of gas and oil changing quite dramatically so even if there is gain in gas, it’s feasible that oil prices are lower forever… It would be surprising if oil did return to those heady peaks… We could be having a really golden age for gas where China soaks up lots of that LNG capability, or it could be largely supplied by pipeline, in which case ‘the golden age’ would not be the phrase you’d be using.”
First vs second generation renewables
Dieter Helm: First generation renewables are bad, as we’ve thrown too much subsidy at them; the second generation renewables are good – we should just plough lots of R&D money into them.
Cameron Hepburn: “The pace of change in renewables is…actually more predictable than you think.” Cameron’s work suggests that there’s a steady development of renewables, which “in the long run is not great for fossil producers because the rate of tech progress is phenomenal, and it doesn’t look like it is stopping any time soon.”
Patrick Barouki: “In Europe we have a very important role to play to equalise the price for global LNG.”
The death of the IOC and the multinational
Howard Rogers: “We are starting to see the IOC starting to think more in terms of the potential gas has as the lowest carbon-intensity fossil fuel.”
Technology
Dieter Helm: “The great days may be over, and in their place a whole new range of technology companies may appear, driving forward their new technologies.”
Howard Rogers: “There is rapid tech progress on carbon capture.”
Cameron Hepburn: “Battery doesn’t need to take a huge leap forward – it is a bit like solar: just coming down year after year at a reliable rate. We are already seeing profitable installation of battery technology on grids… But that doesn’t mean that gas doesn’t have a role. There is some degree to which these are substitute technologies, but they’re not fully substitutes. You can have all the storage you like but you’re not going to be able to cover a two week seasonal minimum in energy during the winter in Northern Europe.”
Eastern Mediterranean developments
Howard Rogers: “I think the East Med is an interesting geographical province, but I think the problem is that once these big finds have been discovered, the politicians don’t know what to do with them.”
Norway’s role in the future markets
Patrick Barouki: “Norway could play the role of the swing producer.”