Everyone other than Donald Trump is convinced that renewable, clean energy is the way of the future. But Royal Dutch Shell CEO Ben van Beurden still managed to surprise the world by predicting that the change would happen by the late 2020’s. So what exactly does this mean for oil? Should investors start dumping it? Not exactly, but that idea isn’t wrong either
What Does the Shell CEO's Prediction Mean?
According to Shell CEO Ben van Beurden, if technology continues to improve at its current pace, oil will reach its peak demand by the late 2020s or early 2030s at the latest. That’s far more aggressive than the International Energy Agency’s prediction, which sees oil peaking after 2040. What does van Beurden see that the IEA doesn’t?
Well, quite a bit, apparently. Or maybe he just sees the obvious writing on the wall. Even with OPEC cutting production, oil prices continue to drop as cars are becoming more and more efficient in regards to fuel. Hybrids are more effective than ever before, and electric vehicles are everywhere these days thanks to Elon Musk and Tesla making them cool.
Does that mean it’s time to give up on oil?
Not even a little bit. Even with all our progress in clean energy, the U.S. is still very much an oilcentric country. That’s not changing anytime soon. Even after demand peaks, there’s still residual demand. “Peak” simply means that it reaches its highest point, not that the demand simply vanishes and disappears.
However, given the surprising source of this extreme prediction for oil’s future, traders would be wise to start investing in the solution. Van Beurden supports the switch to cleaner power sources in order to achieve climate goals. That means Shell is already focusing on renewable energy solutions, and so should the market.
Here's a video from Shell regarding CEO Ben van Beurden on Q2 2017 results:
Shares of Royal Dutch Shell plc (RDS-A, RDS-B) rose on the announcement, and should continue to do so. Van Beurden seems to have a plan for the future, which is critical. After all, what good is an oil company after oil isn’t being used anymore?
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