The UK could reduce its global spending on oil and save £232bn a year between 2020 and 2030 by adopting low-carbon transport, that’s according to a new report from economic analysts.
Experts from Cambridge Econometrics suggest that a switch to low-carbon technologies such as hybrid and electric vehicles would significantly reduce global oil prices, allowing oil importing countries, such as the UK, to invest additional savings into other parts of the economy.
Philip Summerton, Cambridge Econometrics director and lead author of the report said:
“Without any further policy changes, oil prices are likely to recover in the long-term, driven by global economic growth and increasing demand for mobility.
“In a world where climate policies are being implemented to drive investment in low-carbon technologies – as governments agreed in Paris – demand for oil will be curbed, and ultimately reduced, leading to lower oil prices than would otherwise be the case.”
The conclusions from the new report would be hugely beneficial to the UK – a country which imported 38% of its oil in 2014.
The Oil Market Futures analysis suggests that with greater support for clean transport, the UK could potentially lower its oil bill by £13bn by 2030.
The report highlights that an increased focus on domestically-produced electricity or hydrogen – to power low-carbon vehicles – could benefit the UK economy to the tune of £5bn and create as many as 19,000 new jobs.
The study, titled ‘Oil Market Futures’, presents the long-term impacts on oil prices and the wider economy if there is a global effort to tackle climate change.
The results show that, in a world where climate policies are implemented to drive investment in low-carbon technologies the demand for oil will be significantly lower: by around 11 million barrels per day in 2030 and by 60 million barrels per day in 2050.
The study says that with a lower oil demand it would result in oil prices stabilizing to between $83 and $87 per barrel in the long run, rather than increasing to $90 per barrel by 2030 and over $130 per barrel by 2050 (in 2014 prices), as expected in the business-as-usual case. As a result, industries and consumers would benefit from reduced spending on oil, leading to net macroeconomic benefits.
Cambridge Econometrics experts also suggest that the age of ultra-cheap oil will only be a temporary situation, with a prediction that oil prices could rise to $130 a barrel by 2050. However, this figure could be reduced to a reasonable level of around $83 a barrel if governments undertake a positive approach to drive investment for low-carbon mobility.
“Through policy support and technological innovation, we can expect the global economy to be using 11 million fewer barrels of oil per day by 2030 than we would without significant changes to transport technologies,” Summerton added.
“Lower oil prices would benefit oil-importing regions such as Europe by reducing inflationary pressures on consumers, increasing real incomes, and shifting spending towards other goods and services that deliver more value for Europe.”
The Oil Market Futures report was released in the build up to the New York climate change agreement on Friday (22 April) which will see 130 countries ratify the Paris deal agreed last December.
The report demonstrates that every country will need to revolutionise the transport sector with ambitious low-carbon mobility polices in order to ensure that global temperature rises are kept well below 2C.
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