The recent rise in oil prices reminds us that volatility will remain a core feature of the global hydrocarbon market. But what are the more fundamental changes we can expect over the next decade"font-size: medium;">Race between the US and China
We have been taking a closer look at the emergence of new transport fuels, given that transport accounts for about 60 percent of global oil consumption. Our research led us to explore an interesting dichotomy: The race between the US and China in the pursuit of alternative transport fuels and the impacts on their respective economies. Both countries aim to reduce dependence on petroleum and this goal is driving their investment in new technologies.
A pretty realistic scenario for the US is the implementation of a fuel-efficiency standard to 40 miles per gallon by 2030 and the blending of 30 billion gallons of biofuels. We calculate that this would replace more than 30 percent of gasoline and diesel demand by 2030 relative to 2010. As a result, US crude imports would be reduced by approximately 1 billion barrels of oil by 2030 compared with the volume imported in 2009.
China's goal is to have alternative energy make up 30 percent of transport fuels by 2020. Today, it imports more than half its total petroleum consumption and, with the decline in domestic oilfield production and the rise in demand for hydrocarbon fuel, the country's dependence on oil imports is growing. According to our analysis, the alternative energy industry could substitute traditional transport fuels to save oil imports by 21 percent in China by 2020.
Nature of investments differs
It is, however, the differences in the nature of each country's investments that strikes me as most telling. We conclude that China could enjoy a competitive advantage over the US in electric vehicles, thanks to its state-backed focus on this area of technology, its domestic supplies of lithium and its current battery production capability.
The US' market led-approach will result in a more gradual development of new technologies and disparate federal funding could place it at a disadvantage. However, the US will be better placed to create new innovations across many platforms that can be integrated into the existing fuel supply infrastructure. These cover advanced combustion engines, electric technologies and advanced biofuels.
In short, China's decisiveness will allow it to scale out and achieve its targets faster, but in a narrower field of technologies. While the US may be slower in its development, its openness to new and disruptive technologies is more likely to generate breakthrough technologies.
This article is accompanies the Accenture report, "The Case for City Disclosure, written for Carbon Disclosure Project (CDP)"
By: Arthur Hanna, Accenture APAC Utilities Industry Lead