There is really no need to waste a good crisis. If you look in the right places, there is plenty of potential to build business in today’s energy market, along with many new ways to generate value from the supply chain.
A number of new opportunities present themselves because the global market has now reached an inflection point – we are witnessing oversupply of hydrocarbons; cost parity and substitution between hydrocarbon and renewable energy sources; and a strong environment agenda.
Turning price parity into an advantage
Oil is being overproduced by some 1 million barrels per day. Companies and countries are running out of storage space. And the oil price is still very low, with little chance of anything other than gradual improvement while production and demand remain so utterly out of whack.
The prices of traditional energy sources are getting much closer to the prices of renewables, almost reaching parity. At the same time, global market demand is shifting to low carbon production – in other words, from coal, oil and gas to renewables, which is enjoying double digit growth right now. In fact, the renewables subsector is starting to stand on its own without subsidies, at least in emerging markets. Here, renewable energy sources fit well into future energy concepts – new economies are adopting decentralized power generation models (able to quickly adopt mini and micro grids) without having to accommodate the legacy models of developed economies.
Making the most of low carbon
When the logo of a Big Oil corporate turns green, this sends a clear signal to the global market. Companies in the energy industry are busily strengthening their environmental credentials and building up their low carbon qualifications.
Technology is playing an important role in the development of green capabilities. Batteries were previously the ‘missing link’ in the potential of renewables, but now they have greatly advanced, and production is taking place on an industrial scale, manufactured by companies such as Tesla and Daimler-Benz. Battery costs came down some 35% in 2015. And there’s strong demand for a key component, lithium (which doubled its spot price at the end of 2015), boosting lithium extraction operations in the salt plains of Bolivia.
These various developments present a vast range of opportunities for the supply chain as well as a compelling case for partnering with a logistics provider. This support will enable energy companies not only to optimize costs but also to obtain environmental and sustainability credentials, demonstrating how to become less carbon intensive and sharing value with the communities they operate in.