Oil Industry

Oil rig in California, Creative Commons: Paul Locke, 1990

Oil is a fossil fuel that, according to the International Energy Administration (IEA), supplies approximately 35% percent of all the energy used worldwide. The combustion of oil produces carbon dioxide, and therefore drives climate change, which is already having significant impacts around the globe. In the United States, energy use accounts for 82 percent of greenhouse emissions, with petroleum counting for 42 percent of those. The use of oil already has has devastating environmental consequences, and continuing to consume oil at similar rates will only worsen the damage.

There are significant environmental hazards associated with every stage of oil production and use. Extracting oil via hydraulic fracturing creates air pollution, and has been linked to the contamination of groundwater and earthquakes. It also results in fugitive emissions, since the deposits of natural gas that are commingled with underground oil are often either released directly into the atmosphere or flared, contributing to climate change. The proliferation of offshore oil production has produced numerous large-scale oil spills, including a major spill from Nova Scotia’s Terra Nova offshore platform in 2004 and the BP oil spill that devastated the Gulf of Mexico in 2010. Likewise, transporting oil—by tanker, pipeline, and rail—has produced its share of environmental mishaps. In North America, notable events include the Exxon Valdez disaster, the Kalamazoo spill of 2010, the Yellowstone River spill of 2011, and most recently, Exxon’s Tar Sands pipeline spill in Arkansas. Elsewhere, there have been major spills in Akwa Iborn, Nigeria (2010); Dalian, China (2010); the Timor Sea off Australia’s coast (2009); and in Daesan Port, South Korea (2007). Each of these spills has had dire effects on local ecosystems.

The combustion of oil also has environmental impacts, primarily by creating air pollution and releasing greenhouse gases that greatly contribute to climate change. The IEA estimates that emissions from oil will grow to 12.6 Gt of CO2 in 2035, principally due to increased transport demand. However, widespread adoption of renewable technologies like solar and wind power could significantly curtail oil use, especially if coupled with an increase in electric cars and stricter energy efficiency standards for vehicles.

growing stable of commentators and experts believe that the energy transition tipping point is here, and that renewables are now unstoppable. As renewable energy grows, it will increasingly eat the lunches of fossil fuel utilities, while energy efficiency, green homes that are cheaper to run and build, and the rise of electric vehicles will further slow consumption; as well as undermine the profits of dirty incumbents, and increasing the political clout of the cleaner solutions sector. Grandfather utilities – unwilling or unable to adapt – will be increasingly threatened by this speed and spread of clean technology.

The extreme volatility in oil prices for 2014 and 2015 is also taking a great toll on the industry, with unconventional oil and gas projects suffering cutbacks due to them no longer being economic. The unreliability of supply costs create political space for carbon pricing to be implemented.  The drop also makes it easier to reduce reliance on energy imports as the economic, social and political risks that come with reliance on such a volatile commodity are more visible, and the benefits of switching to renewable solutions clearer.

Yet despite the many negative effects of continuing a heavy reliance on oil, governments around the world continue to subsidize its production and use. A 2013 study by the International Monetary Fund found that governments worldwide spend $1.9 trillion to subsidize fossil fuel production, including oil. In the United States alone annual fossil fuel subsidies range from $14 billion to $52 billion.

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Top Quotes

  • “There is enough oil in the ground to deep-fry the lot of us, and no obvious means to prevail upon governments and industry to leave it in the ground.” – George Monbiot, UK journalist for the Guardian
  • “Although it is impossible to predict the future, extrapolating present trends…leads to ‘The Perfect Storm’ sometime in the next decade. At the tipping point, oil prices exceed the pain tolerance of a sufficient number of global consumers, causing economies to roll over into severe recession.” – Dave Cohen, Association for the Study of Peak Oil
  • “We are not running out of oil and gas. We are running into oil and gas. Predictions of peak oil and gas are not only being made for the wrong year and decade, but also for the wrong century.” – Dr. Robert Bradley, Institute for Energy Research
  • “Shale gas offers no meaningful potential as even a transition fuel. Moreover, any significant and early development of the industry is likely to prove either economically unwise or risk jeopardising the UK’s international reputation on climate change.” – John Broderick, et al., Tyndall Centre for Climate Change Research
  • “Civilization as we know it will come to an end sometime in this century unless we can find a way to live without fossil fuels.” – Dr. David Goodstein, Out of Gas: The End of the Age of Oil

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