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Yet, increasingly, the oil companies that bestrode the global economy for the past century are assuming an air of vulnerability. In an era when Apple has a market capitalisation twice that of ExxonMobil, the “supermajors” risk becoming relics of a fossil-fuelled past in a digital world.
Squeezed on one side by the rise of low-cost US shale resources and on the other by the accelerating shift to renewable energy, international oil and gas groups are beginning to face up to the threats facing their businesses.
“In our 109-year history, it is unlikely that there has ever been as much change as there is now,” Carl-Henric Svanberg, chairman of BP, told shareholders at the UK group’s annual meeting last week, acknowledging that over the next 20 years “consumption of oil will slow and eventually peak”.
For all the looming risks, fossil fuels still dominate the global energy landscape. Oil, gas and coal together account for 86 per cent of energy used for transport, heat and power worldwide. The questions for companies and investors across the sector are how fast will this change and what should they do to prepare?
Deep disruption is already being felt in the power sector. The electricity generated from renewables, excluding hydro, doubled globally between 2010 and 2015 as political efforts to tackle climate change intensified and the cost of wind and solar plummeted. Today, renewables account for an average 23 per cent of global power output. Denmark has breezy days when all its power comes from wind and Germany hit a record 85 per cent share from renewables one day last month.