A move by OPEC sent a brief surge of optimism through the Canadian petroleum industry last week, when the oil cartel announced it was extending its production cuts.
But according to research released shortly after that announcement, the world is on the verge of an electrifying change that will have a cascading effect on the entire global energy industry — and even OPEC isn't big enough to stand in its way.
A report from Bloomberg New Energy Finance (BNEF) shows that within as little as eight years, electric cars in Europe and North America will be cheaper to buy and run than traditional vehicles powered by internal combustion engines.
The report comes at a vital moment for the world's oil industry.
The Paris promise
This weekend, leaders of the G7 countries gathered in Italy, and one of the issues on the table was their commitment to cut greenhouse gases, agreed to in 2015 with the Paris climate accord.
U.S. President Donald Trump — who has been seen as a climate change skeptic and as a champion of continuing to produce fossil fuels in spite of the environmental costs — has not yet declared whether his country will keep its Paris promise, negotiated under the Obama administration.
Climate change divided the G7 into two camps: Trump on one side, and on the other, the six remaining leaders who spent the weekend urging him to uphold the Paris accord, but failed to get any assurances.
Trump tweeted that he would make a final decision on the accord this week.
That decision was expected earlier this month, but at the time, Trump's team announced it would delay deciding until after the G7 gathering.
As a representative of established business interests, few would be surprised if Trump dumped the Paris agreement.
Holding back the tide
That's because vested interests in the existing industrial economy — based on fossil fuel extraction, distribution and consumption — would like to hold back the changing tide.
That includes the auto retail sector.
On a recent visit to a Toyota dealership to check out a plug-in hybrid, none were available to see. The salesman actively encouraged this potential customer to buy something else.
So far, electric vehicles — small cars packed with expensive technology — are not a big money-maker for the car companies. They prefer the profit margins on thirsty SUVs containing technology paid for decades ago.
No wonder Canadian electric car sales remain low.
According to BNEF, a trend to improving battery technology and falling costs, combined with higher costs for diesel and gasoline cars, will mean electrics will match the cost of internal combustion engines by about 2025.
As is usual with such long-range predictions, the exact dates can only be an estimate, but the direction of the trend is clear: People are going to be using less gas.
And while the world continues to pump out more and more oil, total demand will begin to slow and then decline.
If that prediction comes true, then the U.S. strategy — to extract as much oil as possible to fulfil existing demand — is a good short-term business decision. Cutting back on production and leaving oil in the ground may just mean it will stay there forever, as demand eventually shrinks.
Fighting a rearguard action against change, the companies at each step of the fossil fuel industrial complex that want to be successful must also prepare themselves for a new world.
Increasingly, investors and companies that manage investment portfolios are eyeing traditional industries to see whether they are preparing themselves for a lower carbon world.
According to Reuters, Fidelity Investments is the latest to add its voice with a new set of proxy-voting guidelines, saying it may support shareholder proposals related to sustainability.
"Fidelity doesn't want to be sidelined from some of the most consequential decisions being made on climate risk," Shanna Cleveland, part of a group involved in the decision, told Reuters.
Getting more Canadians to buy and drive electric cars is also part of a federal government strategy announced Friday.
Transportation produces about one quarter of Canada's greenhouse gases, and as part of the country's commitment to getting that number down, the feds want us to buy more zero-emission vehicles.
"Canada is home to countless innovative firms and talent that are already shaping the automotive technologies of the future," Innovation Minister Navdeep Bains said in a statement announcing the plan.
As with any new technology, selling more electrics will bring prices down. But high prices and the barrier of dealing with an unfamiliar technology discourages all but the most adventurous or committed from dropping tried-and-true habits.
So far the federal plan includes creating an advisory group "to contribute to developing options for addressing the key barriers for greater deployment of these technologies in five areas: vehicle supply; cost and benefits of ownership; infrastructure readiness; public awareness; and clean growth and clean jobs."
If the BNEF research can be trusted, falling prices for electric vehicles will have a greater impact than a study by a Canadian advisory group. Falling prices could also lead to exponential sales growth from today's low levels, sharply cutting global demand for gas and diesel.
While digging in their heels may be a good strategy for the short term, companies and countries that are already planning how to adapt to that inevitable change will be the biggest long-term winners.
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