It didn’t work, Lego said this week. Two years ago, the manufacturer of the well-known plastic building blocks launched the plan to no longer use oil as a raw material, but recycled PET – from which many plastic bottles are made. The reason why Lego is still abandoning the plan: the new method would lead to more CO2 emissions than the old one.
Also this week: the British government approved a plan to exploit a new oil field in the North Sea, with an expected yield of 300 million barrels. In the background, the oil price has been rising for weeks, to around $95 per barrel.
But wait a minute: if all climate measures are continued in the future, won’t oil become less important? That is probably the case. But that’s not very fast. Last summer, the international energy agency IEA, which is responsible for global energy supply, launched its latest forecasts for oil demand. And that is still going up, to almost 106 million barrels per day in 2028.
What happens next depends greatly on the speed at which the world achieves its 2050 climate goals. Earlier this year, the British oil company BP outlined three different routes for this in a report on global energy supply. If we make progress, but do not achieve those targets, the world will still consume between 70 and 80 million barrels per day in 2050. If the pace of climate policy really picks up, this will drop to around 40 million barrels. And in the unlikely event that no net greenhouse gas emissions are achieved, that would be around 20 million barrels per day.
This seems disappointing – and it is. But keep in mind that the world economy continues to grow in the meantime. Even under the least favorable path that BP outlines, you can calculate that the amount of oil needed for a certain ‘amount’ of gross domestic product in 2050 will be approximately one-third of current use what it is now.
But why is the oil price so high now, if everyone knows that the demand for oil will fall anyway? Won’t the market take an advance on this, with lower prices?
No, and that has a lot to do with the complicated game that OPEC, the organization of oil exporters, plays under the leadership of Saudi Arabia. Many of these countries are very dependent on oil revenues: without oil, the Saudis, for example, would have an annual budget deficit of no less than 27.8 percent of GDP – and they are not even the worst off. The IMF calculates the oil price needed to keep the budget in balance. For Saudi Arabia this year it is $81. Researchers from S&P Global also note that an additional $10 should actually be added if you include the needs of the state investment fund PIF. PIF is another part of the above-mentioned game: ensuring that your economy becomes less dependent on oil if that commodity falls out of favor. Many Saudi investments are aimed at this, from the new ultra-modern city of Neom to be founded to trying to attract a Tesla factory.
tAn oil price high enough to survive and invest requires relatively low production. But that production itself must be high enough to earn sufficient income. And in the meantime, the oil price also influences the pace at which countries switch to other forms of energy. The lower the price, the slower it goes.
What results is a multi-dimensional game, where the strategy also has to be agreed with different players (OPEC plus nowadays Russia). But hey, you don’t have to feel sorry for oil producers.
In any case, oil will decline in importance. But the question never goes away completely. For the time being, oil (and gas) will be used for all kinds of other purposes, especially the production of plastic. It is estimated that its manufacture now accounts for 9 percent of oil consumption. What will happen to this in the future? Try not to get too depressed by the following numbers.
The OECD, the club of industrialized countries, estimates that 460 million tons of plastic were made worldwide in 2019. That amount will almost triple to 1,230 million tons by 2060. Believe it or not, this is more than enough to cover almost the entire land surface of the Earth with cling film 9 microns thick. Annual.
Particularly in India and Africa, where there is still a lot of prosperity to be made up, plastic consumption is increasing by a factor of 5 or more. That’s why Lego’s message is such a disappointment. Reusing plastic is possible, and biodegradability is a nice prospect. But for now, consumption is rising steeply – putting a floor under oil production itself, by the way.
And Lego? That could at least bring out two new sets, one on bushfires and one on floods. Then the children will learn through play what their future will look like.