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Oil will trade at \$5 per barrel before it trades at \$250 per barrel by the year 2050. Discuss. Maximum word count = 2,000 words. Answers over 2,000 words will be automatically disqualified from the competition.

at the chart you can see a mirror image of the percentage of crude consumed between OECD & developing countries since 1997. [figure 2] I took a look at the similar sort of numbers in the coal market to make a comparison. It’s estimated that there is around 892 billion tonnes of coal reserves in the world. 2013 consumption was around 7.9. That equates to 110-115 years keeping the numbers constant. It’s not precise but should give some sort of idea. If you convert both commodities into the total amount of energy available, it means that there are about 8.9 Gigajoules of crude oil in reserve, and 26.1 in coal. That means that there’s close to 3 times more available energy in coal reserves than there is crude. This amount of supply makes sense when you consider that the midpoint of coal is around \$40 a tonne. If you convert that into the weight of a barrel of crude (138 kg), that comes to \$6 for 138kg of coal. If we take everything into consideration, where we have a theoretical supply of 1.6 trillion barrels left of oil, and a minimum of 95 mb/d consumption, if you do the math that means we’re limited to a maximum of 40-50 years of consumption. When accounted for consumption growth, were looking at around 35-40 years. This helps the case for the potential of \$250 oil considering a shortage by 2050 is not completely farfetched. So even if Electric vehicles and renewable energy become a lot more prevalent in western/developed society, you still have to consider how much that will have an influence on the rest of the world that generally has a lag in adopting such technology given cost barriers, less environmental restrictions, and is growing at a rate multiple times faster on average than the west currently. From this what I’ve been able to determine is that the demand for crude oil likely won’t be disappearing, and even if it does, the supply characteristics simply doesn’t make \$5 a barrel make sense, and may even run the possibility of a shortage in the future. On top of this when you factor the relative value \$5 has for other products, I can confidently say that by 2050 oil has a more likely chance of trading at \$250 than at \$5.

Figure 1

Figure 2