Substitutes for Liquid Fuels – Outlook in a Low Oil Price Environment

About the Workshop

KAPSARC convened a workshop in December 2015 with some 40 international experts in the areas of global oil markets, alternative fuels, electric vehicles and venture capital, to discuss the impact of lower oil prices on the future of alternative liquid fuels. The workshop was held under Chatham House rules.

Key Points

The case for alternatives to gasoline and diesel was historically built on economic concerns; that the world might be running out of oil, which would then become prohibitively expensive. More recently, the argument has been refocused around carbon abatement and avoiding the social costs of climate change.

• In the past, initiatives to pursue alternatives to oil would have come to a halt if confronted with the precipitous fall in oil prices seen over the past 18 months. 
• Today, the impetus to continue investing in technologies that can be cost competitive with refined oil products is provided by global climate governance discussions. The outlook is therefore unlikely to be affected by short term oil price weakness. 
• Innovators attempting to find viable alternatives to oil are now more likely to be venture capital backed entrepreneurs than major oil companies. 
• The target ‘cost’ for low carbon alternatives is not based on the current or expected future price of oil but the underlying cost of oil development and production (excluding fiscal rents) plus the social cost of carbon.