RESEARCH shows oil prices can have a significant impact on the types and quantities of energy sources used, and as a result on greenhouse gas emissions.
Researchers at the International Institute for Applied Systems Analysis (IIASA) and the World Bank believe this study is the first to quantify the energy and emissions impacts of future fuel prices and the various unknowns these impacts depend on, according to IIASA.
Referring to a study published in the journal Nature Energy in June, IIASA claims sustained high (between US$110 and US$120 per barrel) or low (between US$40 and US$55 per barrel) oil prices could have an important impact on future carbon dioxide emissions.
Researchers found the magnitude of the impact depends not just on oil prices, but also on other uncertainties connected to energy supply and demand technologies, alternative resources and climate policy.
Emissions differences caused by diverging oil price paths could be on the order of 5 per cent to 20% of the total budget for staying below the internationally agreed 2 degree Celsius (°C) target, according to the research.
Ongoing low oil prices could harm the climate as much as countries’ Nationally Determined Contributions (NDCs) are expected to help it, study authors said.
In addition, if oil prices were to remain low for decades, the analysis shows that energy efficiency and decarbonisation efforts could be significantly hindered.
As a result emissions increases could be of the same magnitude as the reductions expected, in aggregate, from countries’ NDCs, which were agreed to at the Paris climate conference last year, IIASA said.
However, while high oil prices could give climate change mitigation efforts a mild boost, the study concluded that this would be no substitute for a rigorous global policy to limit climate change to below 2°C above pre-industrial levels.
The study relies on the IIASA energy system model MESSAGE to explore a variety of long-term scenarios for the development of oil prices up to 2050.
IIASA energy researcher David McCollum, who led the study, said the aim of the research was to explore the longer-term impacts of completely different oil price futures, in terms of the future energy mix and carbon emissions.
“What we find is that sustained low or high oil prices could have a major impact on the global energy system over the next several decades; and depending on how the fuel substitution dynamics play out, the carbon dioxide consequences could be significant,” he said.
IIASA energy deputy program director Volker Krey said it was surprising to see how much the future energy picture depended on the link between oil and gas prices.
“Crude oil and natural gas prices have historically risen and fallen in concert. But this situation has changed in the US, thanks in part to the boom in shale gas production.”
“If such developments were to occur elsewhere, either because of shale gas or the advent of a truly global natural gas market, then, according to our analysis, this could have a major impact on the use of different fuels – oil, gas, coal, renewables, and nuclear,” he said.
IIASA energy program director Keywan Riahi said as a result of low oil and gas prices it is harder for coal and renewables to compete.
“Basically, the parallel movement of these high- and low-carbon substitutes to oil and gas partially cancels out the emissions benefits and consequences of one or the other.”
IIASA said the study highlighted a range of questions and uncertainties, for example what effects sustained low prices could have on long-lived energy infrastructure.