Abstract: This article discusses the possibilities and obstacles for a cost-effective implementation of policies that will lead to a significant reduction in global CO2 emissions from the use of oil. The structural conditions and economic consequences of changing national or regional energy systems vary dramatically. In addition, there are a large number of actors with strong interests along the energy value chain that may potentially halt, delay or alter the implementation of the Paris treaty. We analyze these issues by first locating oil in the overall energy system, then identifying possibilities and obstacles at various stages of the oil value chain, and finally by contextualizing global oil by discussing whether and how it may be affected by geopolitics and regional conflict. In brief, our argument is that developments in consumption volumes and patterns will be most important. Market forces are vital, but they are influenced by politics and public policy outcomes. Transportation is the most important sector for oil consumption, with changes in transport behavior, modes and technology being vital drivers. The behavior of investors will be a decisive factor in shaping the production side of the oil system. If investments go down as a response to lasting low oil prices and/or because investors decide to turn to green economy options, the supply of oil will logically shrink. On the other hand, the growth and development aspirations of a rapidly growing population in developing countries are likely to stimulate demand and thus increase exploration, production and subsequently the price. Finally, we emphasize the importance of (geo)politics influencing all aspects of the value chain of oil.
Keywords: climate change; energy system; oil market; Paris treaty