🛢️ Oil & gas - The largest and best disruption ever

Everyone knows that the oil and gas industry is enormous. But it’s hard to wrap your head around how big it actually is. Six of the ten companies with the largest revenue are in the oil and gas industry.

After Saudi Aramco was put on the stock market in 2019 it became the world’s first two trillion-dollar company.

Market cap and revenue do not paint the whole picture. We have 18 so-called petrostates, countries heavily dependent on oil and gas exports. Countries whose existence and international status rest much on their oil and gas fields.

Several wars have directly or indirectly been fought over oil—the Iraqi invasion of Kuwait and the U.S.-led effort to kick them out is the most obvious example.

Well, all of this is about to be disrupted

I wrote earlier about how insanely low the price for solar energy is becoming and how fast it is dropping. In 2015, we for the first time reached the point where building new solar was sometimes cheaper than building new fossil-fueled energy production. Since 2010 solar prices have dropped 85 percent, according to Bloomberg.

In the next ten years the price will probably reach the level where it is cheaper to build new solar energy production than to continue to run already built coal and gas plants. It will be a better investment to shut down the gas plant, and put your money into solar energy production.

The price of wind power is also declining, down 49 percent since 2010. Wind power is the most-used renewable energy source in the U.S.

Batteries are essential in the clean energy mix. Prices dropping 85 percent since 2010 and we see several large battery factories being built.

Coal shows the way

Coal is a precursor to what will happen to oil and gas. The fossil fuel that made the industrial revolution possible is being phased out. Sweden shut down its last coal power plant earlier this year. It happens to be located just a few hundred meters from my apartment in Stockholm. Coal power output is in steep decline in the EU, and renewable energy now beats fossil energy, for the first time. We see the same trend in the U.S.

Goldman Sachs will not invest in new coal power and new coal mines. The world’s largest capital asset manager, BlackRock, with over $7 trillion under management, says something similar and highlights the unpredictability climate change brings to long-term investments.

When that happens on a large scale, that is when the real disruption sets in.

Of course, energy production isn’t the only use of oil and gas. Almost all transportation runs on oil, but as we know, that is also changing. Tesla is leading the charge, and everyone else follows in a shift towards electric vehicles and away from fossil fuels.

Current oil price is a glimpse of the future

If the oil and gas companies can’t transition into new energy production, they will topple over and fall. The same things go for the petro-states.

The Economist writes that the low oil price we see now “is a glimpse of the future,” and the budget of the petro-states doesn’t add up anymore.

“Algeria needs the price of Brent crude, an international benchmark for oil, to rise to $157 a barrel. Oman needs it to hit $87. No Arab oil producer, save tiny Qatar, can balance its books at the current price, around $40.”

The biggest and best disruption ever?

The disruption of oil and gas will be the biggest disruption of an industry ever in human history. We are at the beginning of that, and it will not happen overnight; more likely it will take decades. Still, it will be huge and with dramatic consequences.

Just the geopolitics of it is mind-boggling. The Arab dictatorships with super lousy human rights records will lose much of their international clout. Western democracies can stop sucking up to murderers like Mohammad bin Salman.

Replacing oil and gas with clean energy will be a bonanza for our Earth and for us. Just the particles and smog kills millions of people every year. And climate change is one of the biggest threats for humanity and life on Earth that we are facing.

So the disruption is not only big, it is very good.

Impact the world - and become disgustingly rich

Do you want to make more money than an oil sheik and at the same time make the world better? I can’t think of a bigger and better opportunity than energy. Because even if the current oil and gas companies go away, the energy business won’t. It will still be worth trillions of dollars.