Biofuels and electric cars pose threat to transportation fuels industry

“Oil’s dominant position in transportation fuels has proved impregnable for more than a century, but real threats abound now. Government regulations have had a profound impact on the transportation fuels, catalysing gasoline and diesel substitutes like biofuels and electricity, and major players need to diversify to maintain their long-term competitiveness,” said Brent Giles, Lux Research Director and lead author of the report titled, ‘Dealing with threats to the transportation fuel oil industry’.

Upstream costs in 2014 were 25-30 percent below 2012 highs, largely driven by a collapse of demand. Costs can be lowered further over the next decade, thanks to advances like robotics, improved fracturing methods, lean engineering and treatment solutions for flowback water, said Lux Research.

ALSO READ: Godavari Biorefineries opens chemical intermediates plant in Maharashtra

With global commitments targeting 35 percent cuts in gasoline and diesel consumption, oil companies need to diversify. Natural gas and bio-derived natural gas offer opportunities. Bio-fuels are another area, as exemplified by advances made by Neste and Valero Energy. 

Specialty chemicals could make a difference between profit and loss for oil majors, and steer them into an industry that is less vulnerable to regulatory limits. But, according to Lux Research, oil companies need to position themselves well to manufacture unusual, high-value chemicals rather than just the commodities most produce today.