How do we know if we are already in such a "post-oil" world or whether we are entering one shortly?
Bangladesh will face enormous challenges in a proverbial "post-oil" world, while at the same time, the country will enjoy some unique advantages for mitigating some of the challenges. Before elaborating any further, let me first address what the post-oil world is and when is that supposed to materialize.
If one assumes that a post-oil world means a world where there will be little to no usage of fossil-based petroleum, that world is many decades away into the future. That is because internal combustion engines used for automobiles, which happen to be the largest consumer of oil, are not likely to go away anytime soon.
A recent report from Bloomberg forecasts that electric passenger vehicles will be 58 percent of all new consumer vehicle sales in 2040 (vs. 3 percent today), yet electric vehicles will be only 30 percent of all vehicles in operation across the globe in 2040. That means about 70 percent of the world's automobiles, surely with much better fuel efficiency, will still be operating on fossil fuel by the mid-century and beyond.
So, what exactly is the post-oil world then? And how do we know if we are already in such a "post-oil" world or whether we are entering one shortly?
One industry joke answers these questions by making the argument that we are surely in the post-oil period only because for a brief moment in recent history, Netflix, the streaming movie and TV show provider was more valuable as a company than Exxon-Mobil - the global oil-giant. Then there was also the recent situation where crude oil entered negative price territory during the onset of the coronavirus pandemic. That is a scenario found only on textbooks where the sellers pay money to the buyers for buying something as valuable as oil. These are signs, at least for the laymen, that the end-of-time for oil is near, even though in reality such an end is not as near as it may seem.
What the analyst community mean by the "post-oil" world is basically a world where oil is forced to lose its status as the most valued energy-producing commodity, whereas several other alternative energy sources achieve parity with oil both in terms of energy production cost and storage efficiency.
Popular sentiment against oil as the number on culprit vexing mother nature amid the ever-increasing efficiency levels of batteries and emergence of cost-effective measures to harness the power of the sun, wind, and water is clearly indicating a world where humans will have the option to gradually rely less on fossil fuel over the next several decades. All these forces combined will certainly lead us to a time in history to be better described as "peak-oil" first, before we enter the era of "post-oil".
Now comes the question what can nations do to be prepared to tackle the challenges of the peak-oil world? And what happens to those who fail to be prepared?
The best way to answer these questions is to see what leading nations are currently doing to prepare them for the peak oil world.
By the year 2040, 67 percent of public buses, 47 percent of two-wheeled vehicles (scooters, mopeds, motorcycles, etc.) and 24 percent of light commercial vehicles around the world will be all-electric. Compare these figures to their current levels in 2020, where only 33 percent of public buses, 30 percent of two-wheeled vehicles and only 2 percent of the light commercial vehicles are all-electric.
If these figures are geographically segregated, Europe and China will emerge as the leaders of electronic vehicle adaptation, as the entire vehicle fleet of these two regions is expected to be 50 percent all-electric as early as 2030.
Strong energy efficiency requirements at the national level and generous financial incentives provided by the European and Chinese governments will expedite these two regions' move away from fossil fuel. The impact of the peak oil era will be felt sooner in these regions, giving these two economies early movers' advantage.
Widespread electric vehicle adoption requires electric engines to achieve price parity with internal combustion engines. Bloomberg forecasts that around 2022 in Europe, larger electric vehicles will be priced similarly to gasoline-powered vehicles. Countries like India or Japan is expected to achieve similar parity for smaller vehicles by 2030. The regions that achieve such price parity first and succeed in creating a sustainable ecosystem of electric engines used for both vehicle and industrial production will enjoy superior industrial and business competitiveness over those countries that will cling to a gasoline dependent economy.
It is true that in such a peak-oil world, the price of remaining crude oil will hold steady, and possibly decline further. This may provide an incentive for some myopic nations to cling to fossil fuel further into the future. Such a trajectory, however, is not sustainable and can be deadly for any nation in the long run. Such reluctance to modernize and failure to move away from fossil fuel may render entire economies obsolete down the road.
Smooth migration into the peak oil or post-oil world will be expensive, and no nation will be able to do this in a hurry. Different nations will also have different challenges during this migration.
The most immediate and pervasive challenge facing Bangladesh amid the upcoming peak-oil era will be felt in the country's manpower export sector, with an outsized impact on remittance. Oil-producing countries in the Middle East are Bangladesh's largest source of remittance earnings.
As countries like Saudi Arabia with dwindling revenue from oil export attempt to modernize their economies, provide fewer lifestyle subsidies to their citizens, these countries will be forced to reduce their reliance on foreign labour. This will start with white-collar jobs first, and then gradually enter blue colour jobs as well, where most of the Bangladeshi labourers work.
Finding alternative destinations for manpower export will be difficult in the future, partly due to astonishing advances in automation and robotics in other advanced economies.
Bangladesh will enjoy some unique advantages in the peak-oil world in terms of the speed with which the country can migrate towards an all-electric future, particularly by adopting electric vehicles and engines. The inability to travel longer distances before requiring charging will continue to be the primary challenge for electric vehicles well into the future. One key advantage Bangladesh has in this regard is that its huge population is concentrated across relatively short distances. This will allow Bangladesh to quickly roll out cheaper, battery-powered, electric vehicles the moment they achieve price parity with combustion engine-based vehicles. An economy based on electric vehicles will be viable in Bangladesh sooner than other economies with vast geographies.
Relatively shorter distance to major population centres from the Bay of Bengal is another key advantage Bangladesh will enjoy, if/when the country opts for massive development of solar, wind, and ocean current based alternative energy.
In sum, the peak-oil world will be uniquely challenging for Bangladesh for sure. How Bangladesh mitigates its many challenges while exploiting its unique advantages will decide the ultimate outcome for the country's economy and overall well-being in a post-oil era.
Shafquat Rabbee, is a geopolitical columnist and an Adjunct Faculty at the University of Dallas, TX