Watson Institute for International and Public Affairs

Oil Shake-Up: Refining Transitions in a Low-Carbon Economy

August 27, 2019

Senior Fellow Deborah Gordon and Madhav Acharya recently co-authored a piece looking at why it is critical to assess how shifting to a low-carbon economy will impact oil refining.

Government policies aimed at reducing environmental threats from climate change have fueled renewable energy breakthroughs and cost reductions over the past decade. But even as nations and several U.S. states set renewable energy targets out to 2050 and push for 100 percent renewable energy usage, questions remain about whether these energy sources can sufficiently power the electric grid. At the same time, the maturation of electric cars and trucks, further increases in vehicle fuel efficiency, and other breakthrough technologies are raising critical questions about future oil demand.

There’s a loud buzz about the coming demise of internal combustion engines, an outcome that would significantly reduce gasoline and diesel consumption. But just how such disruptive transport innovations might ripple through the petroleum sector has not been adequately explored.

Most analyses take a simplistic view of one of the world’s most complex and tightly integrated manufacturing operations—refining. They miss the underlying dynamics of refining processes that form the building blocks upon which modern society rests. And those dynamics illuminate the difficulties that could arise in transitioning away from oil.