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Carbon implications of marginal oils from market-derived demand shocks

Author

Listed:
  • Mohammad S. Masnadi

    (University of Pittsburgh)

  • Giacomo Benini

    (Stanford University)

  • Hassan M. El-Houjeiri

    (Technology Outlook, Technology Strategy and Planning Department)

  • Alice Milivinti

    (Stanford University)

  • James E. Anderson

    (Ford Motor Company)

  • Timothy J. Wallington

    (Ford Motor Company)

  • Robert Kleine

    (Ford Motor Company)

  • Valerio Dotti

    (Ca’ Foscari University of Venice)

  • Patrick Jochem

    (German Aerospace Center (DLR))

  • Adam R. Brandt

    (Stanford University)

Abstract

Expanded use of novel oil extraction technologies has increased the variability of petroleum resources and diversified the carbon footprint of the global oil supply1. Past life-cycle assessment (LCA) studies overlooked upstream emission heterogeneity by assuming that a decline in oil demand will displace average crude oil2. We explore the life-cycle greenhouse gas emissions impacts of marginal crude sources, identifying the upstream carbon intensity (CI) of the producers most sensitive to an oil demand decline (for example, due to a shift to alternative vehicles). We link econometric models of production profitability of 1,933 oilfields (~90% of the 2015 world supply) with their production CI. Then, we examine their response to a decline in demand under three oil market structures. According to our estimates, small demand shocks have different upstream CI implications than large shocks. Irrespective of the market structure, small shocks (−2.5% demand) displace mostly heavy crudes with ~25–54% higher CI than that of the global average. However, this imbalance diminishes as the shocks become bigger and if producers with market power coordinate their response to a demand decline. The carbon emissions benefits of reduction in oil demand are systematically dependent on the magnitude of demand drop and the global oil market structure.

Suggested Citation

  • Mohammad S. Masnadi & Giacomo Benini & Hassan M. El-Houjeiri & Alice Milivinti & James E. Anderson & Timothy J. Wallington & Robert Kleine & Valerio Dotti & Patrick Jochem & Adam R. Brandt, 2021. "Carbon implications of marginal oils from market-derived demand shocks," Nature, Nature, vol. 599(7883), pages 80-84, November.
    • Handle: RePEc:nat:nature:v:599:y:2021:i:7883:d:10.1038_s41586-021-03932-2
    DOI: 10.1038/s41586-021-03932-2
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    Citations

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    Cited by:

    1. Giacomo Benini & Adam Brandt & Valerio Dotti & Hassan El-Houjeiri, 2023. "The Economic and Environmental Consequences of the Petroleum Industry Extensive Margin," Working Papers 2023:14, Department of Economics, University of Venice "Ca' Foscari".
    2. Miguel A. Morales Mora & Andrea Marín Rovira & Vicente A. Soriano Ramirez & Patricia López Rivera & Omar Guillen Solis & Vincent Pozos Castillo & Gonzalo AngelesOrdoñez & Alejandro Castillo Antonio & , 2024. "An integrated analysis of the Mexican electrical system’s metabolic pattern and industry sector in the energy transition," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(9), pages 24313-24338, September.
    3. Clement Moyo & Izunna Anyikwa & Andrew Phiri, 2023. "The Impact of Covid-19 on Oil Market Returns: Has Market Efficiency Being Violated?," International Journal of Energy Economics and Policy, Econjournals, vol. 13(1), pages 118-127, January.
    4. Herwartz, Helmut & Theilen, Bernd & Wang, Shu, 2024. "Unraveling the structural sources of oil production and their impact on CO2 emissions," Energy Economics, Elsevier, vol. 132(C).
    5. Chai, Maojie & Nourozieh, Hossein & Chen, Zhangxin & Yang, Min, 2022. "A semi-compositional approach to model asphaltene precipitation and deposition in solvent-based bitumen recovery processes," Applied Energy, Elsevier, vol. 328(C).
    6. Liang Jing & Hassan M. El-Houjeiri & Jean-Christophe Monfort & James Littlefield & Amjaad Al-Qahtani & Yash Dixit & Raymond L. Speth & Adam R. Brandt & Mohammad S. Masnadi & Heather L. MacLean & Willi, 2022. "Understanding variability in petroleum jet fuel life cycle greenhouse gas emissions to inform aviation decarbonization," Nature Communications, Nature, vol. 13(1), pages 1-10, December.
    7. Chen, Fanglin & Chen, Zhongfei & Zhang, Xin, 2024. "Belated stock returns for green innovation under carbon emissions trading market," Journal of Corporate Finance, Elsevier, vol. 85(C).

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