Carbon implications of marginal oils from market-derived demand shocks

Mohammad S. Masnadi (), Giacomo Benini, Hassan M. El-Houjeiri, Alice Milivinti, James E. Anderson, Timothy J. Wallington, Robert Kleine, Valerio Dotti, Patrick Jochem and Adam R. Brandt ()
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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
Adam R. Brandt: Stanford University

Nature, 2021, vol. 599, issue 7883, 80-84

Abstract: 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.

Date: 2021
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DOI: 10.1038/s41586-021-03932-2

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