imgOilIcon Oil

Discourage or encourage drilling, refining, and consuming oil for energy. Oil is a fossil fuel that is used widely in cars, ships, and planes; it is also used for industry, heating, and electricity. Access to oil has sparked major conflicts, and oil spills threaten ecosystems and water.

Examples

  • Governments imposing limits on oil drilling and exploration, removing subsidies, and taxing oil.
  • Universities, corporations, and individuals divesting from oil companies.
  • Financial services industry (e.g., banks) or global development institutions (e.g., World Bank) limiting access to capital for exploration, drilling, refining, and delivery.

Big Message

  • Taxing oil modestly has a minor impact on temperature, but taxing it highly delivers a significant impact. It’s not a silver bullet, but can be an important part of a suite of actions

Key Dynamics

  • When oil is discouraged, by taxing it, watch the red line go down in the “Global Sources of Primary Energy” graph.
  • When oil is taxed, notice what happens to coal and gas in response. Unless there are restrictions on coal and gas, their demand will go up in response to expensive oil. We call this the “squeeze the balloon” problem – depressing fossil fuel emissions in one area causes them to pop up in another. Renewables are also boosted slightly, but the impact is negligible. Adding a carbon price is a good solution to the “squeeze the balloon” problem.
  • The net result is no change in overall GHG emissions and no reduction in future temperature.
  • Notice one of the ways that less oil leads to more coal: view the “Electric Share of Final Energy – Transport” graph. Expensive oil has led to more electrification of the vehicle fleet.

Potential Co-Benefits of Discouraging Oil

  • Fewer oil spills help protect wildlife habitats, biodiversity, and ecosystem services at production sites and along transportation routes.
  • Reduced economic dependence on oil can improve national security and lower government military costs.

Equity Considerations

  • The oil industry provides many high-paying jobs for people with technical trade backgrounds. Providing pathways for these people to find new jobs will be essential.
  • Oil companies wield enormous economic and political power locally and globally. In order to discourage oil, certain industry protections must be eliminated.
  • There is a history of refineries being located in marginalized communities and attempting to avoid environmental regulations.

Slider Settings

very highly taxed highly taxed taxed status quo subsidized
Change in price per barrel of oil equivalent (boi) +$100 to +$60 +$60 to +$30 +$30 to +$10 +$10 to -$10 -$10 to -$30
Cost increase or decrease +100% to +60% +60% to +30% +30% to +10% +10% to -10% -10% to -30%

Model Structure

The cost of oil affects three significant decisions regarding energy infrastructure:

  1. investment in new capacity (whether or not to build new drilling operations and refineries);
  2. use of capacity (whether to run existing operations);
  3. retirement of capacity (whether to keep infrastructure longer or shorter than the average of ~30 years).

FAQs

How can I directly force deeper reductions in oil use? Consider selecting the “Stop building new oil infrastructure” switch in the advanced view, and changing the “% reduction in oil utilization”.