Will the price of oil ever increase again?

The price of oil collapsed in early 2014, and hasn’t rebounded since then. With more oil in proven reserves than we can ever use, a softening demand, and Saudi Arabia getting off oil, will prices ever go back up again?

What is going on in the oil industry?

Graph of oil price from 2012 to 2016The price of oil has cratered. In 2012 it was over $120 a barrel. Today, 2016, it is at $42 a barrel, and this is an improvement from January and February of this year when it went under $30 a barrel.

Previously, when the price of oil fell, OPEC would meet, they’d agree to cut the output, and the constrained supply would ensure the price would rise once more. Why isn’t that happening now?

Most commentators are putting it down to the fact that Iran, who were under sanctions until very recently, understandably don’t want to cut production, and with Iran not cutting back, Saudi Arabia won’t either.

However, there’s another thesis which I think is more likely, and if true, oil prices will remain low for the foreseeable future. That thesis states that Saudi Arabia has realised that we are at the end of the Oil Age, and that a large percentage of the world’s fossil fuel resources will have to remain in the ground. With this in mind, it makes sense for Saudi Arabia to make sure they can extract, and monetise as much of their fossil fuel resources, as possible, while they still can.

What is the evidence for this?

First off, consider that last Friday 170+ countries signed the Paris Climate Accord whose aim to to limit global warming to 1.5-2C. Now that we have an upper limit on the temperature increase we are willing to accept, we also know how much CO2 we need to put into the atmosphere to achieve this amount of warming. It comes in at 1,100Gt CO2 [PDF] (1Gt = 1 gigaton = 1 billion tons).

On the other hand, the total proven reserves of the fossil fuel companies, and countries comes to 3,300Gt CO2. Notice the problem? 70-80% of the world’s proven reserves of fossil fuels will have to stay in the ground if we are to keep global warming below 2C.

Now Saudi Arabia has known about this issue for quite some time. As far back as the year 2000, Sheikh Yamani famously predicted that

Thirty years from now there will be a huge amount of oil – and no buyers. Oil will be left in the ground. The Stone Age came to an end, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil.

In fairness Sheikh Yamani’s reasoning didn’t have to do with climate change, but better drilling and exploration technologies, but still it has come to pass, and in this scenario Saudi Arabia has to race to produce as much oil as it can, no matter what the price, so as little Saudi oil as possible is left in the ground. Consequently Saudi Arabia is now producing somewhere between 10.3m-11m barrels per day – an historic high.

And then at last week’s OPEC meeting in Doha to try to stabilise oil production, Saudi Arabia scuppered the talks, ensuring no freezing of oil outputs. This has the added advantage of squeezing the other producers, few of whom can produce oil at the same low cost as Saudi Arabia.

total-cost-of-producing-oil

On the demand side, the International Energy Agency (IEA) has admitted that for 2016 global demand trends are not as positive as they were. The IEA is counting on demand from developing countries where India recently announced that it is going to install 100GW of solar by 2022 (in large part because solar is now cheaper in India than coal), while China is aiming to increase its installed solar by over 100GW by 2020.

And if news of the 400,000 orders for the Tesla Model 3 are anything to go by, there is no love amongst consumers for fossil fuel spewing vehicles.

Then yesterday comes the announcement that the Saudi cabinet approved a set of reforms aimed at moving the country away from its dependence on oil profits. They have seen the writing on the wall, and so while on the one hand they are going all out to maximise the amount of oil they can extract and sell, they are at the same time setting up a sovereign wealth fund of $2tn to ensure they, in the words of Deputy Crown Prince Mohammed bin Salman

can live without oil by 2020

So, with Saudi Arabia diversifying away from oil revenues, and unlikely to reduce output any time soon, there is no obvious reason why oil prices will ever rise again. And Sheikh Yamani’s prediction about a huge amount of oil being left in the ground will come to pass.

Can blockchain and the Internet of Things mitigate supply chain reputation risk?

Supply chains are complex, unwieldy beasts, which are notoriously hard to tame, but a solution could be in the offing, using Blockchain, and Internet of Things technologies.

“Mommy, I want to be a supply chain manager when I grow up”, said no-one. Ever.

Supply chain management has to be one of the most difficult, thankless jobs in business. In this globalised age, it becomes increasingly complex, all the more so, the bigger an organisation becomes.

Getting a company’s supply chain right, can transform a company’s fortunes. Witness Apple Computers, a large part of Apple’s resurrection was due to having the best supply chain in the world (as ranked by Gartner for the last 5 years in a row).

Getting you supply chain wrong on the other hand can have serious consequences. Tesco saw €360m knocked off its value overnight when it was discovered that it’s beef burgers were found to be 29% horse meat. Investigations subsequently showed that the horse meat entered the supply chain without Tesco’s knowledge, but the issue still had significant implications for people’s trust in the brand.

In another famous example, taken from the Economist Intelligence Unit’s  Managing supply-chain risk for reward [pdf] report it noted

Nearly a decade ago, lightning struck a Philips microchip plant in New Mexico, causing a fire that contaminated millions of mobile phone chips. Among Philips’ biggest customers were Nokia and Ericsson, the mobile phone manufacturers, but each reacted differently to the disaster. Nokia’s supplychain management strategy allowed it to switch suppliers quickly; it even re-engineered some of its phones to accept both American and Japanese chips, which meant its production line was relatively unaffected. Ericsson, however, accepted Philips’ word that production at the plant would be back on track in a week and took no action. That decision cost Ericsson more than US$400m in annual earnings and, perhaps more significantly, the company lost market share. By contrast, Nokia’s profits rose by 42% that year.

And then there is the issue of conflict minerals. These are natural resources (such as cassiterite (for tin), wolframite (for tungsten), coltan (for tantalum), and gold ore) mined in a conflict zone and sold to help finance the fighting. These minerals are required for the manufacture of electronics such as tablets, laptops, and mobile phones. Coincidentally, Apple announced yesterday that it is now auditing 100 percent of its suppliers for the use of conflict minerals.

How best to gain and enforce transparency into supply chains? Traditionally this has been done with audits, a resource intensive process if carried out correctly.

However two more recent technologies may help significantly improve this procedure – blockchain, and the Internet of Things.

Blockchain, the technology which underpins cryptocurriencies like bitcoin, is basically a cryptographically secure, immutable record of transactions. And recently it has been used to set up and enforce smart contracts for things such as managing community energy exchange transactions in New York, to issue equity to drivers in a cooperatively owned ride sharing platform, and to authenticate users, and manage the billing process when charging electric vehicles in Germany.

If every item in your supply chain is part of a blockchain, then it has a proven provenance. Add to this always-on traceability using Internet of Things technologies, and you suddenly have a robust, transparent, virtually bullet-proof supply chain.

Has anyone rolled this out for their supply chain yet? Not that I know of, but it can only be a matter of time (did I mention supply chains are complex?).

 

Photo credit Neville Hobson

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Apple puts its environmental initiatives front and centre at its spring event

 

LisaJacksonAppleRenewableEnergyApple held it’s annual spring event yesterday in Palo Alto to make iPhone, iPad, and iOS related announcements (amongst others).

However, this year for a change the first executive invited to address the audience was Apple’s vice president of Environment, Policy and Social Initiatives, former EPA Administrator, Lisa Jackson.

Lisa was greeted by warm applause which became more enthusiastic when she announced that 93% of Apple’s facilities worldwide are now powered by renewable energy. This means Apple is now well on its way to achieving its stated aim of being fully renewably powered globally. And in 23 countries, including the United States and China, Apple is already 100% renewably powered.

In China Jackson explained, Apple has a 40MW solar farm which has a minimal impact on the local environment, and allows for the local Yak farmers to graze their animals and grow hay under the panels (seen above). This solar farm produces more electricity than Apple uses currently in all of China.

Apple’s data centres are also fully renewably powered, and it has a policy of siting new data centres only if the site has access to renewable power. This was one of the reasons behind Apple’s choosing Ireland and Denmark for its two newest data centres last year.

In fact, since hiring Jackson away from the EPA, Apple has made some extremely positive moves in reducing its footprint, and greatly increasing its transparency. This focus on transparency may go some of the way to explaining Apple’s decision last week to move a significant portion of its iCloud storage business away from notoriously opaque Amazon to Google (although, it is as likely to do with diversifying suppliers, moving to a supplier more in line with Apple’s views on data privacy, and possibly easing the transition to eventually self-hosting the data).

Jackson also talked about Apple’s investments in forestry, and how Apple are using paper sourced from sustainably farmed forests for 99% of its packaging now.

Apple is demonstrating tremendous leadership in the energy and sustainability space (as well as the privacy space, but that another story!). Kudos to them, and interestingly Amazon appears to be finally getting around to supplying some of its operations with renewable energy too – though, it still shuns any kind of auditing or reporting on its energy and emissions. Sigh, maybe someday after seeing Apple put their environmental initiatives front and centre, Amazon will also see the value of doing this.

More prestigious speaking engagements

I recently received an invitation to address the bi-annual meeting of the Council of European Professional Informatics Societies (CEPIS) in Athens.

CEPIS, if you are not familiar with it is

a non-profit organisation seeking to improve and promote a high standard among ICT professionals, in recognition of the impact that ICT has on employment, business and society. CEPIS currently represents 33 member societies in 32 countries across greater Europe. Through its members, who are the professional ICT bodies at national level, CEPIS represents 450,000 ICT professionals

Quite an honour to be asked to address them.

This got me to thinking of all the prestigious talks I’ve given in the last few months.

I addressed the European Commission’s European technology platform for Smart Grids on Energy Digitalisation last November.

DrivingATesla

I addressed the TeslaWorld event in Antwerp last year (see video above). This was a spectacular event with two Tesla Model S cars on either side of the stage, a phenomenal line-up of speakers, and I got to drive a Tesla on the way back to the airport! So that was pretty awesome, and I have to admit to seeing my Prius in a less favourable light when I arrived home😦

I gave the opening keynote at the SAP for Utilities event in Huntington Beach last September on the topic of The convergence of the Internet of Things and Energy, and I was bowled over by the positive feedback I received afterwards from the attendees.

And I was very honoured to be asked to be the keynote speaker at the EclipseCon event in Toulouse last year.

There were other events I spoke at last year as well (SAP TechEd and ThingMonk off the top of my head).

But with the CEPIS invite, and another I’m not allowed to reveal just yet, 2016 is definitely shaping up to be an even better year for speaking engagements!

 

Libelium launches its IoT Marketplace to make Internet of Things projects as painless as possible

In a time when Spain’s economy is in the doldrums, it is nice to see some good news coming out of the Iberian peninsula, especially in the Internet of Things (IoT) space – technology’s new hotness!

Libelium, an IoT hardware and software provider based in the North of Spain, and recently profiled in a Financial Times piece where they were referred to as a “baby unicorn”, just announced that it has launched an IoT Marketplace.

The marketplace currently has 15 boxed IoT solutions for sale, but Libelium plans to increase this to 50 as the year progresses.

The solutions cover the Smart Cities, Smart Environment, Smart Parking, Smart Agriculture, Smart Water, and Air Quality verticals.

LibeliumMarketplacePurchase

As well as the kits covering verticals, there are also Application Development kits for developing IoT solutions for Microsoft Azure, esri, IBM Bluemix, Thingworx, and Telefonica’s cloud platforms.

And there specific Solution kits created together with partners like Indra, Thing+, IOTSENS, and elementblue. These kits include pre-configured hardware to speed up time to live.

In a move likely to be popular with their customers, Libelium took advantage of existing partnerships with cloud providers to ensure that kits were available with trial access to cloud offerings. This cleverly allows Marketplace customers to try the different cloud platforms, seeing which one works well, before buying.

And, this is a true marketplace. Clicking on the Buy button, brings the user to a screen with fields for entering credit card details, or using a Paypal account to buy the kit (I didn’t attempt to purchase an actual kit, so I can’t verify that part of the site works, but I’ve no reason to think it doesn’t).

I asked Libelium CEO Alicia Asín about the genesis of the marketplace and she explained that Libelium’s VARs were often not finding it easy to sell solutions to customers because they were working from a 70+ page catalog, and architecting a solution for a customer wasn’t something they were necessarily comfortable doing.

So in order to make it easier to come up with the right equipment Libelium launched a trial with four vertical kits last year in June. Despite being launched half way through the year, they were some of the company’s top selling products by the year’s end, and so the marketplace was born.

This marketplace idea is an interesting one for organisations looking to run a pilot or proof of concept, without too much risk. The variety of hardware, communications standards, and software protocols to be taken into account in any significant IoT project can be daunting, and any attempt to simplify this should be lauded.

 

Using the Internet of Things to keep people safe

At the 2014 SAP TechEd && d-code event in Las Vegas, I spoke to Dr Severin Kezeu of SK Solutions. His company has developed an Internet of Things based safety technology which has been deployed on building sites throughout the world.

What it does is to send in realtime, the positions of all vehicles, and workers on site, so that in the case a potential collision is detected, action can be taken to avert the collision, thereby saving expensive equipment, and more importantly, keeping people safe.