How will the digital revolution transform the energy sector?

There is a core paradox at the centre of the global macroeconomic and geopolitical landscape: economics is becoming more global and politics is becoming more local. The global economy is more interconnected than ever before.

For example, the ripple effect of China’s economic slowdown is impacting commodity-exporting countries. At the political level, we’re seeing more and more local political reaction to current geopolitical concerns. The rise of right-wing nationalist parties, the call for greater sub-regional independence, and the decline of trust in global institutions are all pointers of this political trend to greater localism. Today’s world is one of mixed signals, which creates a perception of uncertainty and volatility.

But one trend is clear. The speed and scale of the digital transformation is impacting multiple industries. The digital agenda is being driven by a combination of technologies from cloud, analytics, mobile, to cheap sensors. Together, these technologies are putting data and intelligence at the centre of new business models. Industries, companies and business leaders are grappling with a world that is more volatile and more complex, yet demands greater agility, more speed, and more digital competence.

These trends are impacting the energy sector. Much of the sector’s focus has been on the oil price dynamics of supply and demand, and the implications for capital efficiency. The continued high production rates are driving up reserves of crude in different parts of the world and forcing producers to look hard at production and asset productivity.

Digital is also affecting the supply and demand of the sector in different ways. There are four trends that we see playing out consistently across all markets: changing patterns of consumption, new ways of optimizing assets, cross-industry partnerships and the greater use of industrial platforms.

The online world is changing patterns of consumption: less ownership and more pay-by-use. Cars in cities are being rented by the hour; new insurance models are now based on actual time at the wheel; and cars are becoming data platforms with self-diagnostics, satellite navigation, entertainment systems, and links to critical infrastructure and traffic systems to reduce city congestion. Smarter cars, smarter homes and smarter appliances will all impact on the demand for energy.