Carbon intensity (CI) is one metric the market has started to employ to measure GHG emissions from specific types of crude oil production. Oil produced with a lower amount of GHG emissions per barrel of oil has a lower CI than crudes produced with higher emissions.
Therefore, fewer voluntary carbon credits would be required to offset emissions of lower-CI crudes.
As demand grows for low-carbon oil, CI measurements like those calculated by S&P Global Platts Analytics could impact the traded price of oil, particularly in terms of differentials between crude grades and lower-carbon varieties of the same grade of crude. The market could apply CI as an attribute of the crude, like sulfur.
Just as higher sulfur content devalues crude, the market could equally come to devalue crude produced at a relatively high rate of emissions. In the not-too-distant future, the market for low-carbon oil could mature and price in upstream CI, with crudes of lower CI trading at a premium to those of higher CI.
Having ascertained the CI for individual production fields, there is scope for more in-depth analysis of the implications – including price impacts.
Impacts to the global supply curve will be quantifiable, as well, by incorporating the cost of addressing or offsetting emissions in the cost of production. In a market seeking low-carbon oil and limiting capital and market demand for high-carbon production, fields with high CI production would see carbon-inclusive production costs rise.
