If you’re an oil company or investor, it’s probably dawning on you that peak oil – the point at which geology and technology dictate the maximum rate of production, after which decline sets in – will not determine future oil prices and, therefore, the value of your energy portfolio. So what will? Peak demand could, and it’s a credible theory that is gaining a following. In a recent interview, John Browne, the former chief executive of BP, said, “Oil prices will be limited by peak demand, not peak supply.”
By that, he means the point will come when the world simply doesn’t need ever-rising amounts of oil. At about $100, oil prices are still high enough to encourage conservation. Cars are becoming far more fuel-efficient and are being driven shorter distances. Natural gas, in apparently infinite supply, is increasingly being used as transportation and heating fuels (when’s the last time you heard of someone installing an oil furnace?). Electric cars are entering the auto mix and alternative fuels, from Brazilian sugar-cane ethanol to biodiesel (made from vegetable oils or animal fats) are entering the fuel mix. At the same time, governments in China and elsewhere are encouraging the transition to less-carbon-intensive cities, if only to keep their citizens from dying of lung cancer.
— The Globe and Mail, Oil’s biggest problem? A new ‘peak’ worry