Peak Oil, Meet Plateauing Demand
TTAC is no stranger to the topic of Peak Oil, but the theory has fallen by the wayside with the recent explosion in unconventional oil and gas. A study by the British think tank Chatham House argues that the biggest issue facing oil and gas producers in the coming century isn’t Peak Oil, but Peak Demand ( summary here).
The crux of Chatham House’s argument rests on the reformation of the transportation industry – a desire for fuel-efficient automobiles, the expanding use of biofuels and government regulation mandating reduced carbon emissions has all led to a slackening demand for oil.
Those factors, combined with the rise in “unconventional” supplies, like shale gas could have drastic effects on the oil and gas industry. In 2009, 95 percent of energy used in the global transportation sector came from petroleum. In 2030, Chatham House estimates this number could be as low as 60 percent. One interesting component of this actually comes from China. Chatham House argues that because their fueling infrastructure isn’t so tied into “legacy” fuels like gasoline, there is significant potential for them to be on the leading edge of alternative fuel adoption.
The report cites the increasing adoption of fuel-efficient vehicles like hybrids, Generation Y’s reluctance to drive cars and the potential for CNG powered automobiles as some of the largest drivers of peak demand phenomenon. Among the unintended consequences of reduced driving would be a significant drop off in tax revenues for municipalities that levy a gas tax. Reduced sales of fuel would naturally reduce revenues.
More by Derek Kreindler
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One of the things must be fleet mpg. By 2030 there shouldn't be too many of the gas guzzlers left in the auto fleet and the SUV craze *might* have slowed down. At least gotten smaller per vehicle. That has to pay dividends.
The enviro-lefties have painted us into a corner. No new refineries can or will be built in this country. In fact, some have shut down due to onerous EPA fines. With the brave new world of "alternative" energy, power grids are running with more and more intermittent sources of electricity and less coal. Blackouts and brownouts are sure to increase. Anyone who has ever been around a refinery or other industrial plant knows that power "bumps" are harmful to operations and may lead to down time or worse. Thanks to Californians for giving the rest of us a preview of our new economy.
Aside from the recession, we're also looking at a generation of buyers who are more in tune with the electronic lifestyle. Facebook, tele-conferencing, electronic back-offices... all drive demand for travel down. The problem with Peak demand is that it basically disincentivizes new investments in oil, whether traditional, alternative or biofuel. If there's not enough demand to keep prices high, then biofuels won't work... at all. Not enough profit to keep players in it. You can argue all you want about environmental policy, but this is basically it... we've been drinking from the gravy train and the gravy train is running dry.
The age of conspicuous consumption of oil being all the rage is over. High prices, increased awareness and a shift of attention from cars to the rest of living amongst younger people is having a big effect. This is a good thing.