“By 2030, the growth in fossil fuel use will almost have stopped,” Bloomberg New Energy Finance founder Michael Liebreich told renewable-energy investors at the BNEF 2013 annual summit in New York last month.
The concept of “peak oil”, coined by a Shell Oil geologist named M. King Hubbert, implies that world oil production will plateau and decline, and hence cause prices to sky rocket, as less oil is supplied while demand increase. Recent research shows that we might experience the opposite scenario; demand peaks and decreases gradually as new forms of renewable energy becomes increasingly more available.
There are several factors pointing towards the new “peak oil” situation according to Seth M. Kleinman, a Citi Commodities Researcher. “Higher [oil] prices, the removal of many fuel subsidies and rising fuel economy mandates have dramatically improved the outlook for fuel efficiency in global automotive and truck fleets. [In combination with an] accelerating push to substitute natural gas for oil and ongoing improvements in fuel economy is enough to mean that oil demand growth may be topping out much sooner than the market expects”, Kleinman states in a recent report, and in this manner supports Liebreich’s view.
The Boston Company Asset Management’s recent analysis concluded that “consumers are finally thinking about consumption and exhibiting price-elastic behavior.” Meaning that price and consumption have become more closely coupled than the previously almost price inelastic consumer behavior towards oil, reported by IMF in 2011.
«These reports confirm what we have been stressing for years”, says Ina Bjørnrå from Young Friends of the Earth Norway. “Drilling for oil in the Arctic is a short-term race for short-term profits, as we in the near future we will see an energy revolution transitioning the world’s energy demands from fossil fuels to renewable energy sources. Arctic drilling is a crucial misinvestment,” she argues.
The one factor that might corrupt these predictions is a possible price drop on crude oil caused by enhanced oil recovery (EOR), increasing the amount of crude oil that can be extracted from an oil field. Such a scenario would cause an increase in supply, fueling an increase in demand due to a price drop.
The U.S. Energy Information Agency’s prognosis, sees global demand growing from 98 million barrels a day in 2020 to 112 million in 2035.
