Are We Nearing Peak Oil?

According to Bernstein Research, peak oil – when oil usage is expected to begin falling globally – could arrive as soon as 2030. While this may seem unlikely with low prices and plentiful supply today, it is not only possible, but also necessary.

If this sounds like deja-vu for you, it probably is. For years, we've heard predictions about peak oil, including during the last “boom” a few years, when oil prices hit $150 a barrel on fears that supply would never catch up to demand. Even the 1970s OPEC oil embargo was hailed by some as peak oil (we've nearly doubled oil consumption globally since then).

Oil today is cheap and plentiful, and it's hard to imagine that it is anywhere near peaking, especially with countries like Saudi Arabia and, soon, Iran looking to increase production in the coming years. Moreover, new technologies such as oil sands extraction and more complex offshore drilling are making more and more oil resources exploitable, one reason known reserves continue to climb. Even at $25 a barrel, Saudi Arabia can make profits.

So, why does Bernstein Research think that oil will peak? Partly because, in some parts of the world, it already has. The global North, for example, peaked in 2005. All the growth since then has come from the global South -- most notably China and India -- and Bernstein expects those countries to begin shifting away from oil in the coming decade.

A few factors will work to level out that demand growth. Increased fuel efficiency and the diversification of fuels used to power the world will keep prices below the peaks we saw over the past decade. This includes everything from liquefied natural gas and diesel to electric vehicles.

One scenario that oil could follow is that of its fellow polluting commodity, coal. A decade ago, few expected the cheap, plentiful fossil fuel was anywhere near its peak. Yet, due to a wide variety of factors, coal has not only peaked globally, but it has begun to fall off a cliff.

This brings up a key point. Peak oil does not necessarily mean, as we once thought it did, that we have consumed the majority of the world's oil resources. It merely means that our usage of it has peaked. Coal remains plentiful, and even here in the United States, where we've mined the dirty fossil fuel for generations, the vast majority of it remains underground -- where it will likely stay.

Could oil follow this path? Actually, it's not theoretical. It must. We need to pretty much stop burning fossil fuels within the next decade, and certainly before 2030, to have any chance to stay below the 1.5 degrees Celsius limit that has become the scientific consensus on allowable warming. All these factors can come together and help wean the global economy from oil.

“We can see a plausible future in which global oil demand peaks in the next decade due to major improvements in petroleum alternatives, and due to ongoing conservation and efficiency efforts,” lawyer and energy expert Tam Hunt wrote of Bernstein's findings on GreentechMedia.

Peak oil, coming soon. Otherwise, kiss global climate goals, and any hope for sustainability, goodbye.

Image credit: Eric Kounce via Wikimedia Commons