Peak Oil Toppled

There is a theory about the supply of fossil fuels for transportation – it is called peak oil. It states that when the consumption of oil exceeds the discovery of oil, there will be a sharp decline in reserves. This will lead to a price shock similar to what was experienced in the 70s, which caused a worldwide recession.

In fact peak oil was thought to have occurred recently, however, as the price of oil rises it is counter balanced by additional reserves that have been proven but have now become economically feasible to extract. This has cushioned the impact of declining reserves but will not forestall the inevitable decline in the world stocks of oil.

The pressure on the price of oil plus the desire of the producing countries, mainly the Organisation of Petroleum Exporting Countries (OPEC) to extract as much money as possible from a dwindling resource is expected to be the key driver in the search for alternative non-fossil fuels.

Meanwhile, the American (US) economy has managed to cling to the use of fossil fuels without creating higher oil prices. We ask how?

Recent media reports reveal that America’s reliance on imported oil and other fossil fuels has decreased from 60% in 2008 to 45% in 2012. The main reason for the decrease is America’s increased usage of shale oil and gas.

The technology relating to the drilling and extraction of oil and gas from shale deposits has been developed to a stage where the total reserves of energy in America has sharply increased. This is totally new technology which has unlocked previously unobtainable oil and gas. Current estimates state that there is more than 200 years of oil and gas extractable in these deposits. The change that this discovery will generate is that the inclination of the American’s to embrace low carbon dioxide emission strategies will be much less than it has been in the past. Most people will be surprised, as America has been dragging their feet when it came to carbon dioxide reduction anyway.

The price of fossil fuels will fall as a result of this development – US natural gas prices have halved in the past three years. The ability of the OPEC countries to cripple western economies will reduce and lead to a fundamental shift in the current balance of economic power.

The desire of western economies to introduce low carbon dioxide emission technologies will wane as the the price of oil and gas reduces. This will have a profound impact on the global efforts to stave off the spectre of carbon dioxide induced global warming.

Watch this space for future developments.