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.