Matt Rogers argues that, despite much recent talk of the end of oil and the idea of energy independence, it’s likely that “oil will remain the largest component of the global energy equation for the next 50 years or more.” Oil has many benefits: It provides comfort, convenience, and cleanliness, coming in a form that is high in energy density with low volatility, delivered by an almost universal infrastructure. Oil is likely to be in heavy demand for decades to come, especially for transportation use.
Contrary to those who worry about imminent “peak oil”, Rogers says that recently-high oil prices have resulted less from changes in the supply of crude than from the rising demand for diesel fuel and commodity market investment. Transportation requirements can be met for the coming decades, if necessary, through unconventional reserves such as Canadian oil sands. Outside of transportation needs, oil may be increasingly replaced, perhaps leading to a long-term decline in global demand. In fact, Rogers points out, there is already a the long-term decline in gasoline demand among OECD countries. This is likely to continue due to factors such as increasing fuel efficiency for light-duty vehicles, the greater use of ethanol in blends, a shift toward electric vehicles, shorter commutes, policy changes to limit city traffic, cuts in fuel subsidies, and carbon dioxide taxes.
Demand for oil for power and industrial uses will continue to decline, as we switch increasingly to natural gas, coal, and nuclear energy. Oil’s continued preeminence as a power source for transportation is likely for decades, however. Rogers points out the low price elasticity of demand for diesel, partly due to subsidies but also because of a lack of substitutes. Considering all these trends together, Rogers expects that we will reach peak demand for oil well before we hit peak supply. This could happen as early as 2015, though that will depend heavily on trends in developing countries as urban density rises.