January 27, 2005

Thoughts on End of Cheap Oil

Blog inspires thoughts on peak of oil production and end of cheap oil (1 of 3)

This evening I was reading a blog entry about the peak of oil production at Heavens Rim. It got me thinking...
The peak of oil has been widely predicted and I've seen estimates between 10 years and never. (If I had to guess, I'd say about 40-50 years and it will be a gradual process.) Assuming that oil production peaks, the decline in production will cause prices of oil to rise and society will be impacted. I see three primary impacts on society, just as happened to the US in the 1970's energy crisis: increased efficiency, replacement of oil with other energy products, and slower economic growth. The balance between these three responses decides whether the peak has a mild effect or a serious one.

I believe there will be no serious crisis. The effects on the economy will be moderate and most of the response will be replacement tempered with efficiency. The primary reason there will be no serious crisis (and the response of replacement will be large enough) is oil has many substitutes. Although oil is the primary energy source today, many other products like natural gas, coal, wind power, shale oil, etc. can provide the services that oil does today, when given time to respond.

What do you believe will be the effect of the peak of oil production (or the end of cheap oil)?

My next entry in this series will describe a case study that illustrates what I believe will happen. I also introduce a new element to my entries, the digression.


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