Peak Oil

What with rising prices of oil hogging the headlines, the theory of peak oil has been brought back into sharp focus. Expert explain this rise in oil prices as being due to,

" booming energy demand, shrinking conventional resources and consequent shift in demand-supply axis. However, not all of the increase in the past few years has been due to the fundamentals; associated dynamics like a weakening dollar, speculative activities and fear of supply disruptions from unstable resource centres have played a significant role. "

Further OPEC, which is now producing around 32 million bbl per day, has now a very conservative spare capacity; estimated to be less than 10%, much below its five-year average of around 15%. Besides supply restraints from OPEC, there remains sluggish growth in non-OPEC oil production. OPEC says it is shying away from increasing output because of the US economic slowdown; political turmoil in West Asia; and expectations of slackening global demand.

With this backdrop, the theory of Peak Oil threatens to become a reality. Now, many oil geologists believe that 90% of the globe’s oil fields have already been tapped and many are already exhausted. This is reflected in the report cards of oil MNCs. Reserve replacement ratios (RRR) for most, if not all, is less than one.

In light of these facts it would be foolish to ignore alternative means of transport; other than gas guzzlers.