Change is the only thing we can be certain of.
What is the price of oil doing? There are many commentaries about what the price will do, but one thing we can all agree on is that the cost of production per barrel for many is above the current price which is not sustainable. I don’t think the world will run out of oil, I think the world will run out of appetite for oil, just like coal. Just like there is plenty of coal still in the ground around the world, demand for it has died and I see a similar outcome for oil. The only thing I see the current low of oil doing is to extend the period before its eventual demise. I am not saying oil demand will disappear completely but rather enter an entirely new phase.
We have OPEC keeping output high and Iran about to come back into the picture. There is PLENTY of oil out there. What I see is the main oil suppliers are also predicting the end of the oil rush and the current strategy is two fold. 1) sell it while they can, and 2) if the price is low the incentive to move away from oil is delayed. That is the best possible win:win for oil producers in the current environment.
DEMAND SIDE AND GLOBAL WARMING
Global warming and pollution/air quality (particularly in China) are key catalysts I think for the worlds love affair of oil to be over. The fact China has come on-board for emissions targets is a big deal for oil. China as an importer of oil could be the economic catalyst it needs to offset the transition from a high growth developing economy into a first world economy with stable and modest growth rates. If China can develop energy alternatives, improve electricity generation (i.e. no coal fired plants) that would be a big dent in oil demand and just the sort of country that could accelerate a shift to electric cars.
If the Germans can’t make fossil fuel cars (read here Volkswagen) meet strict emissions standards, or least it’s too expensive to do so what hope is there for oil?
OIL PRODUCING NATIONS
My biggest concern is the potential economic collapse and civil unrest in those countries that have been riding the economic easy road of the oil rush, some of these countries will not know what hit them. Either the price of oil will be low, or the demand for oil will be low. Either way the future looks bleak for many nations, while very positive for oil users.
I can see a future world where the energy that drives the world economy could be drastically different from today. If the cost and supply of energy becomes abundant and freely available that will create a big power shift. We are on the cusp of a new energy revolution to power the world economy. In the same way air travel killed long distance train travel, and trains killed the horse and cart – change is the only thing we can be certain of.