I was quite interested to read this article in The Times which suggested that the peak output of crude oil production would quite possibly be driven by the limits of consumer demand for the stuff, rather then the constraints of supply of oil. This idea, put forward by BP’s chief economist, Paul Davies, was that consumer demand would weaken, due to economic factors and also political factors as Western societies increasingly demand ‘cleaner’ energy solutions for their cars.
With car makers introducing alternative energy vehicles and these likely to be widespread by the end of the decade, it is quite understandable where Paul Davies is coming from. And given that the decline in existing oilfield production is less then had been thought, it is possible that supplies could continue to increase to meet the rising demand from the newly booming economies of India and China.
With alternative energy cars still very much at the prototype stage, it is unlikely that the current demand-driven spike in oil prices will slacken in the short to medium term. But I was curious to read the opinion of Times correspondent Carl Mortished. He suggested that to reach a peak in production would require global regulation, taxation, and other notions beloved of journalists. It seems to me that the reason why oil production is continuing to climb is the very global nature of the commodity; there is no government able to regulate it, and even the producer’s cartel OPEC is not very successful. It is, rather, the demands of the free market that drive the oil industry, just as it is the demands of the free market that drive auto makers to devise alternatives to gasoline powered cars.