Peak Oil News: Resource Investor - Energy - How Peak Oil Can Mitigate Itself

Friday, July 15, 2005

Resource Investor - Energy - How Peak Oil Can Mitigate Itself

Resource Investor - Energy - How Peak Oil Can Mitigate Itself

How Peak Oil Can Mitigate Itself

By Stephen Clayson

LONDON ( -- The current oil price level is causing consternation in many quarters due to its potential for wreaking economic havoc, but an argument can be made that the Peak Oil theory, which partly underlies the current price of the commodity, is really nothing worry about in the long run, and on the contrary the resultantly high price it dictates will precipitate the final shift away from dependence on oil as an energy source.

By this line of reasoning, today’s oil price of around $60/barrel is the first phase of the commodity’s swan song, and though the price could well go much higher, ultimately oil’s days are numbered as consumers will increasingly find it economic to switch to alternatives in response to a consistently high price.

But what are the alternatives? Much has been made recently of the coming resurgence of nuclear power, and quite rightly so. Nuclear power, in the medium term derived from the fission process but in the long term from fusion as well, can go a long, long way towards fulfilling our ever burgeoning energy needs, once the correct apparatus is in place.

Public and political opinion seems to have finally turned the corner in favour of nuclear power as the realisation dawns that despite whatever drawbacks nuclear technologies may have as an energy source these are considerably less than the drawbacks of other alternatives to oil fired power generation. Significant strides towards increasing nuclear power generation capacity are already being made, primarily in Asia and to a lesser extent in Europe and the US, but the latter two should come onboard seriously in time.

The other technology that should eventually help usurp oil as a main energy source is the hydrogen fuel cell, most crucially in high portability applications such as in automobiles. Hybrid autos are already illustrating the way in which new technologies can be accepted by the buying public as offering viable alternatives to conventional internal combustion powered vehicles, and should function as a stepping stone technology between internal combustion and a widespread switch over to hydrogen fuel cell powered cars, trucks and buses once the technology has been optimised.

Hydrogen fuel cells rely solely on hydrogen as an input, the production of which via electrolysis of water requires only water and electricity. This means that with the right plant and know-how, the hydrogen for fuel cells could be produced almost anywhere. Although at present the most efficient means of hydrogen production is from natural gas, as this resource ultimately reaches its own peak and thereafter dwindles, it will make economic sense for hydrogen to be extracted from water. The energy required for this at an industrial level would be best sourced from nuclear generation.

A shift away from oil as an energy source would also confer some extra benefits on the industrialised societies, namely a reduced dependence on foreign oil resources that frequently lie in unstable or otherwise problematic regions, and a reduction in the output of carbon dioxide and other various pollutants through the combustion of oil and oil products such as gasoline.

Demand will almost certainly remain though for oil as the feedstock of various chemical processes, such as those that produce certain types of plastic. But the long term support that this demand would provide for the oil price is as yet unclear, and hard to predict. Oil will likely always have a value, but deprived of its role as one of the world’s primary energy sources and with so many other factors in play within the relevant timeframe, any useful estimate of this is difficult to concoct.

Ultimately, we must largely vest control of the process of shifting away from oil as an energy source to the power of the market. Though governments have a role to play in giving the process a helping hand and encouraging the development of suitable technology ahead of the market’s requirements, only the market itself can ultimately force the global economy into a new era of energy procurement.

In the short to medium term of course, the ideas propounded above mean little for the advisability of investments in the oil sector. For a long time yet, oil will be in huge demand as an energy source, and with the extraordinary economic growth potential remaining in China as well as to a lesser extent the rest of Asia, is likely only to become more so.

But looking to the long term, where all factors are variable, an even more egregious oil price than today’s will help precipitate the end of the hydrocarbon age by stimulating through enhanced economic viability the development of the technologies that are needed to well and truly shed our dependence on the black stuff, with the obvious consequent effects on demand and price.


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