During the years 1999 and 2000, the price of Crude Oil more than doubled. At the time, the theory of peak oil was used to explain the rise in prices. According to this theory, crude oil production was in terminal decline. I remember hearing in the press that the world would run out of oil within thirty to fifty years and there will be no oil left to service our requirements. I immediately calculated the period and thought I will still be alive to see that day.
In 2001, I met one economist at the IMA conference in Indore and posed him the same question about by when will we run out of the crude oil. The response from him was NEVER. This really amused me. There were so many theories running around about how there will be no shale oil production and about the depleting fossil fuel reserves. Holding my enthusiasm to present a counterpoint which was to be from all the knowledge that I had acquired by reading business dailies, I requested him to elaborate on the same.
The explanation was a typical economic response. He explained that prices will adjust to ensure that oil never runs out of supply. If supply does indeed decline, the price will rise to a point where it will lead to a lower consumption / demand or will rise to a point where we'll switch to an alternative cheaper fuel. Higher prices would spur intensive innovation and technological development leading to finding additional oil or developing other sources of energy.
Though the response came from an economist and not a scientist or a oilman, I was still assured that I need not worry about crude oil running out and even if we stop using oil, it would be because we would switch to something better.
From early 2002 until the middle of 2008, crude oil began a sustained up-move. At its peak, it had increased to more than five times its 2002 level. Once again, the theory of peak oil became popular and so were predictions of oil reaching astronomical prices.
Scenario has changed today and we find ourselves with more crude oil than we know what to do with it. In real terms, prices are around the same as they were 15 years ago.
Much of the decrease in price is due to US production of shale oil. Recently, US production has slowed down as producing shale oil is unprofitable at current prices. Shale oil is down, but not out. As soon as prices go up again, the supply will return.
But do we really need to worry about crude oil running out? My answer is no. Will we stop using crude oil? May be yes, but it will be for something better.
In 2001, I met one economist at the IMA conference in Indore and posed him the same question about by when will we run out of the crude oil. The response from him was NEVER. This really amused me. There were so many theories running around about how there will be no shale oil production and about the depleting fossil fuel reserves. Holding my enthusiasm to present a counterpoint which was to be from all the knowledge that I had acquired by reading business dailies, I requested him to elaborate on the same.
The explanation was a typical economic response. He explained that prices will adjust to ensure that oil never runs out of supply. If supply does indeed decline, the price will rise to a point where it will lead to a lower consumption / demand or will rise to a point where we'll switch to an alternative cheaper fuel. Higher prices would spur intensive innovation and technological development leading to finding additional oil or developing other sources of energy.
Though the response came from an economist and not a scientist or a oilman, I was still assured that I need not worry about crude oil running out and even if we stop using oil, it would be because we would switch to something better.
From early 2002 until the middle of 2008, crude oil began a sustained up-move. At its peak, it had increased to more than five times its 2002 level. Once again, the theory of peak oil became popular and so were predictions of oil reaching astronomical prices.
Scenario has changed today and we find ourselves with more crude oil than we know what to do with it. In real terms, prices are around the same as they were 15 years ago.
Much of the decrease in price is due to US production of shale oil. Recently, US production has slowed down as producing shale oil is unprofitable at current prices. Shale oil is down, but not out. As soon as prices go up again, the supply will return.
But do we really need to worry about crude oil running out? My answer is no. Will we stop using crude oil? May be yes, but it will be for something better.
Please revert with your feedback and what do you think about crude oil being run out
