Peak Oil Is Dead
They're not alone.
Last month, the BNY Mellon's asset management subsidiary, the Boston Company, published a paper called "End of an Era: The Death of Peak Oil." AOL Energy's Peter Gardett pointed us to it.
In brief, peak oil theory argues that oil production will peak, then fall sending prices surging. Ultimately, supply is unable to meet demand and prices become unbearable, sending the global economy to the edge.
The team, led by Robin Wehbé, makes arguments similar to Kleinman and Morse's: the rise of natural gas as an alternative fuel to oil, combined with increasing fuel efficiency, is causing crude demand to sink.
Wehbé and co. add that U.S. consumption has also become much more price elastic. They observe the following:
- When oil prices rise to 3% of gross domestic product, consumption becomes more cautionary
- A spike to 6.5% reduces consumption, exhibiting sharp price elasticity. (Currently this 6.5% level would translate into $165-a-barrel crude prices and $5-a-gallon gasoline prices.)
Team Wehbé decline to make a call on crude prices, and actually say they won't even necessarily go down.
Rather, they argue, the aforementioned trends will put an end to supply-shortage-related price spikes:
"...the likelier scenario is a gradual increase in global demand with ample sources and time for supply growth. Thus, we bid farewell to the days of Peak Oil."
It was fun while it lasted.