Serves the Commercial Small Fleet Market of 10 – 50 Vehicles

$4-Per-Gallon Could Happen Again Soon

November 05, 2009

The "peak oil" thesis-the idea that oil production has flattened and will decline because of economic, geological, and technical restraints-was once considered a fringe theory. But peak oil has become mainstream thinking in the oil industry in the last six months.

So says Steven Kopits, who runs the New York office of Douglas Westwood, an energy analysis firm, according to the Christian Science Monitor. The forecasts of adherents to the peak oil thesis say: Get ready for $4-per-gallon gasoline.

Various factors make $4-a-gallon gasoline more probable in the years ahead.

David Bowden, executive director of the Association for the Study of Peak Oil & Gas-USA in Denver, says the supply of oil will tighten in the next few years, leading to higher prices.

Some peak-oil enthusiasts say higher prices could even lead to a "seesaw economic recovery." If oil prices rise much higher, the economy will slow down again until the demand for oil slows, pushing prices lower once more. Then the economy could pick up again.

But when will the world reach peak oil?

Kopits says oil probably reached a "practical peak" in late 2004 when world output flattened out, not keeping pace anymore with rising economic growth. Some investment banks say that the world's July 2008 production of 86.7 million barrels per day was the peak. An Australian-based investment advisory firm, Macquarie, says peak oil is happening this year at 89.6 million barrels per day.

Neither Bowden nor Kopits see an easy substitute for liquid fuel in transportation.

Although an abundance of natural gas exists, a new service station infrastructure is needed before compressed gas could replace gasoline on a wide scale. The American auto fleet could resemble that of Europe with its smaller, more efficient vehicles, but that would take a decade or so.

 

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