Peak Oil Demand: The Role of Fuel Efficiency and Alternative Fuels in a Global Oil Production Decline

Some argue that peak conventional oil production is imminent due to physical resource scarcity. We examine the alternative possibility of reduced oil use due to improved efficiency and oil substitution. Our model uses historical relationships to project future demand for (a) transport services, (b) all liquid fuels, and (c) substitution with alternative energy carriers, including electricity. Results show great increases in passenger and freight transport activity, but less reliance on oil. Demand for liquids inputs to refineries declines significantly after 2070. By 2100 transport energy demand rises >1000% in Asia, while flattening in North America (+23%) and Europe (-20%). Conventional oil demand declines after 2035, and cumulative oil production is 1900 Gbbl from 2010 to 2100 (close to the U.S. Geological Survey median estimate of remaining oil, which only includes projected discoveries through 2025). These results suggest that effort is better spent to determine and influence the trajectory of oil substitution and efficiency improvement rather than to focus on oil resource scarcity. The results also imply that policy makers should not rely on liquid fossil fuel scarcity to constrain damage from climate change. However, there is an unpredictable range of emissions impacts depending on which mix of substitutes for conventional oil gains dominance-oil sands, electricity, coal-to-liquids, or others.