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Understanding Peak Oil
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Even the midst for global push towards greater sustainability and the use of renewable energy, much of our world still relies on fossil fuels for industrialisation – making it all the more imperative to understand peak oil.
Peak oil refers to when global oil production will exceed its peak growth rate before declining. In the same way that other natural resources are finite, so is gas, crude, and oil – meaning it's only a matter of time before availability will dwindle.
In this article, we’ll explain what peak oil is, why it is important, and how we can avoid reaching peak oil.
What is peak oil?
Peak oil refers to the point when global oil production will reach its maximum rate before entering a decline.
This concept of peak oil is based on the idea that oil is a finite resource, and once extraction surpasses a peak – production will naturally wane as a result of decreased reserves and newfound challenges to extract these finite resources.
“ "About 15 to 20 years back, there was a concern that the oil supply was going to peak. We're going to run out of oil… now, the concern is somewhat different, which is that we're going to hit a peak or a plateau in demand.” – (Atul Arya, Chief Energy Strategist at US credit rating agency S&P Global). ”
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Key Aspects of Peak Oil
- Declining Production – After the peak, the output of oil will naturally start to decline – in the same way that someone’s career may peak or with the climax in a movie or book. As a result, this will make it more challenging and expensive to extract remaining reserves.
- Economic & Social Impact – As oil prices will skyrocket after peak oil, since it will be more difficult and costly to produce, oil prices and supply shortages will become more prevalent – such as with gasoline for cars. This will cause economic disruptions, as people will struggle to get to work, school, and more – disrupting social and economic priorities.
- Potential Encouragement of Renewable Alternatives – Once peak oil hits, it’s probable to assume that more countries and industries will be willing to invest in renewable energy, electric vehicles, and energy efficiency.
- Geopolitical Effects – Energy-rich countries, such as the U.S. and China, will likely gain even more influence over the world as a result of their large oil reserves – while oil-dependent nations are bound to face instability and possibly a newfound dependence on other countries to fulfill their energy resources.
Overall, understanding peak oil is pivotal to better comprehend how geopolitical tensions, social and economic routines, and energy reserves could shift should peak oil occur – especially as we continue to battle climate change.
Why is peak oil concerning?
Peak oil is concerning as the consequences would be catastrophic – since reaching peak oil would have a profound impact on our world for several reasons, such as by devastating our economy and igniting geopolitical tensions.
Think of drinking a milkshake through a straw. At first, it’s easy to drink as much as you want because there’s a lot of milkshake still in the cup – but as you get to the bottom of the milkshake, you have to start struggling to get anymore melted ice cream up through the straw. Peak oil will work the same way, as it will be extremely difficult to secure any more oil as we deplete through the current reserves.
“ We have allowed oil to become vital to virtually everything we do. Ninety per cent of all our transportation, whether by land, air or sea, is fuelled by oil. Ninety-five per cent of all goods in shops involve the use of oil. Ninety-five per cent of all our food products require oil use. Just to farm a single cow and deliver it to market requires six barrels of oil, enough to drive a car from New York to Los Angeles. – (Jeremy Legget). ”
Here’s a breakdown of the potential effects of peak oil and why the consequences of peak oil would be deleterious for the world:
Economic Impact
Oil continues to be a main driver of our global economy, especially since Trump has returned to the White House with a newfound focus on fossil fuel production.
Therefore, many industries continue to rely on fossil fuels for transportation and various industrial processes – meaning that peak oil and its eventual decline would cause an economic instability, more inflation, and wreak havoc on countries reliant on oil imports.
Energy Transition Challenges
While renewable energy sources are growing and becoming more normalised, it still hasn’t fully taken the place of non-renewable energy sources – especially in industries such as transportation and aviation.
This reveals how a sudden, sharp decline in oil availability could create energy shortages, which in turn – could stall the eventual transition to clean energy, as it will be harder to establish renewable energy sources when there are no more fossil fuel reserves to support the slow and steady transition.
Think of it in the same vein as weaning off of sugar. Going cold turkey is a challenge, but when someone slowly decreases their sugar intake – it may make it easier for them to switch to clean eating. The same concept applies to peak oil and transitioning to the use of renewable energy.
Geopolitical Tensions
Ever since the Industrial Revolution took off and global consumerism skyrocketed, oil has grown to be a source of international power and conflict – and peak oil would only trigger this long-standing global debate as countries would then be competing for the remaining reserves.
Environmental Risks
As oil reserves will become less readily available, it may encourage the industry to proceed with methods of extracting oil that could harm the environment – such as previously seen with the Conocophillips Willow Project.
Oil fracking projects could become more detrimental to the environment, such as by causing more damage and pollution – all of which would deter us from our goals to push towards long-term, global sustainability.
Energy Dependency
Many countries, such as Saudi Arabia, are still dependent on oil for their energy needs – which means that peak oil could impact these countries and their normal activities such as agriculture and healthcare services.
This reveals how peak oil could not only impact the environment and economic circumstances, but the personal health and well-being of people across the planet.
Why is the return of peak oil in the U.S. worrisome?
As Trump has returned office, he has made it clear that the U.S. will redirect its focus to produce more oil – which could be concerning for the whole world for a few reasons:
- Increased Fossil Fuel Dependence – The U.S., one of the most powerful countries in in the world, will become dependent on oil once again – which in turn, could impact other nations and their energy reserves.
- Environmental Impact – Increased oil production will lead to excess emissions, which won’t be good for the U.S. – who is already the second largest emitter of greenhouse gas emissions.
- Market Instability – The U.S. producing more oil could skew global oil prices and disrupt economies that rely on oil exports.
- Regulatory Rollbacks – Trump has been known to roll back on environmental policies in the United States, and pursuing the development of more in-house oil confirms that the U.S. is straying away from prioritising the environment.
- Loss of Long-Term Energy Security – The U.S. shifting its focus to fossil fuels over renewables could leave the U.S., one of the most resourceful and powerful nations on the planet, in a troubling bind when peak oil finally hits – which could impact its allies and nations which rely on the U.S. for these finite resources.
In short, peak oil is concerning as it could impact fragile economies, disrupt our energy systems, and make the shift to renewable energy all the more challenging.
How can we avoid reaching peak oil?
We can avoid reaching peak oil by making an honest shift to the use of renewable energy and alternative energy resources to decrease our current dependence on fossil fuels.
Remember, it is important to avoid reaching peak oil – as a world with limited oil reserves and resources is bound to suffer the negative consequences.
Does renewable energy help deter reaching peak oil?
The International Energy Agency believes that peak oil use is near as the world continues to switch to the use of renewable energy.
This reveals how reducing our dependence on fossil can help to avoid peak oil, as renewable energy sources will keep our oil reserves available for longer.
Think of how when you have a backup supply of various canned goods in your pantry, it prevents you from needing to take a last minute trip to the grocery store – you have readily available preserves of different ingredients in case you need a replacement for something in a recipe. The same concept applies to renewable energy helping to avoid peak oil, as the readily available renewable energy decreases the need to opt for the use of fossil fuels.
Here’s exactly how renewable energy helps deter reaching peak oil:
- Reduced Demand for Oil – As more energy comes from resources such as solar or wind power, less oil power will be needed for transportation or various industrial processes.
- Extended Oil Reserves – If oil consumption does start to dwindle, built up reserves of renewable energy can help to delay the peak oil point.
- Alternative Energy Sources – Electric vehicles (EVs) and biofuels will decrease the demand for diesel and help to conserve oil supplies.
- Energy Security – Diversifying energy sources will help to make economies less vulnerable to oil shortages and price fluctuations.
- Environmental Benefits – As renewable energy helps to reduce GHG emissions, it can help to fight climate change while reducing the need to extract harder-to-reach oil.
However, it is important to recognise that the use of renewable energy sources alone will not help to deter peak oil – bug it will play a part in help to slow down the depletion of our oil reserves and cultivate a more sustainable energy future.
The table below will break down additional ways we can avoid peak oil:
| Strategy | Description |
|---|---|
| Encouraging Electric Vehicles (EVs) | Promoting EV adoption reduces the demand for gasoline, extending the lifespan of oil reserves. |
| Investing in Biofuels | Research and development of biofuels can provide alternatives for industries that heavily rely on oil, such as aviation and shipping. |
| Enhancing Public Transportation | Expanding and improving public transit systems can reduce the number of individual vehicles on the road, lowering overall oil consumption. |
| Improving Vehicle Fuel Efficiency | Developing fuel-efficient engines and hybrid technologies can help vehicles consume less gasoline and diesel per mile. |
| Encouraging Carpooling and Ridesharing | Promoting shared transportation options decreases the number of vehicles on the road, cutting down on fuel use. |
| Advancing Hydrogen Fuel Technologies | Hydrogen fuel cells can serve as an alternative energy source for transportation and industry, reducing oil dependency. |
| Supporting Circular Economy Practices | Recycling and reusing petroleum-based products can lower the need for new oil extraction. |
| Promoting Urban Planning for Walkability | Designing cities with pedestrian-friendly infrastructure and bike lanes reduces the need for oil-dependent transportation. |
Overall, understanding peak oil is crucial – as it can serve as the motivation necessary to encourage the transition to clean energy and other practices that can help us to decrease our dependency on finite resources.
What about Greenly?
If reading this article about peak oil has inspired you to consider your company’s own carbon footprint, Greenly can help.
At Greenly we can help you to assess your company’s carbon footprint, and then give you the tools you need to cut down on emissions. We offer a free demo for you to better understand our platform and all that it has to offer – including assistance on how to reduce emissions, optimise energy efficiency, and more to help you get started on your climate journey.
Learn more about Greenly’s carbon management platform here.
Sources
DW https://www.dw.com/en/what-is-peak-oil-and-when-will-we-reach-it/a-70645124
Business Insider https://www.businessinsider.com/countries-with-most-energy-reserves-2014-2
Untied Diversity https://library.uniteddiversity.coop/Energy/Peak_Oil/peakoilquotesandcomments.pdf
Independent https://www.independent.co.uk/climate-change/news/what-they-don-t-want-you-to-know-about-the-coming-oil-crisis-6111184.html
KPMG https://assets.kpmg.com/content/dam/kpmg/au/pdf/2023/geopolitics-of-oil-and-gas.pdf
We Forum https://www.weforum.org/stories/2016/05/which-economies-are-most-reliant-on-oil/
CNBC https://www.cnbc.com/2025/03/20/energy-secretary-chris-wright-says-trump-push-to-produce-more-oil-is-driving-down-prices-.html
BBC https://www.bbc.com/future/article/20230726-an-experts-guide-to-peak-oil-and-what-it-really-means