Summary
Peak oil is a little-known concept among the public, even among investors. The expression “peak oil” refers to the maximum level of oil production. Peak oil does not denote the end of the oil age, but rather the end of relatively cheap oil. According to the data available, I have concluded – based on maturing deposits and an insufficient discovery of new reserves – that conventional oil has peaked in 2005 and that between now and the year 2020, total production (including non-conventional oil) will reach a maximum that still falls short of 100 million barrels per day. From that point on, oil will become scarcer, more cost-intensive to produce, and, in part at least, crowded out by renewable energy. At the same time, however, the demand for energy will increase.
The largest oil reserves lie in countries that are predominantly Muslim. In 2011, some of these countries have seen political protests and even armed rebellion. In Tunisia and Egypt, governments were overthrown. In Libya, international forces intervened as mass protests turned into civil war. Along with the geological reality that oil reserves continue to mature and do not automatically replenish, political unrest in producer countries could temporarily restrict oil output, as was the case in Libya and, to a lesser extent, Egypt.
In order to quell unrest and pacify citizens, some governments in the region, including Saudi Arabia, provide the domestic population with very low-cost oil. This results in increased domestic demand, and a corresponding drop in the oil volume available for export. Available data suggests that once peak oil has been reached, the global economy will face a prolonged oil crisis. Investors can benefit from the long-term trend reflecting a need to revamp the global energy system towards more efficiency, self-sufficiency, renewable energy, and clean technology.