It’s no secret that many of the world’s largest economies rely heavily on oil. In little more than a century, petroleum and its various byproducts have risen from humble roots as an intriguing oddity to a behemoth of a commodity that has infiltrated virtually every aspect of daily life. While its uses are many, the explosive growth of the fossil fuel can largely be traced to the advent and widespread adoption of the internal combustion engine in the early 20th century. The seemingly ever-growing demand for gas has sustained global markets, driven the rise of otherwise resource-poor countries and forever altered the face of geopolitics.
In fact, by the middle of the 21st century, that insatiable thirst had begun to cause concerns about “peak oil” – the idea that demand would soon outstrip the capacity to supply, causing serious oil shortages and triggering various crises around the world. The reality of peak oil may indeed soon be on us, but not in the way that many had foreseen. Instead of oil suffering from peak oil supply as most had predicted, we may be on the verge of witnessing peak oil demand. A combination of forces has slowly chipped away at the iron grip of petroleum, casting an uncertain light on the future of the mighty industry. One of the greatest areas of concern is also the greatest driver of petroleum’s growth throughout the decades – the automobile.
Peak Automobile
The need for gasoline has often buoyed petroleum markets, making up a significant percentage of overall demand. About 70 percent of that demand in the United States can be traced to transportation, of which personal vehicles account for an estimated 65 percent. There are more than 255 million passenger vehicles on the road in the U.S. alone, and that number has steadily grown since about 1960. Similar trends can be found throughout much of the developed and developing world, and this growth has ensured a steady need for gas. However, that may be about to change. Energy and transportation experts have warned that car ownership and use will not grow forever, and in fact may not grow for much longer. If peak oil is to come in the next few decades, peak automobile may be a primary cause.
An Alternative to Personal Ownership
Studies have shown that the average personal vehicle is used for about an hour per day, meaning that it serves no purpose over more than 95 percent of its service life. With average payments for new vehicles topping out at nearly $500 per month, that’s a significant investment for relatively little return. Drivers in developed countries are beginning to recognize this fact, and they’re searching for more affordable – and more practical – alternatives. One such alternative that already exists is ride-sharing platforms such as Uber, which provide convenient taxi-like services that can be accessed on the go from a smartphone app. In the future, fully autonomous vehicles may take the ride-sharing platform to its inevitable logical conclusion. With no need for human drivers, autonomous vehicles could quickly and efficiently be summoned on demand, virtually eliminating the need for personal vehicles
The Electric Revolution
While a peak automobile world may still be well off in the distance, that isn’t the only force working to reduce the consumption of gasoline. Electric vehicles represent only a very small fraction of the total number of personal vehicles at present, but no one is certain how long that will remain true. With rapidly developing technologies sparked by significant monetary investments, and with environmental concerns steadily growing in the public consciousness, an electric car revolution appears more plausible than ever. While projections vary from source to source, it’s clear that electric vehicles are set to become far more common in the coming decades, and the resulting reduction in demand for gas could have tremendous implications for the petroleum industry as a whole.
A Path Forward
It’s not all bad news for petroleum, however. As the world economy grows larger and more interconnected, the need to transport freight will continue to grow as well. This is especially true in the developing world, where competing technologies are unlikely to challenge the reign of petroleum in the foreseeable future. Increasing demand for food, water and other vital resources as a result of a swelling global population will also produce a greater need for fuel, as resources often must be transported over greater distances and at greater volumes. Aviation is also a source of continued growth, with both passenger air traffic and air freight increasing year-over-year on a consistent basis.
Nonetheless, the industry must prepare to adapt to the reality of peak oil demand. With a market that is already depressed due to excess supply, and lingering questions and conflicts over how the problem should be addressed, the future appears increasingly uncertain. One solution lies in technology, and particularly in the ability to produce petroleum more efficiently and at a lower cost without sacrificing production volume. Artificial intelligence, automation and remote operations are likely to play a significant role in creating an industry that is leaner, more efficient and more productive. New developments in subsurface imaging and various drilling and extraction technologies may also help to reduce costs without impacting production capabilities, with some analysts estimating an improvement of up to 25 percent in the coming decades. As the demand for petroleum products continues to evolve – most notably in the slowing and eventual decline of the personal gas-powered automobile – it falls on the industry as a whole to chart a new, technology-oriented path toward sustainable growth.
