Peaking Out

WSJ reports:

Fresh data from the International Energy Agency show oil consumption in the 30 member countries of the Organization for Economic Cooperation and Development fell 0.6% in 2006. Though the decline appears small, it marks the first annual drop in more than 20 years among the OECD countries, which drain close to 60% of the 84.4 million barrels of oil used globally each day. Industrialized nations' demand tiptoed into negative territory in 2002, but the dip was so slight that it registered as flat.

The absolute decline comes within an OECD GDP growth rate of 3-4%. So it is a more significant drop than the 0.6% would imply.

Putting aside all the "peak oil" silliness, economies continue to transition from fossil fuel to electricity based energy. The Saudis know it. They have been implementing long term strategies to diversify their economy away from oil for a decade now. Middle East countries in general are working hard to sell themselves as logistics hubs. And Dubai wants to be a regional financial power.

The oil companies also well appreciate that oil sales will diminish as a percentage of their sales over time. As far back as the early nineties, Shell Oil was presenting their "post oil" strategy in various forums around Europe, including the business school I attended. That strategy continues to develop.

The transition to more efficient forms of energy should obviously be encouraged. The process of shipping a bulk liquids around so they can be burned in discrete internal combustion engines is clearly inefficient. Energy distribution over wires is much cleaner, faster, and easier. Someday the fact that we generate power on a vehicle by vehicle basis will seem absurd, like powering a toaster with a small alcohol burning motor.

Presently, gasoline is the best alternative we have for powering vehicles. But that will not last. Give it another fifteen to twenty years and we'll be on to the next thing.

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