What is peak oil?
‘Peak oil’ is an expression that is widely mis-understood. It does not relate to a prediction that there’s no more oil left to extract from the earth’s oil fields (although oil is a finite resource and it must run-out sometime). Rather, it relates to the maximum rate at which we can extract oil - which, in turn, relates to ease of access and rates of extraction at the wells.
It seems inevitable that global demand will move to a point where it consistently exceeds supply, particularly with the growing demand from non-OECD (developing) nations. The effect must be a structural increase in oil prices, coupled with the prospect of oil shortages and a consequent increase in market volatility. The only questions are “how soon, and by how much?”
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Based on our assessment, we might expect to see the following effects reflected in our economy within the term of the next government:
- Markedly higher prices for all forms of travel (air, sea, rail and road)
- Increased food prices
- Increased general retail prices
- Increased domestic utility bills for heating and power