BP: World more likely to switch away from rather than run out of oil

A greenhouse gas issue

Most scientists agree that the burning of fossil fuels over the past 150 years has been a major factor in climate change, including global warming, among other weather changes. That climate change, and the prospect of even more severe climate change as greenhouse gases build, has prompted many nations to initiate public policies to transition away from fossil fuels, including oil, and toward greener, alternate energy sources.

Further, Davies said that the world is capable of producing the 100 million of barrels per day the International Energy Agency says will be needed later this century to meet global oil demand, but that more than likely, that amount of oil won't be needed, due to the use of alternate energies and individual behavior changes, Reuters reported.

Pricey commodity

Global oil supply averaged 87 million barrels per day and global oil demand totaled 85.8 million barrels per day in 2007, according to IEA data. Oil's price has increased more than 90% in the past three years on strong demand for oil in emerging markets in Asia, including China and India; in developed nations in North America and Europe, and due to geopolitical concerns in several, key oil producing nations (Iraq, Iran, Nigeria, Venezuela). Oil traded Friday up 13 cents $90.30.

Some theorists and oil analysts have argued that oil's price is not only being driven by the aforementioned demand, but also by the prospect of "peak oil" -- a theory that argues that global oil production will peak in the decade ahead, or soon thereafter. Many others, including the IEA, CERA, and Davies differ, arguing that the world is far from its oil production peak in geologic terms, and in Davies' case, arguing that environmental policy changes will make a discussion of peak oil production moot.

Oil Analysis: At first glance, given the surging economies in the developing world in Asia and Latin America, it would seem that a prediction that oil demand will hit a top before the supply does is premature. Oil consumption in these regions continues to increase at a strong rate. Nevertheless, when one views the consumption playing field more-comprehensively, there are signs that Davies may have touched on a phenomenon: climate change concerns are prompting public and private officials to move away from oil and coal as energy sources and there appears to be growing support from citizens to implement these changes.

One indicator to watch: the IEA's OECD oil inventory statistic. Currently at 123.8 million barrels, below its 5-year average, if in the decades ahead inventories continue to build even after factoring-out recessions and/or oil production increases, that would suggest that nations are making a fundamental and permanent decision to reduce, and eventually eliminate, oil use.