Crude Oil Realities:-

In their report of November 2008, the International Energy Agency (IEA) reviewed the state of the world's energy supply/demand and made predictions for the future. They carried out a study of 800 producing oil fields around the world and found that the production of these fields is reducing, on average, at 9.1% per annum. 

If you apply this reduction on an inverse compound basis, the production of these oil fields will be less than 50% of current production in the year 2016 (that's not far away). Added to this is the impact of the rising demand from developing nations such as China and India.  Declining crude oil production combined with rising demand will cause fuel prices to rise to unprecedented heights.

As well as cost of personal transport, this will effect the cost of food and consumer goods - everything that has to be transported from its place of origin to your retail outlet.  A recent study (left) found that the average distance our food is transported from farm gate to dinner table is 2414 km.

 Agricultural production and materials that contain products derived from crude oil (e.g. plastics, some phamaceuticals etc.) will also be adversely effected.  It’s not a rosy picture.  Due to greater fertiliser use and farm mechanisation, energy now represents half the cost of growing wheat and more than 40% of growing corn or sorghum.

The choice a public/goods transport system will be critical to the future economic well being of you and your family.  If you can’t afford fuel for your car, how do you get to work, school, shops etc.?

What effect will rising production and transport costs for food and consumer goods have on inflation?  If you reduce the demand for fuel for personal and goods transport, you reduce the demand for crude oil production.  In turn, this keeps the price of crude oil lower plus extends the life of producing oil fields.

STOP PRESS

The quotes below are from the 25 May 2010 E-Letter of Energy and Capital (find them here). These commentators drill down beneath the press releases of oil companies and Governments to find out the real story in order to give their subscribers good investment advice.  If their advice is bad - they don't have a business.

Their E-Letters Part 1 (2 April 2010) and Part 2 (16 April 2010) about peak oil are worth a read.

Ethanol:-

There is a wide spread belief that ethanol is going to be our saviour.  The reality is different as shown below. 

Batteries:-

Battery technology has improved dramatically over the last decade but batteries are still handicapped by their cost, size, weight and limited range in a car.  The time to recharge is also a problem but there are companies investigating proposals for facilities to provide battery exchanges - a fully charged battery for a flat one.

Hydrogen:-

Hydrogen shows some promise but is still an infant technology.  Its energy content is low, hence a greater volume is required for a specific power output than, for example, LPG. There have not yet been any hydrogen powered vehicles released to the market.  For this technology to succeed, a bulk producer of hydrogen will be required plus an extensive network of filling stations.

Electricity:-

Electricity will be the commuters saviour.  The great advantage of electricity is that it can be generated in so many ways - coal, wind, solar, hydro, tides ocean currents etc. plus new technologies that have not yet emerged from the laboratories.