“When the impacts of electric and natural gas vehicles are combined with the rise of biofuels, in an environment of high prices, all against a backdrop of rising efficiency standards, it becomes clear that oil is facing significant pressures in its core market.
How oil producers will react to an eventual decrease in oil demand remains to be seen. Given how deeply many oil-producing countries rely on oil revenues to balance their books, there is little doubt that any sustained reduction in oil demand will have significant social, political and economic implications. While some may consider this a controversial thesis, the basic functioning of the market all but ensures that when substitutes emerge that can provide the same service at lower cost, consumers will respond. As energy thinker Amory Lovins is fond of pointing out, if these trends continue, oil will likely become uncompetitive even at low prices well before it becomes unavailable even at high prices.
This notwithstanding, the decline of oil is likely to be gradual, a process more like phasing one instrument out of the symphony than disbanding the orchestra altogether.
Oil will always have customers, for the simple reason that it can be refined into thousands of different products; still, it is likely that the 65 percent of it that is devoted to ground transportation will be gradually priced out of the market by the basic functioning of market competition in the decades ahead.”