How Will Peak Oil Affect World Gas Demand?

Peak oil is a major concern for the energy industry. At some point oil will reach the maximum rate of global extraction, thereafter, oil production will decline until the global reserves are extinguished.

The debate continues as energy experts argue when peak oil will occur or indeed if it has already past. The latest indications from the Association for the Study of Peak Oil (ASPO) would seem to suggest that peak oil has come and gone, in which case the global demand for alternative accessible fuel sources – namely coal and gas – could be set to rise dramatically in the coming years.

The first ASPO conference was held in 2005 and attitudes to peak oil have changed considerably in the four years since. The prediction of a peak output of 100 million barrels of oil per day never materialised, falling short at a fairly consistent level of 74 million barrels per day. The cost of oil production rocketed as marginal sources became economically unviable to extract and OPEC production dipped below expectations.

In the current climate, oil producers are reporting production depletion rates of around 5 per cent, which are expected to increase to 6.5 per cent by 2014. If these predictions are correct, each year global production will sink by around 4 million barrels per day, the equivalent of the entire annual oil production of the North Sea.

The shortfall will need to be made up somehow and natural gas seems the most likely immediate solution. In the long-term, renewable energy sources may cater to some of the demand but in reality natural gas is the best option to satisfy world demand. North American supplies of shale gas have hit a glut which can expand to take up the slack left by a lack of oil. New discoveries of gas found in Australasia are also expected to come online in the next three to five years.

Peak oil may well have come sooner than anticipated but natural gas is a suitable intermediary alternative. As the cleanest burning of the fossil fuels,  gas is also the most environmentally friendly solution until a concerted effort can be made to use renewable energy sources to cut carbon emissions.