"GAP OIL."

You heard it here first: GAP OIL. I am coining this term since I haven't seen it used before but it succinctly sums-up the prevailing situation regarding the provision and price of oil. We hear much about peak oil, and often this is misunderstood to mean that the world will imminently run out of oil. However, this is neither the case nor the definition of peak oil. As I have commented recently here, Dr Richard Pike, the CEO of the Royal Society of Chemistry and a former oil-man, has made convincing arguments that there is more oil - about twice as much - to be recovered than the 1.2 trillion barrels worth that is generally accepted. That may well be true, but it does not impact on the rate of recovery of oil per se, which is the crux of the issue.

The world gets through around 84 million barrels of oil on a daily basis, which adds-up to just over 30 billion barrels a year... a staggering quantity which has provided the foundations of the modern industrialised globe and its relentless population of 6.7 billion souls. Only time will tell, to what extent that number will ascend to, but if the WHO is to be believed is will be over 9 billion by 2050 and rising perhaps to 12 billion in the subsequent century, all fed by oil. I have noted on previous occasions a Hubbert analysis, similar to that made for oil, that predicts instead that world population will rather peak at 7.1 billion by 2024 and then fall to around 2.5 billion by 2100. As I say, only time will tell us which manner of estimate is correct.

Demand for oil appears equally inexorable, and there are estimates that say in two decades China will be using more oil than the U.S., and that the world in total will demand another 50% by then. It is obvious that no matter how much recoverable oil there is in the ground, if it cannot be recovered at a sufficient rate to match the prevailing demand for it, then a gap will ensue between demand and supply, as happened last summer with the effect of driving-up the price of oil to almost $150 a barrel. This state of "gap-oil" will maintain a similar consequence: namely that the price of oil will soar from its present low value and the impact on the world economy will be severe, with oscillations of unparalleled amplitude to the global markets. There will be actual shortages of oil too, with supplies going to the highest bidder, and a shift of economic and political power being placed in those hands that hold the oil.

This will happen irrespective of whether we are at the peak of world oil production. The concept of world peak oil is misleading in any case, since all oil wells are at different phases of their relative depletion and for example Russia will still be producing oil long after the North Sea, for example, and Saudi Arabia long after that. Hence some countries will be dependent on others. World peak oil can be thought of as the peaking of the largest fields, and for example once the giant Ghawar field peaks we can begin to kiss our lifestyles goodbye. This should auger-in a new age of energy efficiency and a growing reliance on sustainable economies, necessarily localised and so less dependent on the current level of transportation, based around the bioeconomy, i.e. on what can be grown.

Technological solutions, e.g. the hydrogen economy will not be with us for decades if at all, and at the very least we need some interstitial solutions, most viably based on photosynthesis. Once peak oil does strike it will enlarge the gap further by drawing-down the supply side, which will fall ever consummately against demand. It is gap-oil we need to fear, the state when supply fails demand and which is both inevitable and imminent.