Oil is fundamental to almost every aspect of modern life. Oil fuels over 90 per cent of land, sea and air transport, provides 40 per cent of commercial energy, and provides the raw materials for products as diverse as plastics, medicines, clothing and building materials.
Oil is a finite resource, yet we continue to use it as if we will always have it. We have built our economy, society and lifestyles on the assumption of abundant, cheap oil. But the world’s demand for oil is now outstripping its supply. New sources of oil continue to be discovered, but they are not enough to replace the oil we are already using, and the costs of extraction are steadily increasing.
Oil prices have already risen significantly in response to this situation. At their peak in summer 2008, oil prices were ten times higher than at the start of the decade. Even in summer 2009, in the depths of global economic recession, oil cost five times the level of a decade before.Since the start of 2012, oil has been over $100 a barrel – and prices show little sign of falling.
Experts recognise that the production of oil will peak, reaching a point at which the volume of oil pumped from the ground will begin to decline. When this might occur is subject to argument and debate, but a recent authoritative review concluded that this will happen in the next 10-20 years. As the International Energy Agency makes clear “The era of cheap oil is over”.
For Transition the challenge is to find new ways to organise our society and economy as oil prices rise and oil becomes scarce.