Oil will run out 100 years before new fuels developed - US study

AFP quoted US study as saying that the world will run out of oil around 100 years before replacement energy sources are available if oil use and development of new fuels continue at the current pace.

UC Davis researchers at the University of California used the current share prices of oil companies and alternative energy companies to predict when replacement fuels will be ready to fill the gap left when oil runs dry.

The study said that if the world’s oil reserves were the 1.332 trillion barrels estimated in 2008 and oil consumption stood at 85.22 million barrels per day and growing yearly at 1.3% oil would be depleted by 2041.

But by plugging current stock market prices into a complex equation, Mr Debbie Niemeier UC Davis engineering professor and Ms Nataliya Malyshkina postdoctoral researcher calculated that a viable alternative fuel to oil will not be available before the middle of next century.

The researchers analyzed the share prices of 25 oil companies quoted on US, European and Australian stock exchanges and of 44 alternative energy companies that produce fuels such as ethanol or bio diesel or are developing fuel cells, batteries and propulsion systems aimed at replacing gasoline and diesel in vehicles of the future.

Ms Malyshkina said that what they found is that the market capitalization or total value of all stock shares of traditional oil companies far outstripped that of the alternative energy companies. That indicated to them that investors believe oil is going to do well in the near future and occupy a larger share of the energy market than alternative energy.

She said that to assess the time until a considerable fraction of oil is likely to be replaced by alternatives we used advanced pricing equations to make sense of the large discrepancy between the market capitalization of traditional oil companies and the market capitalization of alternative-energy companies.

Their calculations showed that there would not be a widely available replacement for oil-based fuels before 2140 which, even if the more optimistic date of 2054 for oil depletion is retained would mean there could be a gap of around 90 years when it might be difficult to run a motor vehicle.

Ms Malyshkina said that nearly two thirds of crude oil is used to produce gasoline and diesel to run vehicles. The researchers’ calculations were based on the theory that long-term investors are good predictors of when new technologies will become commonplace.

She said that sophisticated investors tend to put considerable effort into collecting, processing and understanding information relevant to the future cash flows paid by securities. As a result, market forecasts of future events, representing consensus predictions of a large number of investors, tend to be relatively accurate. Similar calculations have been used to accurately predict the outcome of elections and the results of sports events.

(Sourced from AFP)