The Traditional Petroleum-Based Economy's Eventful Future: Of Peak Oil, Big Oil, Chinese Oil, Flags and Open Doors

48 Pages Posted: 8 May 2006

Date Written: April 25, 2006


This article examines the future of our petroleum-based economy in light of the voluminous debates over Peak Oil and includes the perspectives of the Western multinational oil companies themselves. The article surveys the Peak Oil discussions and the media campaigns of the major oil companies and finds that they reflect three different, although related, concerns: First, the "true" Peak Oil debate about when world-wide, long-term oil production will follow the downward slope of the famous Hubbert curve; second, the causes of the recent doubling in short-term energy prices, not forecast even as late as 2003; and third, the long-term national security implications of the Western world's increasing dependence on oil and natural gas imports from hostile and unstable countries.

The article compares the analyses and forecasts of the Peak Oil debaters with the views of the major oil companies, primarily by examining the recent ExxonMobil Energy Outlook through 2030. This Outlook projects that the world will use 50% more energy in 2030 than in 2005, even with energy efficiency improvements in both OECD and non-OECD countries. In 2030, oil and gas will still constitute 60% of our energy supplies, the same percentage as in 2005, but the world has adequate remaining reserves to fuel this demand. The world's dependence on OPEC crude oil will increase significantly and consuming countries will become increasingly reliant on imports of LNG.

Yet, two key, understated assumptions of this Outlook are that "timely and adequate energy supplies" will be available and that "investments can be made in a timely fashion." These assumptions appear to assume away the very issues sought to be addressed. The import of these assumptions is then discussed through BP's analysis of energy supply and demand fundamentals: that "events always override the fundamentals." The article then addresses the six key factors or "events" that, in the author's view, underlie much of the current Peak Oil discussion, such as the proposition that "Big Oil is not so big" and "China believes in Peak Oil." The Shell Global Scenario of integrated capital markets, trade and market liberalization (the "Open Doors" scenario) is contrasted with its "Flags" scenario of national preferences, post-9-11 security concerns, and distrust of markets and corporate governance in a post-Enron world. The article concludes with policy implications of the "eventful" future facing the traditional petroleum-based economy today.

Keywords: peak oil, energy policy, oil, petroleum, gas, China, Hubbert's Curve, Saudi Arabia, terror premium, liquified natural gas, peak gas, petroleum economy, oil reserves, energy market

JEL Classification: K33, L10, L20, N50, N70, Q33, Q40, Q41, Q43, Q48

Suggested Citation

Weaver, Jacqueline Lang, The Traditional Petroleum-Based Economy's Eventful Future: Of Peak Oil, Big Oil, Chinese Oil, Flags and Open Doors (April 25, 2006). U of Houston Law Center No. 2006-W-06, Available at SSRN: or

Jacqueline Lang Weaver (Contact Author)

University of Houston Law Center ( email )

4604 Calhoun Road
Houston, TX 77204-6060
United States

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