You're right jontee - the problem is indeed supply and demand. Demand is increasing and supply isn't. And yes, production will stop if it is not profitable, but the fact is that oil is so useful that people are prepared to pay a high price for it - there's no other way to power planes, and no transport alternative where you can "recharge" in a minute to give hundreds of miles of range for a large vehicle.
We'll only see prices fall if (or when) the world enters a recession, and the moment it recovers prices will shoot up again.
Doing "coal to liquids", as it's called, is certainly a practical way to produce oil, but it is very dirty (especially in terms of CO2), and at the same time is more expensive and yields a lower energy return than conventional oil. This is why it's biggest historical uses, as you point out, were only when the countries had no alternative, i.e. Germany during WW2, and South Africa during sanctions. It could certainly help supply liquid fuels in the face of declining oil supply, but due to the infrastructure needed it's unlikely it could be ramped up fast enough to offset declining production from areas such as the North Sea and Cantarell in Mexico, where annual decline rates have been in the 10-20% range.
The biggest concern is that China and the US have a huge amount of coal - if they decide that the way to deal with peak oil is to convert that coal to transport fuel, then we might as well forget trying to tackle climate change.
Electric bikes with renewable electricity are part of the answer - as long as there's enough lithium to go round in future!
Mike
|