Tesla Motors Inc (TSLA), Honda Motor Co Ltd (ADR) (HMC), Uncharted Territory and a Modern Peak Oil Theory

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In Saudi Arabia, 54 GW of planned renewable energy is, in fact, a direct replacement for oil-driven power plants. The major oil exporter is finding it cheaper to generate electricity from the sun than from oil, another sign that demand will see downward pressure long-term.

The global picture
When we combine a drop in oil demand in the developed world with a rise in oil demand in the developing world, it has resulted in fairly constant demand over the past decade. In fact, from 2006 to last year, total liquid fuels consumption rose only 0.77% per year. That compares with compound growth of 1.7% from 1995 to 2006. Demand growth is definitely slowing.

As fuel efficiency rises, natural gas finds more uses, and alternatives such as electric vehicles and even solar take hold, the developed world will continue to see a slow decline in oil demand. The question is how fast the developing world will adopt new technologies. That’s what will determine the direction of global oil demand over the next few decades.

A bold prediction
When we combine all of the data I’ve discussed, it leads me to believe that a peak in global oil demand is right around the corner, and it won’t be because supply is running out. The peak may not come this year or next, but by 2020 I think we’ll be using less oil each year. Cheap natural gas, environmental concerns, and new technologies will drive the reduction in oil usage in developed nations, and eventually those trends will spill into developing countries.

Oil is no longer the most cost-efficient energy, even in transportation, and new technologies will bring down the cost of other energy sources as well. These factors are what will drive the eventual decline in oil consumption, not the scarceness of the resource, as so many have predicted in the past.

The article Uncharted Territory: A Modern Peak Oil Theory originally appeared on Fool.com is written by Travis Hoium .

Fool contributor Travis Hoium has no position in any stocks mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw. The Motley Fool recommends and owns shares of Tesla Motors.

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