Opportunity in Peak Oil

We have reached Peak Oil (basics here if you are not familiar), which is mostly bad news (particularly for the environment, since more energy will likely be generated by burning coal, which is far dirtier). But there is also opportunity.

It is impossible to know for sure if we have reached Peak Oil from a purely geological perspective, but that discussion is academic. The geopolitics and economics of the oil industry are such that we are effectively at the point where global supply cannot increase substantially. More importantly, global supply cannot increase quickly (see World Oil: Market or Mayhem by James L. Smith).

In 2008, global demand for oil raced past the world production limit. Since supply cannot increase (at least not quickly), prices skyrocketed. This sort of price volatility is now likely to be the norm. Oil is the fuel that drives our economy. It is not only used for transportation, it is a raw material in plastics, fertilizer, cosmetics, and more. High oil prices are crushing to our economy. Because there is a limit to the supply of oil, there is now effectively a limit to the growth of the world economy.

But there lies the opportunity. If you have a business that effectively provides a product or service that traditionally relies on oil,* you can keep your prices low, and you will not be exposed to an extremely volatile cost center. You would not be limited by the the thing that limits your competitors. That is potentially enough of a competitive advantage to dominate an industry (if you have the talent and capital).

*It is worth pointing out that anything to do with electricity in the US does not yet fall into this category. We generate electricity from gas, coal, hydro and nuclear. Wind turbines and solar panels are not competing with a product that depends on oil.