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  Summary of Discussions
  The transport sector’s demand for oil is less price sensitive than any other part of the economy. This is partly because demand for transport services is relatively insensitive to price and partly because substitutes for oil in road transport are currently far from cost-effective. Evidence from the USA suggests that as incomes rise, transport sector oil demand becomes even less price sensitive. This implies that oil consumption is set to become increasingly concentrated in the transport sector. It also implies that relatively limited fluctuations in demand can have increasingly significant effects on oil prices.
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  Peak Oil and the Evolving Strategies of Oil Importing and Exporting Countries
  Statistical trends for oil intensity from individual countries and groups of countries show that an average increase in GDP of 3% per annum equates to a projected demand for liquids of 101 million barrels per day (Mbpd) by the year 2030. The following analysis shows that this demand cannot be fulfilled by production from current reserves and expected new discoveries.
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  Future Prices and Availability of Transport Fuels
  It is a truism that future prices of energy for transportation will be determined by the forces of supply and demand. For transport fuels, these forces have entered a crucial phase that is likely to persist for several decades. Oil production from conventional resources outside of the OPEC countries will peak within a few years. Unconventional fossil resources that can be exploited at current prices, resources whose early development is already well underway, pose an even greater threat to the global climate than conventional fuels. To bring these resources to the market at a rate to match the growth in demand for mobility fuels in the developed and developing economies will require massive, risky investments. Serious risks are posed by the environmental acceptability of these fuels as well as by the fact that a sudden downturn in world oil prices would turn them into stranded assets.
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  Medium-Term Oil Market Uncertainties
  The oil market has changed dramatically over the past eight years, with prices rising from $10 to over $90/barrel. The dynamics of the industry have changed, but there is still considerable debate over whether this represents a paradigmatic shift of supply and demand conditions or is simply a result of longer term cyclical factors. Non-OECD oil demand growth is running three times faster than in the OECD, and is set to surpass the OECD in volumetric terms in the middle of the next decade. Non-OPEC supplies have plateaued over the past five years and look set to remain at such levels for the coming five years. Understanding the drivers behind these shifts gives an insight into the prospects for the coming years. However, even looking five years forward, there are many variables which could affect the outcome. These forecasts therefore provide a guide to the future, but should not be expected to project supply and demand with pinpoint accuracy. Equally important is the need to understand the uncertainties which lie behind any forecast that could change the final outcome.
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  Long-run Trends in Transport Demand, Fuel Price Elasticities and Implications of the Oil Outlook for Transport Policy
  This paper discusses the role of transportation in policies to address energy security and climate change. It focuses on three elements: the impact of energy prices on transport demand, the potential contributions of the transport sector to energy policies, and the interaction between energy and other policy concerns in transport. Transport is relatively unresponsive to broad-based price signals, in particular to changes in prices of fuels, but nevertheless there is considerable scope to improve the fuel efficiency of vehicle fleets. As a result, we should not expect energy policies to trigger dramatic changes in the nature of transport systems. Furthermore, this unresponsiveness suggests that it is relatively costly to reduce energy use in transport, and thus that efficient policies will probably not extract as much energy saving (in percentage terms) from transport as from other sectors. Reducing energy use in transport can be done with price incentives or with regulatory measures. But if reducing climate change is a primary goal, measures that mandate conservation need to be accompanied by others that make fossil fuels economically unattractive – for example broad-based carbon taxes. Otherwise, fossil-fuel reserves will remain economically usable and therefore will constitute a future source of carbon dioxide emissions. We argue that other transport problems, notably congestion, local air pollution, and accidents, are associated with considerably higher marginal external costs than are climate change and energy security. It follows that policies to deal directly with these other problems deserve high priority, regardless of energy policies.
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