The End of Oil (Ryan Kellogg, November 2024, NBER: Working Paper 33207)
It is now plausible to envision scenarios in which global demand for crude oil falls to essentially zero by the end of this century, driven by improvements in clean energy technologies, adoption of stringent climate policies, or both. This paper asks what such a demand decline, when anticipated, might mean for global oil supply. One possibility is the well-known “green paradox”: because oil is an exhaustible resource, producers may accelerate near-term extraction in order to beat the demand decline. This reaction would increase near-term CO2 emissions and could possibly even lead the total present value of climate damages to be greater than if demand had not declined at all. However, because oil extraction requires potentially long-lived investments in wells and other infrastructure, the opposite may occur: an anticipated demand decline reduces producers’ investment rates, decreasing near-term oil production and CO2 emissions.
remember Peak Oil? That was hilarious.