As we see the price of oil enter a deflationary spiral and the production curb that will result, it makes me think of future scenarios that may lead to oil production declines. How large must the renewable energy sector be in order to capture a material share of the energy mix and begin to displace oil and start to depress the oil price?
Some estimate that the renewable industry would need to be an order of magnitude larger (10X) than it is today to have this kind of impact. At the point where renewables start displacing a material share of the oil supply, would global energy deflation become inevitable, especially with a technology with a falling cost structure?
What effect would this have on oil production? Would it bring the peak? Would it take off the training wheels too soon?
Will big oil and investors wait until energy prices actually do deflate to abandon many plays, especially if those reserves represent a depreciating rather than an appreciating asset?