The stock market has a worrying message for the future. It suggests we may run out of oil a century before we have an alternative fuel ready to replace it.

Nataliya Malyshkina and Deb Niemeier at the University of California, Davis, used the share prices of publicly traded oil and renewable-energy companies to predict when the new technologies are likely to be adopted.

The price of a new-technology company’s shares reflects investors’ forecasts of when its technologies will be introduced. Because their money is at stake, investors tend to put a lot of work into collecting and understanding relevant information, such as progress in the development of a technology and applicable government regulations and taxes, says Malyshkina.

“Better investors, whose forecasts are more accurate, tend to become richer and, therefore, influence market prices more than investors that make wrong bets,” she says. Share prices have previously been used to accurately predict the outcome of US elections and sporting events.


When the pair studied the share prices of oil companies and alternative-energy technology companies, and estimated the rate of change of future investment, they found that investors do not expect the replacement of oil-based fuels with renewables for another 131 years.

Smart money

“Investors put far more money into the traditional oil companies than into alternative energy companies,” says Malyshkina. “Therefore, investors believe that in the near future the traditional oil business is going to do better and to occupy a considerably larger share of the energy market than alternative-energy companies.”

If global oil consumption continues to rise at the current rate of 1.3 per cent per year, the planet’s proven oil reserves of 1.332 trillion barrels are expected to run out in 2041. “Our results suggest that there is a danger that crude oil will be depleted before it can be replaced by viable substitutes,” the pair claim.

All is not lost, however. Malyshkina and Niemeier predict that as oil reserves shrink, and the need for a replacement becomes more pressing, people’s behaviour and that of the market is likely to change.

Journal reference: Environmental Science and Technology, DOI: 10.1021/es100730q

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