Oil demand is predicted to continue to increase despite the high price of oil. There are many sources of demand for oil. As countries develop and industrialize their oil consumption grows with their economy. Today China and India are the big players when is comes to growing economies. The world has never seen economic growth like it has with these two countries and the impact on oil demand has already began. Developed countries are also yet to seriously change their oil habits, but will likely adapt at a faster pace if oil prices continue to rise.
A definitive oil replacement has still not been found, but a few contenders are vying for the spot.
Biodiesel has probably been the most grass roots oil replacement so far. Biodeisel engines run on greases like the ones thrown out everyday by the fast food chains. For decades the environmentally conscious have been converting their diesel vehicles into bio diesel. One issue with biodiesel is that fact that it still releases emissions similar to gasoline, just at lower levels. Also there are serious issues with biodiesel running at low temperatures, because it thickens easily and requires additives at temperatures below 40 degrees.
Propane is currently the most used gas alternative in the US with almost propane 200,000 vehicles being driven today. However, propane is not considered a good alternative to gasoline because it is produced as a byproduct in natural gas and petroleum refining.
Hydrogen has been hyped in the last few years, but is yet to make a significant impact on the energy industry. Hydrogen is talked about so much because it can easily be made by nuclear and alternative power sources and has no known environmental impact since the exhaust is just water. Fleets of government vehicles have tested the technology, and big auto makers are betting big on hydrogen, so it seems to be a likely replacement in the more distant future.
Battery power has been used to complement gasoline engines to greatly boost the fuel economy of hybrid vehicles. Batteries have only rarely been used as replacements for gasoline because they can rarely produce the power to accelerate quickly. One huge advantage to batteries is they can save wasted energy, for example, hybrid vehicles' batteries are recharged every time to car uses its brakes. Whatever gas alternative is used in the future it will likely be used in conjunction with battery power.
Ethanol is probably the most well known gasoline alternative. In Brazil sugar is converted to ethanol and nearly half of the fuel sold in ethanol. In
the US only about 3% of the fuel sold is ethanol, but the number has been growing. Recently a new gas mix called E85 has grown into a significant player. This gas is 85% ethanol and usually gets about 80% of the fuel efficiency of regular gasoline, and its price is also around 20% lower than regular gas. Lead by GM and Ford, most vehicles sold in the US today can run on the E85 mixture and those that are not compatible can be converted for less than $200. While today ethanol in the US is mostly profitable because of subsidies, in the future ethanol grown from more fibrous plants instead of corn is predicted to have a better yield. Also one of ethanol's huge costs is transportation. If the ethanol industry had pipelines like the oil industries it would become much cheaper.
Every one knows the oil supply can't last forever, but no one has a very good estimate when it will end. Saudi Arabia has the largest amount of oil, but they aren't willing to tell the world exactly how much they think they have or when it may be depleted. Other countries have almost completely depleted their oil reserves such as the US and some other developed countries. Mexico announced in 2004 that their largest oil field and the second fastest producing field in the world, Cantarell Field, has begun a steep decline in production. In 2002 Cantarell produced 2.1 million barrels a day. By 2008 it is predicting to only produce 1 million a day. The largest oil field is Ghawar field in Saudi Arabia. According to the Saudi Government the field has 75-83 billion barrels of oil and should be able to increase production in the future. The field considered to be second largest is Kuwait's Burgan Field at 66-72 billion barrels. In 2005 it was announced to Burgan field will begin decreasing production and is estimated to have a lifespan of 30-40 years.
One different oil source is not an oil field as much as a tar pit. Canada's Athabasca Oil Sands have been estimated to hold 1.6 trillion barrels of crude oil. While this sounds like a wonderful supply of oil the extraction process is very expensive and difficult. Someday this process will certainly be refined and if oil prices continue to increase the Athabasca Oil Sands will become a huge supplier of gasoline to North America.