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A charging plug is seen on an electric vehicle (EV) at the second media day for the Shanghai auto show in Shanghai, China April 17, 2019.Aly Song/Reuters

Predicting the future of oil – its price, or the amount that will be pulled from the ground – is difficult. But because it has long been central to modern life, the commodity invites speculative forecasts. They are often issued with certainty. And they have often been very, very wrong.

In 1999, the price of a barrel had crashed to barely more than US$10. The cover of The Economist declared the world was “drowning in oil” and argued the price would fall to US$5.

Six years later, it was soaring past US$50. The talk then became about “peak oil.” Booming demand meant that fields were sure to run dry, leading prices to surge, forever.

And oil did indeed almost hit US$150 – briefly. But high prices proved the mother of invention and new fracking technology unlocked vast reservoirs. Oil production in the United States had been in terminal decline, before it doubled in a decade to record output.

And prices? As any Albertan can tell you, they plunged.

Last year, many analysts began talking of a new oil peak – peak demand. The British oil company BP suggested global demand peaked in 2019. The Canada Energy Regulator forecast that, in a future of lower demand, Canadian oil exports could peak in 2035.

The latest predictions may not come to pass, but they have a compelling logic to them.

The world is moving toward reducing greenhouse gas emissions. Cars and trucks are among the chief users of oil, but technology to wean them off it is advancing rapidly. Places from California to China say they will ban the sale of gas-powered cars by 2035. By that year, General Motors – the company that brought the world the Hummer – says its “aspiration” is to be selling only electric vehicles.

Among investors there’s an old adage: The four most dangerous words are “this time it’s different.” Oil has been transportation’s go-to fuel for more than a century, through crashes and booms, propelling humans down highways and to the moon. It is a cheap and versatile fuel. Yet the likely sunset of the internal combustion engine means oil’s dominance could be coming to an end.

For Canada, where oil is the No. 1 export, worth $90-billion in a typical year, the big question is: How soon will that end arrive?

Norway, which made a fortune from offshore oil, offers a possible future. The majority of new car sales there last year were EVs (though only about one of 10 cars currently on its roads are EVs.) A changing fleet will have an impact of demand, and gas and diesel fuel sales in Norway fell 3.3 per cent in 2019 from the year before. It is a glimpse of how broader demand for oil could soon face small, steady declines.

Two-thirds of oil burned in the U.S. – Canada’s main customer – is used in transportation. Motor gasoline alone accounted for 9.3 million barrels a day in 2019. The U.S. Energy Information Agency’s outlook sees a decline postpandemic to 8.9 million barrels a day for gas in 2022, even as the economy recovers.

There was understandable consternation in Canada last month after U.S. President Joe Biden spiked the proposed Keystone XL pipeline. In the long run, however, Americans (and Canadians, Europeans and Asians) using ever less gasoline to fuel their cars could be the bigger story.

And the pace of change may accelerate. Mr. Biden moved to toughen fuel efficiency rules on his first day in office and a week later used the might of federal purchasing power to boost the EV business. He has also proposed 500,000 charging stations by 2030, or about four times the number of gas stations.

Canadian oil has some built-in advantage. The typical oil reservoir – and especially fracked fields in places such as the Permian Basin in Texas – needs constant new drilling (and new investment) to maintain output. The oil sands, the source of Canada’s doubling of production over the past two decades, are different. Projects have big costs up front but lower continuing costs to maintain output. As a result, Canadian crude will be there to feed a North American market where millions of gasoline-fuelled cars will be on the road for years to come.

That buys Canada time. The current shifts in oil demand appear to be of the tectonic variety. Slow for now, but the changes could eventually become wrenching for Canada’s oil industry, and our economy.

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