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A fashionable, if annoying, business term is "peak." Name the commodity or resource, slap "peak" in front of it, and all of a sudden you have a crisis that can generate a few thousand disaster headlines. In recent years, we have been treated to peak oil, coal, gold, water, wheat – even peak soil. The only thing that wasn't peaking was stupidity.

Today, we can add a fresh new one: peak demand, as in oil demand.

Five or six years ago, peak oil was the peak worry as prices galloped ever higher. Surely, the world was running out of oil as China and the rest of the growth-mad developing world discovered the joys of sitting in traffic as their SUVs slurped gasoline like Oktoberfest beer; the price said as much. As it rose to almost $150 (U.S.) a barrel, Goldman Sachs boldly predicted that $200 oil was possible.

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Then, suddenly, it wasn't possible. The financial crisis and deep recessions everywhere sent the price plummeting. You don't hear much about peak oil anymore, even though both the Texas and Brent prices are treading on either side of $100, well more than double the low reached in 2008 and 2009. For that, credit – or blame – slowing global growth, rising exports from Iraq and Libya, technology that can suck oil out of inconvenient places and surging U.S. shale-oil production.

If you're an oil company or investor, it's probably dawning on you that peak oil – the point at which geology and technology dictate the maximum rate of production, after which decline sets in – will not determine future oil prices and, therefore, the value of your energy portfolio. So what will? Peak demand could, and it's a credible theory that is gaining a following. In a recent interview, John Browne, the former chief executive of BP, said, "Oil prices will be limited by peak demand, not peak supply."

By that, he means the point will come when the world simply doesn't need ever-rising amounts of oil. At about $100, oil prices are still high enough to encourage conservation. Cars are becoming far more fuel-efficient and are being driven shorter distances. Natural gas, in apparently infinite supply, is increasingly being used as transportation and heating fuels (when's the last time you heard of someone installing an oil furnace?). Electric cars are entering the auto mix and alternative fuels, from Brazilian sugar-cane ethanol to biodiesel (made from vegetable oils or animal fats) are entering the fuel mix. At the same time, governments in China and elsewhere are encouraging the transition to less-carbon-intensive cities, if only to keep their citizens from dying of lung cancer.

The world consumes about 89 million barrels of oil a day. Analysts at Citi think demand will level off at about 92 million barrels as long as the fuel efficiency for cars and trucks keeps improving by 2.5 per cent a year. "The tipping point for oil may come much sooner than the markets are expecting," Citi's commodities team, led by Ed Morse, said in a report.

BP is more bullish on demand: It expects it to go to 104 million barrels a day by 2030.

The peak demand theory, while plausible, is a little too pat. That's because the oil markets face a bigger known unknown (to borrow an expression used by former U.S. defence secretary Donald Rumsfeld) in the form of unburnable carbon. What is known is that burning carbon is raising carbon-dioxide levels to potentially catastrophic levels as the planet warms. In May, an atmospheric station in Hawaii recorded an atmospheric reading of 400 parts per million of CO2 equivalent, a 25-per-cent increase over 55 years and a rate of increase three times faster than it was in the early 1960s. Climate scientists say the CO2 must be stabilized at 450 ppm to limit global warming to two degrees above the temperature that prevailed before the Industrial Revolution.

What is not known is how much oil and coal will have to be left in the ground to prevent runaway carbon-dioxide buildup in the atmosphere. Earlier this year, the Grantham Research Institute on Climate Change at the London School of Economics and a not-for-profit research group called Carbon Tracker issued a paper titled "Unburnable carbon 2013: Wasted capital and stranded assets." It concluded that about two-thirds of the Earth's estimated oil, gas and coal reserves would have to stay in the ground if the two-degree goal is to have any chance of being achieved. The International Energy Agency agrees.

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Some pension funds are already worried that the enormous stored wealth of the hydrocarbon players – their reserves – is a mirage. Last month, the managers of 70 pension funds with assets of more than $3-trillion wrote a letter to the top 45 oil, gas, coal and utility companies asking them to explain how climate change would affect their business. "As long-term investors, we see the world moving toward a low-carbon future in which fossil-fuel reserves that companies continue to develop may actually become a liability," Jack Ehnes, head of California's State Teachers' Retirement System, said in a Washington Post article.

Put the peak demand and a yet another "peak" – peak carbon – together and you have a scenario that should send waves of anxiety through oil and coal companies and their investors. The share prices do not reflect either of the two risks, suggesting that investors rightly do not believe oil use will fall, or that they're deluded. Energy was always a volatile investment, prone to cycle swings. The next swing could be down forever.

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