The oil industry is experiencing a revolution that will “de-conventionalize” the way we deal with oil. As I pointed out in a blog last week, long-term predictions suggest we will soon see a surfeit of oil as new technologies allow extraction to occur from previously untapped supplies.

So what does virtually unlimited amounts of oil mean for our future energy policy? Will renewable energy continue to take a back seat to oil resurgence in the energy sector?

Not exactly. America’s energy needs are expected to have increased by 25% in 2035. Such growth in demand means that there is considerable potential for a variety of energy sources to grow.

Untouched reserves in the Arctic and New Zealand’s Ross Sea, the latter of which may be second in size only to Saudi Arabia, illustrate just some of the opportunities still available for conventional oil.

The flipside is such opportunities, although potentially lucrative, are also wrought with huge logistical problems and may not be worth their exorbitant extraction costs, depending on global prices. As the most accessible conventional reserves are used up, capital required to drill in remote locations will be required. This is costly and a potentially disastrous, particularly because cleaning up a spill in such a region would be so difficult. Containing a disaster in the Gulf of Mexico’s in 2010 illustrated the dangers of deep-water drilling.

Reserves in more remote locations are still available and new technologies are facilitating oil extraction from unconventional sources such as Canada’s tar sand. These resources are making oil essentially infinite.

This leads us to a very important question: what will the relationship between essentially infinite amounts of oil and renewable energy look like?

It would not be that different from predictions of a pending peak in oil production. The main trend will still be the same: renewable energy taking up a larger slice of the energy pie. Sustainable energy, starting from a much lower base, was always going to take a greater share as investment increased.

Renewable energy has grown exponentially over recent years. BP alone has invested $7 billion in renewables since 2005, much of it in biofuels and wind. Such investment is well ahead of BP’s target of $8 billion in renewables by 2015. A company of such magnitude would not consolidate its investment to such a degree unless it was certain worthwhile returns would ensue.

Renewables made up 3.9% of global energy consumption last year, a 17.7% increase from 2010. Such data suggests alternative energy sources such as solar are here to stay.

But even with government assistance to renewables, investment in oil will continue to grow as well. Growth will be catalyzed largely by unconventional oil expansion from areas such as the Bakken/Three Forks shale in North Dakota.

Another important factor to note is that despite alternative energy making huge strides, from 2007-2011 Americans still depended on fossil fuels for 84.4% of all energy consumption. The reason we have such a heavy reliance is rather simple: fossil fuels have provided us with cheap energy for over a century. Until renewables can compete with fossil fuels such as oil without heavy government assistance, it will be extremely difficult to obtain a green economy and a transition away from finite energy sources will be prolonged.

An overnight transition away from fossil fuels is therefore not economically or politically viable right now, but it is environmentally necessary. This is one of the many reasons we need to continue to encourage private investment in renewable energy.

The oil industry’s continued growth is contingent on new technologies providing capital gains sufficient to offset risks involved. Increased risks in oil – whether from a national security, environmental, or economic standpoint – give potential for new industries such as renewables to grow. This is not all that different to a world with peak oil; a phenomenon which would have catalyzed companies to go in search of untapped oil in remote locations anyway.

Current trends suggest even with a volatile market in fossil fuels and renewables, it will be the latter that continues to take a larger share of the energy market.

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