“Today we witness a very great change for hydrocarbons,” said Alexei Miller, head of Russian oil and gas giant Gazprom, last week. “The [oil price is already] very high, and we think it will reach $250 a barrel.” Cue legions of financial journalists fainting and writhing in coils at the news of impending economic Armageddon. So do you think that we’ll see some attempt to move away from dependence on oil now?

Miller is the only CEO of a major oil company who is predicting $250 a barrel oil within eighteen months, because the others remember what happened the last time the oil price peaked like this, in the 1970s. The big consuming countries responded by cutting back on oil use so drastically that the OPEC cartel lost control of the price, which then bumped along below $20 a barrel through the late 80s and 90s.

With oil in the high $130s, we are already seeing a move away from the monster vehicles that became so popular in the United States during the cheap oil years, but 1970s-style conservation is not going to bring the oil price down this time. For every American or German switching to a car with lower fuel consumption, there is a Chinese or Indian first-time car buyer taking up the slack and keeping demand high.

So if the car-driving masses are ever to escape from high fuel prices, they cannot rely on simply cutting demand through conservation.

They need an alternative fuel, and the bio-fuels that are now on offer -- made from corn (maize, mealies), sugar cane, sugar beets, oil palm or soybeans -- simply cannot replace oil. There just isn’t enough land and water to grow bio-fuels and food too.

It would take half the land-mass of the continental United States to grow enough grain to fuel America’s cars and trucks. “Second-generation” bio-fuels that depend on plants like switchgrass and willow are better in terms of not competing with food because they grow quickly on waste ground, but they cannot provide the volume of fuel needed either.

So if we’re going to go on driving cars, but we can’t afford to fuel them from petroleum (and we can’t afford to put all those greenhouse gas emissions in the air either), then what do we do instead?

This is where it gets interesting, because there are two alternative fuels that could theoretically be produced in the volumes required, and that would not add to the carbon dioxide in the atmosphere.

One is algae, grown in open ponds on marginal land, or in nutrient-rich sewage farms, or even in completely contained environments in the dark.

Other plants also contain oil, but the great virtue of algae (pond scum, in the vernacular) is that it can double its mass every two hours under ideal circumstances, which means it can be harvested daily. The US Department of Energy estimates that to replace all the petroleum fuel in the country with home-grown algae fuel would require 40,000 sq. km. (15,000 sq. mi.) of land, which is less than one-seventh of the area devoted to growing corn in the United States.

The oil that is produced can be burned as biodiesel, or further refined until it is almost the same as the fuel we put we put in our vehicles today. It needs no special distribution network, works in unmodified engines, and is effectively carbon-neutral. And the biomass that is left after the oil has been extracted can be fed to cattle, or fermented to produce ethanol.

Fuel from algae is not yet ready for prime time, but there are now numerous start-up companies exploring rival ways of growing and processing it, and oil majors like Shell and Chevron are already jumping in as well.

The main question is cost, but so long as petroleum stays above $100 a barrel it’s likely that some of these methods will prove competitive.

The other, more radical proposal is to transform carbon dioxide from the problem into part of the solution by combining it with hydrogen to make a synthetic octane fuel suitable for use in vehicles. You get your CO2 from the exhaust gases of coal and gas-fired power plants or just extract it from the air directly (the first prototypes of machines for doing this are now being tested), and you obtain your hydrogen however you like.

Getting hydrogen requires energy, and is only carbon-neutral if the electricity used to split it out of water comes from a non-fossil fuel source like solar, wind or nuclear. But combining the hydrogen with CO2 avoids the huge problems of storage, refrigeration and high pressures connected with using pure hydrogen as a fuel: the synthetic octane can be handled and burned just like conventional fuel.

One or both of these approaches is going to start challenging conventional oil in the market within five to ten years if the price of oil stays high. Security of supply and cost are the big concerns driving this process now, but the ultimate prize is vehicle fuel that does not contribute to global warming. Conventional oil can never offer that advantage, so in the long run it is in big trouble.