Posted by
Andrews on Saturday, October 03, 2009 11:39:18 PM
Let me make a simple analogy.
You have a big jar of change. A huge one. It is so huge you really don't know how much money is in it. One day you need five dollars for a toll road, so you fish out five dollars. In the process you happen to take out too much change, so you put $3.75 back. A few days later a friend, quite impressed with the tremendous jar of change asks you how much is in it. You shake your head. "I'm not sure, " you reply, " it had at least $8.75 in it, but I took out $5.00"
Later, you think you may need $10 more for a small purchase, so you fish out 40 quarters. You don't spend them, so you put them back in. Another friend later asks how much is in the jar. You answer "At least $10."
So, are your friends right in thinking there is only $3.85 or $10 in the jar? Of course not. Those numbers are simply the quantity you have established to be in the jar. There could be many times that. The problem is, you only take out change when you need it, and only in the amount you need, or slightly more. So you never know the total quantity in the jar. So, though you can tell your friends how much has been confirmed, you have no idea how much is really in the jar.
And that is precisely our situation with "peak oil". For forty or more years, we have heard "oil will run out in 25 to 30 years". Is it an accident the numbers are both so consistent and so wrong? No, the oil industry seems to feel keeping proven reserves at a level of about 25 to 30 years at the current level of consumption provides the optimal level of security.
The problem is, as I showed in "
Rejecting "Peak Oil"" and "
A Thought on Oil Reserves", there are some who act like your friends, mistaking "known reserves" for "total ever extractable". But just as the $10 is not all the change in your jar, the known reserves are not all the oil in the earth. The oil companies simply scale back prospecting as they reach that 25-30 year cut off, so we always have about the same quantity of known reserves, in terms of current consumption.
Now, is there a finite amount of oil? Yes, unless the abiotic production people are right. Does that mean we should restrict our oil usage? Of course, just as we restrict our usage of any good, not using more than makes economic sense, but the price mechanism ensures that without any intervention.
The truth is, the free market ensures nothing will ever completely run out. Should we ever reach a point where we are unable to find new reserves, and technology cannot find new sources or extract oil from supposedly depleted sources, prices will rise. That will simultaneously cause consumption to reduce and will inspire both the use of existing alternatives and the search for new alternatives. With oil more expensive, alternatives not now profitable will be, and as they are used more, they will also become cheaper, with increased use spurring innovation and funding research into cheaper production. Simultaneously we will fund new research for alternatives.
And as prices continue to rise, less and less will be consumed, and more alternatives will be found so that, in the end, we will never completely run out of oil.
This pattern has held since the dawn of time. England's move from wood to coal kept her form being deforested. Our change from whale oil to petroleum kept the whales from being driven to extinction. And so on and so on. The pattern has held in every historical situation, as prices rise due to scarcity, means are found to economize, to replace and to reuse.And there is no need for even a dime of government money or a moment of state intervention. Prices alone determine that this will happen.
All of which makes "peak oil" an absurdity.
POSTSCRIPT
I would suggest, as I have many times before, the very brief
The Doomsday Myths by
Charles Maurice and Charles W. Smithson (which appears to have finally been reprinted) and Julian Simon's
The Ultimate Resource (which still appears to be out of print, though a sequel appears to be available, along with used copies), both of which provide lots of numerical backing for this very argument. I also would suggest reading my post "
Rejecting "Peak Oil"" and the articles to which it links, as well as my more recent post "
The Wrong Way to Look at Issues".