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Is 'peak oil' the new

By John Silveira

Issue #107 • September/October, 2007

"Peak oil" is becoming the latest doomsday buzzword. What is it? It's a well-thought-out theory that predicts that the rate at which we find and recover oil is soon going to fall behind the rate at which we consume it. The point at which that happens is the "peak." Prior to this peak, prices will have been relatively stable and reasonable, and the economies of the world have grown because the supply of energy outpaced the demand. But there is coming a time, and some say it's here now, when the world's oil fields cannot produce as fast as we consume. Demand will exceed supply, oil prices are going to skyrocket, and the world's economies are going to begin to fail as the oil fields themselves fail.

Oil today is important to civilization. We use it to produce electric power and to make gasoline, heating oil, fertilizer, chemicals, plastics, and more. Eighty-four percent goes to power and fuel, and only 16% to other things. What happens if we run out? Tidy little doomsday scenarios have been woven and show how transportation will stop running, food production will drop because of less fertilizer and pesticides, currency markets will fail, prices of everything will take off, and this will mean both the end of civilization as we know it and an irreversible decline in the human condition. It's all very neat, but that doesn't mean it's accurate.

There had been predictions we would run out of oil as early as the 1920s. We were supposed to run out about 80 years ago. Over the next eight decades magazines such as Time, Newsweek, and Scientific American carried articles that grimly predicted the next date for when the world would go to hell in an oil-depleted handbasket. But each date has come and gone and barely been noticed, except that apologists occasionally explained why previous dates weren't realized and why another future, but accurate, date would be the real McCoy.

How do they come up with these doomsday forecasts? Those who predict the future almost always think it's going to be just more of the present. In every doomsday scenario, the present is stretched to extremes in the future. In this case, it's the belief that things will get worse and worse because there's no way for the world to go on unless it continues to be run on oil—because it is run on oil now.

But as with so many other pessimistic scenarios (remember Y2K?), peak oil will not be the end of the world; it just means the world has to change, and it is changing.

Yes, the supply of oil is running out. It only makes sense that if petroleum reserves are finite, each barrel taken from the earth depletes the amount left by one barrel.

But there are several things wrong with the doom forecast. First is the assumption that as oil becomes scarcer it will run out evenly for all users. That is, transportation, agriculture, and industry will all run down the same way. But the fact is, as substitutes are found for some uses, such as transportation and the production of electricity, it will lessen the pressure on other sectors of our life and, in particular, that 16% used for other purposes.

Also, there's still plenty of crude. There just isn't the right kind of crude. What's running out is "sweet" crude; that's raw petroleum with less than 1% sulfur content. It's what most of our gasoline is made from, and it's the most desirable oil. But there's still lots of "sour" crude, oil with more than 1% sulfur. There's also more crude locked up in tar sands and shale than there is in all the world's current "proven" reserves. It's just difficult to access, but that doesn't mean it'll always be that way.

Here's another fact: There are already alternatives to the use of oil. They just have to be developed. For instance, there are transportation alternatives: diesels that run on soy oil, electric cars (powered from nuclear power plants), steam engines that run on any of several renewable energy sources. These are just the possibilities we now know of. Anyone who doesn't think there are going to be other alternatives discovered (or invented) just hasn't been paying attention to history. There are always some tinkerers, somewhere, ready to pounce on civilization with a new solution, and whose ideas or inventions will eventually become so commonplace that we'll all come to think they were predictable—just as we have come to regard every marvel we have today as commonplace.

Am I saying the future is going to be rosy? No, because it never has been. There are going to be problems along the way—environmental, social, economic... But there are always problems. And there are people who are going to spend all their time predicting doom—some of them make pretty good money doing it. But there are also people who spend all their time trying to solve tomorrow's problems. They're the ones who make civilization move.

If we try to make the future just more of the present, it will get grim. And that's what politicians, bureaucrats, and today's stagnant corporations will try to do. They will try to manage fuel supplies, and they will attempt to keep today's corporations in business. There may even be rationing, and more micromanaging of the economy.

But what will allow us to maintain a vibrant and growing (not just sustainable) economy is accepting change, letting the entrepreneurs innovate and profit, and letting those who don't change fail.

As long as we maintain a free-market economy where those who can satisfy our needs and desires are rewarded, and those who cannot will be allowed to fail, we can expect a better future. As soon as we allow our politicians, bureaucrats, and special interest groups (be they corporations, government agencies, or environmental groups) try to mandate the future, doomsday will arrive.

Read More by John Silveira

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