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Ogmius Newsletter

Letter to the Editor

What’s the “Point” of Peak Oil?

Ogmius received the following letter from a current Bush Administration official in response to Frank Laird’s article, Apocalypse Soon: Climate Change, the End of Oil, and the Perils of Limiting Choices from the last edition of Ogmius.

In Ogmius No. 18, Frank Laird nicely demonstrates the influence of peak oil, particularly as the acknowledgement of global warming becomes widespread.  Similarly, he succinctly identifies the problems brought on by advocates assuming their chosen solution is, in fact, the only logical one.  But, backing up a bit, just how accurate are peak oil theorists and how useful is peak oil as a guide to policymaking?

Open your newspaper and you’ll read claims that it is coming soon (based on this GAO report) or listen to environmental leaders (US Green Building Council’s CEO) or legislators that it may already here.  Because the world is running out of oil, peak oilers say, we must develop a national or global strategy to deal with the impending economic and security catastrophe, preferably with a patriotic catchphrase that has been trotted out already - Manhattan, Apollo, combining the two, or how about Overlord (too militaristic perhaps but if there is a “war on climate” maybe it will surface, or perhaps signal the newest and greatest sea invasion)?  And peak oil is another arrow in the quiver in the fight to win the policy battle regarding global warming and climate change, or it might just be the sign of all impending doom.

But are peak oilers right?  Is the resource glass not just half empty but on its last drip?  Reserves of oil are finite, but, according to even the GAO study, no one knows which period it will occur, and the shape of the curve is more than in question—dealing with a decline is a much different prospect than falling off a cliff.  How many times have we run out of oil?  Peak oil theorists tend to ignore economic and investment cycles.  We are in the midst of a 30-year boom in the global investment cycle so production will continue to increase for the short-term and level off rather than fall off a peak.  We have never been able to predict our reserves or which countries even have the most petroleum, for various reasons (see where Canada now stands compared to 10 or 20 years ago or check out reserves vs. production over time on the Energy Information Administration’s pages).  While there will be an eventual point of maximum production, betting on the end of oil is a fool’s game.

Much like the concept of energy independence, which few have the courage to take on in a thoughtful manner, policymakers and politicians have a hard time confronting the obvious or simply taking on the uncomfortable.  Somehow GAO judged the studies they reviewed as if they are all created equal, a dubious prospect - probably the most rigorous is this one that did not even make it into GAO’s appendix due to the limitations of its methodology.

Many “peak oilers” have it backwards.  It is the fact that, for decades to come, petroleum and hydrocarbons will remain abundant and price-competitive compared to alternatives, and that we must wean ourselves from oil dependence and its attendant environmental and security vulnerabilities.  If climate change mitigation is the priority, carbon must have a price because oil is all too plentiful, not because it is scarce.