Comments (8)

• James Waddell

• The right question is not "Are we running out of oil?", though that question gets peoples attention [which is, incidentally, why I used it as a title of an essay I wrote earlier this year. It's too long to post here, but anyone who wants it, just let me know, jlwaddell@aol.com].

  The better questions: Given the limits of geology and rapidly increasing demand, are we running out of cheap, easy-to-obtain oil? Free market advocates (like me) all know that the market will adjust and provide substitutes, avoiding some sort of doomsday scenario long before we get close.

  But not enough free-marketers ask the question that Gary North asks: At what price (will the market provide an alternative)? How high will declining supply and increasing demand drive the price of oil before an alternative is developed? It could be high enough to have significant impacts on the economy, our investments, and even our standard of living. To simply dismiss the issue by saying "the market will take care of it", is unwise, in my view. We should think through the likely outcomes and prepare ourselves accordingly.

  Another question North asks: What if the government imposes a price ceiling on gasoline in response to popular outrage at high prices? The incentive to find an alternative gets reduced. Then what?

  It's easy to be dismissive of the issue, but that won't help us absorb the effects of higher oil prices.

• Published: March 25, 2005 3:49 PM

• David White

• "How high will declining supply and increasing demand drive the price of oil before an alternative is developed?"

  All I know is that we would have developed alternatives long ago if the government hadn't been subsidizing it so heavily all this time:

  http://washingtontimes.com/functions/print.php?StoryID=20030722-093718-6082r

• Published: March 26, 2005 7:11 AM

• James Waddell

• Interestingly enough, the subsidies in the article you cite seem to have a perverse effect on oil. Rather than making foreign oil cheap and easily available, the violence of our foreign policy makes oil less available and therfore more expensive.

  Oil was at $30 per barrel before the Iraq war, and undoubtedly would have been lower had it not been for the decade of sanctions agaiinst Iraq. Two years after this catastrophic success, oil stands at about $55.

  The author of the Washington Times article, Milton Copulos, states "The economic toll that oil imports take on the U.S. economy can only be eliminated if the need to import oil itself disappears."

  But this assumes that our foreign policy of war and intervention is forced upon us. We need oil, therfore we must intervene abroad. One can make this argument, but it is not axiomatic.

  I contend that a less-interventionist foreign policy would actually be more beneficial in ensuring that we have access to a stable supply of oil.

  If I am right, and we had pursued a less-interventionist policy all along, the price of oil today would be lower, which may not actually have encouraged alternatives.

  For a good glimpse into the impact of the Iraq war on oil supplies, see this site (scroll down to the map), which detail attacks on pipelines since the beginning of the war. There is almost 1 every 3 days.
  http://www.iags.org/iraqpipelinewatch.htm

  Iraq's oil production was at 2.8 mbpd (million barrels per day) in 1989. From 1991-1996 it was below 600,000 every year. It had started to recover to almost its pre-war heights by 2000-2001, but with the second war, it has fallen again.

• Published: March 26, 2005 10:11 AM

• Michael A. Clem

• Let me ask a different question, then. Suppose the days of "cheap oil" are over? Suppose we've been getting a free ride? Suppose our standard of living will have to change to adjust to the situation? Suppose all this, and tell me what the heck we're supposed to be doing about it?
  
  
  If it is inevitable that it hurts our economy and way of life, then what good will hand-wringing do? Do people suppose that the government will come up with laws, regulations, and incentives to encourage energy conservation and alternative energy development better than an undistorted market will? I mean, they've done such a wonderful job with Social Security, education, and health care, you know.
  
  
  Or perhaps we should worry more precisely because the energy market is not undistorted, that government intervention will make the adjustment more difficult than it needs to be?

• Published: March 26, 2005 3:56 PM

• James Waddell

• You are right, hand-wringing does no good. Better to think of how high energy costs may affect you personally, and think of ways to protect yourself. Above all, don't expect the government to make things better. That would require them stepping back and letting the market work.

• Published: March 26, 2005 5:58 PM

• Tessa Snyder

• The market will definitely not help solve the oil peak problem. By the time people feel the real energy crunch it will be too late and expensive to switch to an alternative. It's not just a matter of finding something that works and running with it. There needs to be a global infrastructure set up, and that takes a long time.
  Also, one of the biggest problems is agriculture. Most people don't know that it take a tremendous amount of fuel to make pesticides, fertilzers, not to mention all of the actual mechanical work thats involved in harvesting, storing, and transporting our food. The Green Revolution of the mid 19th century was made possible by oil and natural gas. The sudden over abudnace of food allowed the world's population to sky rocket from around 1 billion to 6 billion.
  
  Take away our capacity to do all the work we have been with cheap oil and we will still survive, but not all 6 billion of us.

  We are the same as any animal in a ecological system- they find an abudant energy/food source, the population booms, then they depelete all their resources until their environment can't sustain them any more and the population crashes. It's a simple biological theory.

• Published: March 26, 2005 10:42 PM

• David White

• "The market will definitely not help solve the oil peak problem."

  It's not an oil peak problem; it's an oil subsidy problem and one that the market is therefore perfectly capable of solving. For if the true cost of gasoline is around $5.50 a gallon, and rising, then the wise move would be for the government to pass the costs of securing the flow of oil from the Persian Gulf onto the oil companies, which would in turn pass the costs onto their customers. The cost of oil would then be fully privatized, relieving the taxpayer of this socially inequitable and environmentally destructive burden. The cost increases could be phased in over, say, five years, with the government making its intentions known in advance. Thus informed, the market would quickly adjust, pumping vast sums of investment capital into alternatives and avoiding a crisis accordingly. And make no mistake about it, the alternatives are there (not just alternative fuels, but modes of transportation and real estate development) and only await the right price signals to become viable.

  Accordingly, I must disagree that we are "the same as any animal in a[n] ecological system," as the spontaneous order generated by a fully funcioning market economy operating under a Lockean rule of law (wherein the rights to life, liberty, and property are protected) would assure the efficient use of natural resources, there being no commons to overrun.

• Published: March 27, 2005 12:20 PM

• Tessa Snyder

• I have to disagree. I have been researching this topic for a while. I've read numerous reports, interviews, news articles, books, speeches, and conference transcripts, by analysts, bankers, politicians, and scientists. Here are a few links, new and old:
  http://www.energybulletin.net/4926.html
  http://www.tass.ru/eng/level2.html?NewsID=1891010&PageNum=0
  http://fromthewilderness.com/free/ww3/050404_lemonde_petro_apocalypse.html
  http://www.fromthewilderness.com/free/ww3/031805_world_stories.shtml#1
  http://www.dossiersdunet.com/article.php3?id_article=149
  http://www.lifeaftertheoilcrash.net
  http://www.whitehouse.gov/energy/
  http://www.rollingstone.com/news/story/_/id/7203633
  http://news.bbc.co.uk/2/hi/business/4399537.stm
  

• Published: April 3, 2005 9:38 PM