Posted on 11/15/2005 7:05:19 AM PST by Dan Evans
The debate over "Black Gold Stranglehold: The Myth of Scarcity and the Politics of Oil" has begun to take familiar lines. "Peak oil" adherents continue to insist that oil resources worldwide are depleting. This mantra is repeated almost like an article of faith.
Ever since M. King Hubbert drew his first "peak-production" curve, statements of this tenet are easy to find. Typically, the "Peak-Production" theory is articulated as so well established that further proof is not needed. "Peak production" statements abound in publication. Consider this example written by an energy consultant in the Bulletin of the Atomic Scientists:
Petroleum reserves are limited. Petroleum is not a renewable resource and production cannot continue to increase indefinitely. A day of reckoning will come sometime in the future. The point at which production can no longer keep up with increasing demand will mean a radical and painful readjustment globally to everyday life.
To counter this argument, Craig Smith and I have argued that proven worldwide reserves of oil are currently estimated by the Energy Information Administration at 1.28 trillion barrels, the largest amount every recorded in human history, despite worldwide consumption of oil doubling since the 1970s. Oil prices are currently declining suggesting ample worldwide supplies are available – oil prices are not increasing as would be expected if chronic oil shortages were imminent.
In response to an article we published here about Brazil's offshore oil discoveries, one bulletin-board poster commented: "Corsi is pushing his abiotic oil agenda. He keeps repeating the canard that oil comes from dinosaurs. NOBODY BELIEVES THAT!" This prompted a response with a correction and an objection: "I suppose you meant to say 'the canard that oil does NOT come from dinosaurs and ancient flora debris'? That's the reason why we call oil a fossil fuel." Even better yet was this: "Who says that oil came from 'dinosaurs and ancient forests'? What a moron."
Interestingly, many critics seem ready to give up the "Fossil-Fuel" theory of oil's origin, as long as they can continue to advance the "Peak-Production" theory. Regardless where the oil comes from, this particular type of critic argues, we are still running out. This line of analysis misses a key point of the abiotic, deep-Earth theory of oil's origin. If oil is naturally produced within the Earth's mantle, oil may well be a renewable resource.
Then, there were some abusive ad hominem attacks, as expected in this heavily charged political environment in which differences have become polarized. Some posters argue that as a "discredited" co-author of "Unfit for Command: Swift Boat Veterans Speak Out Against John Kerry," nothing I write is credible, regardless of how well documented or argued. Here are a couple of examples. "This guy was also co-author of a smear book against John Kerry by the Swift Boat liars ... highly credible!" Or, again: "This man is an architect of the Kerry swift boat smear, so I am unconvinced of his ability or desire to maintain a dispassionate and analytic stance with respect to this topic." Evidently, there are still many who do not accept that John Kerry lost the presidential election of 2004, as there remain many who refuse to accept that Al Gore lost in 2000.
In the final analysis, many on the political Left appear to have gravitated to embrace "Peak-Oil" theories because the argument that we are running out of oil fits in with their overall pattern of leftist political beliefs. Spend any time on the peak-oil bulletin boards and you will find many comments from posters who appear happy at the prospect we may be running out of oil.
Underlying their enthusiasm for "peak oil" is an anti-oil, anti-business attitude that feels our advanced capitalist society is "bad" or "wrong," wasteful of the Earth's valuable natural resources in the pursuit of a materialistic, lazy lifestyle. Posters of this disposition simply want to dismiss any other theory without serious consideration. Here's how one poster summed up that attitude, "Ugh, more abiotic oil crap ..." The ellipsis typically was not followed up by rational argument. Evidently, the poster felt the "Peak-Oil" thesis was just too obvious or well-established to be in need of defense.
No question. The strategic moves are getting bigger.
Solar cells are for satellites. The last I heard, it costs more to make a solar cell that to buy the energy to make it.
The "Peak Oil" hypothesis does not say we will "run out of oil" in the foreseeable future. It simply says that new discoveries will at some discrete point in time fail to match consumption increases, resulting in a more or less permanent acceleration in the increase of the price.
Actually, nothing could be further from the truth. My dad was an investigator for the Federal Trade Commission during the "oil embargo" of the 80s. He was assigned to find out what was really going on and what he discovered will shock you. He found oil storage tanks full to over flowing while people waited in long lines to buy their 10 gallons of gas. He discovered oil tankers loaded to the gunwales with oil parked just over the horizon where they couldn't be seen, because there was no place to put the oil.
Draw your own conclusions.
We've already got the permanent acceleration, though. You don't need to wait until the production begins to decline.
20 years later and it is still $5 a watt. The solar cells were supposed to be getting cheaper, like 5 cents a watt or something. Wouldn't be hard to choose to cover the house with those and have the power grid buy your excess electricity.
That reminds me of Julian Simon's bet with Paul Ehrlich in 1980. Ehrlich had been going on and on about how overpopulation was causing us to run out of resources. Simon bet Ehrlich that most commodities would drop in price not rise and challenged him to pick five items that he thought would become scarcer. Simon won the bet.
That's a good question. I suspect that high prices aren't the only thing that can cause a lower demand. Probably people got sick of waiting in line and they found other things to do -- like staying home instead of going to the movies.
I cannot fathom why people have such a problem with this. Isn't it logical that oil companies are going to be reluctant to sell their product at a loss? Sure, they might have access to a limited supply of cheap crude with long term contracts. But what would be their incentive to buy more expensive oil on the spot market so that the supply equals the demand?
Price controls are either mischievous or they are unnecessary. If the controlled price is above the market price it has no effect. If it is below the market price it creates shortages.
I thought the Earth's core was made up of iron and maybe nickel as well. When did the thinking on the core's composition change?
Of course I can't prove my theory is correct - although it makes sense from first principles i.e. that if you cap prices you disincentive suppliers.
But - your amazement at two branches of government working at cross purposes - surely this has happened more times than either of us can count. I have absolutely no doubt that you could have one branch of government impelmenting price controls while another branch is investigating market disruptions.
In any case if my explanation isn't the correct one then how else to explain your father's observation?
Bingo. It amazes me how many potential ulcers await development on account of so much worrying by some people...much ado about nothing. Hi Tech will save the day.
We spend more money on bottled water than gas. I go to the carry out & pick up about 16 oz of water for about $1.19. That would make that water about $9.52/gallon (if I'm doing my math right)!
orived = proved
Your points are all good ones and far be it from me to say which explanation is the correct one - few points however.
1. Correct me if I'm wrong but the strategic petroleum reserve wasn't created until later on - I want to say around the time of the first Gulf war.
2. The argument that if the oil companies were reluctant to sell *any* of their product at artificially low prices then therefore they would be reluctant to sell *all* of their product at artificially low prices just doesn't make any sense to me. They have to calculate the marginal costs and marginal benefits for each unit of product that they either sell or hold back and (at least in theory) wherever their marginal utility is maximized, then that's how much they would sell. Marginal costs would have to include political costs and political calculations as well as purely financial ones. And all of this assumes perfect wisdom on the part of the oil execs who can't be acting in *complete* collusion. Rarely in business do you see perfect wisdom, perfect collusion, or all or none solutions. That argument for me, that if the prices were artifically low that no oil would be sold just seems absurd.
3. No matter how well the FTC was run at that time, two branches of the government working at cross purposes still seems perfectly reasonable to me. I don't even know that it was the FTC that imposed the Nixonian wage and price controls or some other agency (a litttle research would resolve that problem I'm sure).
4. It could be that there is some truth to both of our conclusions - it's not clear to me that they are really that mutually exclusive - the wage and price controls could have been a factor in the oil company's behavior just as your contention that they were trying to gin up a sense of crisis and make OPEC a political pinata.
Great discussion - seems like there has not been enough of this sort of thing on FR lately.
Kuwait has 10% of proven worlds oil reserves. They just announced that their largest field is now pumping only 1.7, down from 2.0 million barrels a day. The field is rapidly running down.
Chevron announced last year that their proven reserves where 20% overstated.
The hand writing is on the wall..
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