In a recent editorial from Investor’s Business Daily, they ask,
If the world is running out of oil, why do we keep finding more of it?
This quote is obviously a reference to peak oil, which has received a boost in popularity because the top economist at the International Energy Agency insists that we’re going to reach the point of no return a decade sooner than most previous predictions. The problem, I think, stems from a misreading of history.
The Peak Oil Theory traces its origins to geophysicist M. King Hubbert, who was specifically looking at oil within the United States. For the most part, he was correct about the production of oil within a given field or region, there is a bell shaped path. But as this science went from the lab to the public, a good deal of contextual information was left out. As noted on this website about peak oil,
In this regard, the ramifications of Peak Oil for our civilization are similar to the ramifications of dehydration for the human body.
But what is missed by those that are filled with paranoia about peak oil is the role of technology (and also a good dose of economics).
Technology, believe it or not, has taken a giant leap forward since those first models. Oil that was once out of reach at 20-30 dollars a barrel, now looks appetizing. Capture rates have also gone up. But advances have not just been made in drilling.
Drilling technology has advanced to the point where offshore rigs can take the full force of Category 5 hurricanes and spill barely a drop of crude.
In other words, the risk of obtaining this oil in terms of environmental damage has gone down. Thus, the overall costs to society have also taken a dive. Regardless, even if we do take production as a static or declining number, we have to assume no one is going to try to develop a substitute for an commodity that, in the US alone, is worth 1.4 trillion dollars a year. In a world based on profit incentives, its foolish to think we will not switch to some other more efficient substitute when oil gets too costly.
Moral of the story to peak oil paranoids: don’t believe everything you think.