Thursday, October 20, 2011

Peak Oil Doom and Collapse is a Bad Bet

In the 2008 collapse of commodities prices, many true believers in peak oil doom lost a lot of money -- for themselves or for other people who had entrusted the doomers with their hard-earned money. Is the same thing about to happen again, and again?
...we are led to believe that the world's fossil fuel resources are finite and known, and that the peak of production has either been already met or will come soon. Gas, it is assumed, will follow oil. Put simply, we are going to run out of fossil fuels, and they will therefore get (much) more expensive. For the peak oil advocates, the convenient truth is that de-carbonisation via renewables and nuclear is not only good for the climate, but sound economics too. Almost all of this is nonsense – and some of it is dangerous nonsense. There is enough oil and gas (and coal too) to fry the planet several times over. The problem is there may be too much fossil fuel, not too little, and that fossil fuel prices might be too low, not too high. _Guardian
One cannot exploit a finite resource indefinitely. Eventually one will reach the end of economical exploitation, and if one has not prepared for that eventuality, things can become "touch and go."
It’s intuitively obvious that exploiting a finite resource to exhaustion with rising population and wealth will lead to a production peak followed by a decline and rising prices, so when people scoff at “Peak Oil”, it isn’t the principle they dismiss, rather, the simplistic, doom-laden, outcomes campaigners infer from it and spin for their causes.

We really don’t know how difficult “Peak Oil” will be or when it will occur since there’s plenty of oil, the issue is cost and we can only guess where technology will take us in the next 50, never mind 500 years. Too often, we imagine technology will stand still; for example, just as coal replaced wood during the Industrial Revolution, oil demand may be replaced by, say, gas or nuclear energy; on the other hand, we will discover how to produce oil more cheaply and use it more efficiently. _ShetlandTimes
As the more intelligent peak oil monkeys are beginning to realise, oil pricing today is not mainly about geological supply, rather it is mainly about demand economics and political choices. Unfortunately, they are going too far, and blaming all the world's economic problems on oil prices -- mistaking causes for effects and effects for causes. But what can one expect when they are so emotionally dependent upon the imminent occurence of global doom and collapse?

The oil is there, and the price that must be paid for it is determined by sheikhs, presidents, and revolutionaries -- as well as renegade traders and corrupt and delinquent national oil companies.

Those who bet on monotonically increasing prices for oil will lose every time. Just when they are sure that "this time it is different," something will happen to bring prices crashing down. If they only lose their own money, one might consider it poetic justice. But when they lose the money of trusting investors, there is little justice involved.



Blogger Scott said...

An interesting article from the Guardian, given that most of its journalists, especially George Monbiot are the most pessimistic doomsayer type on issues of climate change and peak oil. All you have to do is look at the comments to appreciate that most of the Guardian readership are like it's journalists - negative. Although I think most of their thinking is clouded in left-wing and environmental ideology.

4:31 AM  

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