Thursday, February 11, 2010

Peak Oil Doom Gains Market Share as Climate Catastrophe Doom Loses Support

Climate catastrophe doom has lost credibility over the past several weeks, as rapid-fire revelations of misconduct and blatant deception at the IPCC, the UEA's CRU, NASA GISS, and other climate institutions, have come to light. But people need some kind of doom to cling to, so Peak Oil DOOM! appears to be taking up some of the slack. But is Peak Oil DOOM! any more credible than carbon hysteria doom?

Brian Wang points out that Canadian oil sands are on a steep upward trajectory. He also points to substantial new production from Iraq, Brazil, and the US -- if the price of oil remains above $70 a barrel.

Here we find documentation for substantial new production from Iraq, Brazil, Angola, Saudi Arabia, Canada, and Africa's west coast (excluding Nigeria) amounting to 18 million barrels / day in new production by 2020. That projection also assumes that the price of oil will stay above $70 a barrel. In fact, if the price of oil rises even more, you can expect greater supplies to appear "as if by magic", or some invisible hand.

We may be "running into oil" rather than running out of oil.
In 1971, the demand for oil was at 49.4 billion barrels per year [??AF: million barrels per day?] and world reserves were estimated to hold 521 billion barrels, according to the US department of energy. According to the theories of the oil pessimists, this would mean that the world would be out of oil in a little more than a decade. Instead of facing doom in the 1980s as the depletionists predicted, the amount of oil in reserves increased to approximately 700 billion barrels as demand increased. Since 1971, when reserves held 521 billion barrels, the world has consumed 900 billion barrels of oil, and today, reserves are currently at an estimated 1.36 trillion barrels.

As the petroleum geologist Peter R Odell put it, “if anything, the world is running into oil”. Just look at last week’s discovery of oil in Dubai. Estimating that only 1.5 per cent of the Earth’s total physical resource base has been used since 1860, the Intergovernmental Panel on Climate Change (IPCC) declared that since fossil fuels are in abundance, they would not impose limits on carbon emissions during the 21st century.

Doomers tend to underestimate the flexibility on both the supply side and the demand side for oil. This betrays a basic ignorance of economics. "How can this be?", you may ask, "since some peak oil celebrities are economists themselves?" It is quite easy. Economics is a very broad discipline, and different economists tend to specialise in narrow fields. In addition, different "schools" of economics (similar to different schools of philosophy or any other speculative field) tend to include and exclude various basic common-sense economic ideas that any market stall proprietor would understand instinctively.

Hotelling's law of substitution, and the inherent flexibility of supply and demand -- for everything except breathing air, drinking water, and food -- are basic concepts that are often forgotten by persons considering themselves more sophisticated.

Oil is not necessary for high tech civilisation -- energy is. Julian Simon taught the doomsters of the last century not to bet on scarcity. But each new generation of doomers must be taught the lesson again.

We will always have war -- and along with war comes famine, pestilence, and all manner of suffering. But in the larger world -- as long as a benign hegemony exists such as we have had since 1945 -- technological progress will continue to unfold. It is that technological progress that allows air to grow cleaner (outside of India and China), water to grow cleaner (outside of India, China, and the third world), and forests to grow larger and lusher (outside of the third world).

Should China become the world hegemon, expect Chinese values of environmental protection to be administered worldwide. Those values are even worse than the devastation seen under the USSR across Russia, Central Asia, and Eastern Europe. Under Russian or Chinese hegemony, environmental doom would be a given. But that is not what we have now.

Choose your dooms carefully, because they determine how you will spend your time and resources. Try not to waste them.



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