Peak-a-boo

by Russ Roberts on March 1, 2006

in Energy

Robert Semple in this New York Times story ($) raises the supposedly scary coming of “peak oil:”

The Age of Oil — 100 plus years of astonishing economic growth made possible by cheap, abundant oil — could be ending without our really being aware of it. Oil is a finite commodity. At some point even the vast reservoirs of Saudi Arabia will run dry. But before that happens there will come a day when oil production “peaks,” when demand overtakes supply (and never looks back), resulting in large and possibly catastrophic price increases that could make today’s $60-a-barrel oil look like chump change. Unless, of course, we begin to develop substitutes for oil. Or begin to live more abstemiously. Or both. The concept of peak oil has not been widely written about. But people are talking about it now. It deserves a careful look — largely because it is almost certainly correct.

My favorite part:

demand overtakes supply (and never looks back), resulting in large and possibly catastrophic price increases that could make today’s $60-a-barrel oil look like chump change.

How does demand “overtake” supply?  How does demand look back or never look back?  And I’m glad he hedged his bets with that “almost certainly.”  The doom-and-gloomers don’t seem to understand that the demand they’re talking about is overtaking supply right now and yesterday and the day before.  The only thing that keeps demand from running forward without looking back is price.  In the absence of price, there’s never enough to go around. If the price were zero, if there were no charge for gasoline, say, then people would use a lot more than they do now.  They would drive different cars, drive them more often and live farther from work than they otherwise would.  We’d have different kinds of cars on the market as well.

But gasoline’s price isn’t zero.  It’s positive.  And it isn’t randomly positive or set arbitrarily.  As people try (as they always will) to buy more of something they like than there is of that stuff available, the price goes up and rations expansive demand relative to finite supply.

This is true when most of the earth’s oil is under ground undiscovered and unrefined.  It will still be true when most of the earth’s oil has already been discovered and refined and we are in the allegedly frightening history of oil when reserves are falling.  There’s no reason for price to spike suddenly because some arbitrary number of reserves are left relative to demand.

It’s a little more complicated than this because the supply of oil isn’t random.  It responds to price today and to price tomorrow.  And it’s also more complicated because Saudi Arabia and a few others can control the flow coming out of the tap. But none of those complications change the irrelevancy of the peak oil concept, the idea that something changes fundamentally when reserves start to diminish.

The Times article goes on and on.  Even under the rosiest of scenarios, we’ll allegedly face a crisis in 2037.  Seems far off but we’ve barely enough time, according to Semple.  Catastrophe looms:

This is going to take serious investment. It will also take real leadership, which may be the biggest missing ingredient of all.

A couple of years ago, David Goodstein, vice provost of the California Institute of Technology, published a slim, intelligent, and spry little book called “Out of Gas: The End of the Age of Oil.” A Hubbertian [a believer that the peak oil problem is imminent—RR] at heart, he nevertheless thinks we have time to avoid the worst, but only if we stop deluding ourselves. He also knows, though, that human nature does not easily leap to a challenge that seems always to be receding, and for that reason he does not think that we will really act until the wave crashes down upon us. “Our present national and international leadership is reluctant even to acknowledge that there is a problem,” he writes. “The crisis will occur, and it will be painful. The best we can realistically hope for is that when it happens, it will serve as a wakeup call, and will not so badly undermine our strength that we are unable to take the giant steps that are needed.”

Never mind that these kinds of books that are meant to frighten the citizenry are also meant to increase the demand for the services of the author.  Even more disturbing is that the worriers seem oblivious to history.  Don’t they know that “experts” have been warning us of the peril of  running out of oil for decades?  Don’t they know that technology and prices have solved the alleged problems with any central leadership or design?

I prefer prices to “real leadership.”

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Dennis March 1, 2006 at 1:30 am

In Daniel Yergin's book "The Prize: The Epic Quest for Oil, Money & Power", it mentions the first "no oil in ten years" scare was immediately after World War I. The oil industry was actually on the eve of overproduction that sent prices so low, the big oil companies were afraid they'd go bankrupt!

Tim Worstall March 1, 2006 at 5:54 am

Earlier than that. I believe the first glut was actually in Pennsylvania in the 1870s.

Axel Kassel March 1, 2006 at 6:03 am

The oil-gloomers overlook the potential of giant ocean pens for raising readily harpoonable sperm whales, who are drippy with oil. If that's too controversial, let's retreat to the more basic observation that the supply of oil isn't finite. You can make it from coal, kitchen scraps, or Al Gore if the demand is great enough to cover the conversion costs.

Tom March 1, 2006 at 9:35 am

"or Al Gore if the demand is great enough"

I'll chip in!

Matt March 1, 2006 at 10:18 am

Thomas Friedman writes also in today's NYT ($) and suggests that a massive gas tax hike (to bring per gallon costs to $3.50 to $4.00) is needed because that is the only way to force the consumer to demand alternative energy. Mr. Semple's article suggests gasoline at $4 plus per gallon is going to happen anyway as demand eclipses supply (I don't know what that means either). So I guess Friedman doesn't have to worry about going through the trouble of implementing a gas tax as we are going to run out of oil per the "oil peak."

More fun with Friedman:

In the same article, he mentions the new NYT/CBS News poll that says 60% of Americans disapprove of Bush's handling of our energy crisis (27% approved). I'm just glad I found out that we're having and energy "crisis."

Maybe we can include a spot on this blog about asinine polls and the asinine answers people give to asinine questions.

Joel March 1, 2006 at 11:10 am

Thomas Gold was on the right track. Worth reading for an alternative view to the origins of oil.

http://www.pubmedcentral.nih.gov/articlerender.fcgi?artid=49434

Keith March 1, 2006 at 11:22 am

I wonder if Mr. Semple feels the same way about the prognosis for social security as he does for oil? Somehow I'll bet he thinks its different.

Roy Stogner March 1, 2006 at 1:01 pm

There's no reason for price to spike suddenly because some arbitrary number of reserves are left relative to demand.

No, but there may be a reason for price to spike suddenly because some arbitrary production rate peaks while the demand curve keeps growing. The demand curve for oil is very flat for a lot of people. That's one reason why a little post-hurricane panic and a few supply delays all it took to push US gas prices up 40% – because no matter how high gas prices get, people have to get to work or quit, and businesses have to get their supplies or fold.

Robert March 1, 2006 at 2:12 pm

Why I don't worry about "running out" of oil anytime soon (though the suggestion that Congress has to be involved is less encouraging).

http://deseretnews.com/dn/view/0,1249,600125803,00.html

David March 1, 2006 at 4:46 pm

I agree wholeheartedly with your conclusions. These hysteric cries ignore the critical role of prices. However, I'm not sure its fair to say that because the predictions of experts have been wrong in the past that they are wrong in the present. That part seems to be specious reasoning.

Stuart Staniford March 1, 2006 at 5:41 pm

You guys don't seem to know much about the issues.

For example, one thing you don't address is that in the past the income elasticity of oil has been far higher than the price elasticity of oil. Therefore, while it's certainly true that price will cause demand to adjust to available supply, it may take a lot of price change to do it, and it's likely to have implications for economic growth – significant oil shocks in the past have always caused recessions. Therefore, there is certainly a case to be answered as to what would be the effect on growth of an ongoing decline in the supply of oil.

The fact that people have mispredicted the date of the peak in the past is, while cautionary, not a logical argument that peak oil will never come. Obviously it has to come some day since the amount of oil is necessarily finite. So then the question becomes one of understanding why mistakes were made in the past and how do we do better. You cannot seriously be taking the position that oil production will increase for ever?

Of course, there are substitutes for oil. The question is how much more investment do they require compared to drilling for oil. The leading alternatives (eg tar sands) are massively more capital intensive for equivalent production, suggesting that it will be difficult to ramp them to the levels of supply we enjoy from conventional oil today.

Stuart Staniford March 1, 2006 at 5:48 pm

Oh – on the abiotic (Thomas Gold) stuff. Go do some research and name the largest oil company that finds oil using that theory. Best of luck.

David Mathews March 1, 2006 at 6:01 pm

Does the author of the above article realize that we are living on a planet with 6.5 billion people, the vast majority of which do not enjoy the standard of living which presently exist in the United States of America, and a large portion of that group (approximately two billion) living in extreme poverty as they earn less than $2 a day in income?

When people say "everything is going to be ok" all that they are really saying is "everything is going to be ok with us." Millions of people are allowed to die while the United States enjoys prosperity.

Does the author not realize that the only reason why countries are able to export oil is because their populations are impoverished and often oppressed? If the Middle East enjoyed American-style prosperity they would consume all of their own oil … and probably need to import oil, as well.

The poor people of the world are becoming fed up with the United States. It is only a matter of time before these oppressed people rebel from their oppressors (and, yes, the United States of America does oppress and exploit these people). When they cut off our supplies of oil we will have to learn how to live with less … perhaps a whole lot less.

The United States of America lacks discretion and discipline. Have you noticed how so many Americans are becoming so very obese? Our unhealthy habits and addictions are destroying the United States. Maybe you will live long enough to see the end of this great but terribly misguided country. I do hope so …

deb March 1, 2006 at 6:05 pm

RR: But gasoline's price isn't zero. It's positive. And it isn't randomly positive or set arbitrarily. As people try (as they always will) to buy more of something they like than there is of that stuff available, the price goes up and rations expansive demand relative to finite supply.

David: I agree wholeheartedly with your conclusions. These hysteric cries ignore the critical role of prices.

I guess you guys are right – the people writing about peak oil must have missed the episodes of Saturday Night Live where Father Guido Sarducci explained the law of supply anda demand. Good thing you guys are here to 'splain it to them!

Agric March 1, 2006 at 6:33 pm

It's so refreshing to see the myth of peak oil debunked using sound economic arguments.

The wise among us know that the fundamental science of economics underlies the superstructure of all the 'lesser' sciences. The price theory of plate tectonics is one excellent example, money supply theory of oil reservoir porosity another.

I've heard that Exxon might be recruiting vast numbers of economists to explore for oil since the geologists are doing such a poor job of it.

NathanB March 1, 2006 at 6:40 pm

I'm not an economist, but is there really such a thing as an inelastic good as long as other goods are elastic?

In the long term we'll have some combination of previously undiscovered oil fields, alternative fuels, and more efficient vehicles. In the short term we'll take fewer car trips, telecommute more, and hold off on that shiny iPod or HDTV.

Anyway, for all you peak oilers, why don't you put your money where your mouth is and stockpile barrels of crude in your backyard (or invest in oil futures or whatever)?

Henri Hein March 1, 2006 at 7:06 pm

Nobody seem to notice the funny comments from David Matthews.

Assuming the comments were meant in earnest:

"Does the author not realize that the only reason why countries are able to export oil is because their populations are impoverished and often oppressed?"

Does David Matthews not realize that Canada and Norway export a lot of oil? Are the Canadians and Norwegians impoverished and oppressed?

"Have you noticed how so many Americans are becoming so very obese?"

Even if true, this is related to oil and energy exactly how?

David Mathews March 1, 2006 at 7:23 pm

Hello Henri,

Canada & Norway are two wealthy countries exporting oil. Have you ever heard of Nigeria, Mexico, Indonesia, Iraq, Saudi Arabia? I would think that two exceptions do not diminish the extraordinary suffering which is occurring in these other countries.

American obesity relates to oil and energy … all evidences of excess and a lack of self restraint among Americans.

Americans are obese & becoming more obese every day. When the supply of oil is limited either by geopolitical events, natural limits, or another hurricane … all of these obese Americans are going to have to walk to the grocery store, McDonald's and the mall. They won't enjoy walking because previously their only experience of that activity was limited to the short walk between the sofa and the fridge.

Imagine the immense suffering of Obese America when they cannot any longer supply their stomach with thousands of calories of junk food without having to expend thousands of calories walking to the nearest fast food restaurant …

David Mathews March 1, 2006 at 7:37 pm

Hello Everyone,

If there is anybody here who really believes that oil is beneficial to humankind, I encourage you all to spend a year or so in Nigeria's Delta.

Live with the impoverished people who are dying for the sake of America's fleet of SUVs. Drink water from their polluted rivers, breathe their polluted air, dodge the bullets shot both by the oppressed and the oppressors, enjoy the perpetual light of natural gas flares …

Then return to America and complain when the price of gasoline rises by 10 cents a gallon, "those oil corporations are evil!"

Yes, the oil corporations are evil … but not because of how expensive it has become to fill up the tank of your SUVs. The oil industry is actively killing people all over the globe through its support of oppressive and violent regimes which routinely violate human rights (such as, for example, the present leadership of the United States. Care to contemplate what is happening at Gitmo?).

The oil industry also pollutes the Earth on a massive scale. Global warming, oil slicks in the ocean, smog in Los Angeles, the scourge of Development with its addiction to asphalt and consumerism … the list of sins is large and impressive.

When all is said and done, oil is paving the path to humankind's extinction. Soon enough — a day in the not-to-distant future — humankind will cease to exist on the Earth (and everywhere else in the Universe).

The Earth existed for four billion years without humankind. It will likely exist for another four billion years after humans are gone. By and large, I'd say that humans have made a terrible mess of the Earth & demonstrated why violent animals should never acquire the ability to make tools or harness energy.

It is a pity that humans have wasted this opportunity provided by God and nature. God recognizes that He has made a terrible mistake & He will never again repeat this error.

Henri Hein March 1, 2006 at 9:25 pm

David,

There are countries such as Canada and Norway that produce large amounts of oil, and remain wealthy and free.

Then there are countries such as North Korea and Tunisia that have no oil, where populations suffer from poverty and oppression.

You thesis that oil causes poverty and oppression does not stand up to a 5-second emperical scrutiny.

Chris Moore March 1, 2006 at 9:33 pm

David Mathews:
It is not the oil (or the oil companies for that matter) that oppress all those people you speak of — it is the (generally speaking) tyrants in power. One may argue that the money generated from oil is what funds the oppression, but then what about all of the other oppressive African nations without oil reserves, or for that matter North Korea?

"Millions of people are allowed to die while the United States enjoys prosperity. "

I sure hope you support off-shoring and free trade…

"When they cut off our supplies of oil we will have to learn how to live with less … perhaps a whole lot less."

Actually, Colorado has more than enough Oil shale(http://en.wikipedia.org/wiki/Oil_shale) to satisfy America's oil needs for the foreseeable future, just at say ~$80/barrel. So yes gas would go up, but we're talking about prices going up ~30% — not: "Imagine the immense suffering of Obese America when they cannot any longer supply their stomach with thousands of calories of junk food without having to expend thousands of calories walking to the nearest fast food restaurant …"

David Mathews March 1, 2006 at 9:42 pm

Hello Henri,

Perhaps you are right … Nigeria, Indonesia, Mexico, Venezuela, Saudi Arabia, Iran, Iraq & and a lot of other oil exporting countries are impoverished and oppressed by their own poor luck, bad leadership and unfortunate history.

But I have extreme doubts about that opinion … this sort of argument requires a lot more time and space that this sort of format allows.

What is certain is that the oil industry has committed all sorts of crimes in Nigeria. The Nigerians, certainly, have suffered greatly from the oil curse. They are suffering and dying on America's behalf.

David Mathews March 1, 2006 at 9:57 pm

Hello Chris,

The tyrants who oppress the impoverished citizens of oil-exporting countries would not possess power without the complicity of the oil companies & Western governments. Haven't you heard of all the support that Saddam Hussein got from the U.S.A. and Britain prior to the invastion of Kuwait? There are numerous other examples of such behavior …

As to oil shale's ability to save Obese America from the curse of having to walk, I'd say that you are seeking after a mirage. You can dream all you want of some solution to America's oil problem, but soon enough reality catches up with and thorough thrashes that dream.

The United States of America — home of the Obese SUV-driving American — is a country very much in decline. The U.S. of A. has trampled on a whole lot of people on the way up. There's hell to pay on the way down.

However, if the oil shale really does solve the problem … there are much greater threats that humankind faces which will ultimately drive the Homo sapiens to extinction. I'd say that it is extremely unlikely that humans will exist on the Earth ten thousand years from now.

Extinction is the only just punishment for a species which is so violently destructive as to threaten the very survival of its own hospitable planet. The Earth doesn't need humankind, but humans are absolutely dependant upon the Earth.

Joel Bernstein March 1, 2006 at 11:05 pm

David: I'm not sure if I exactly understand your argument. One minute, opressed third world people don't have enough wealth, and the next, rich Americans have too much. Is there some ideal amount of wealth that a person should have? How is that quantity determined?

For the record, I do not believe that *anyone* on this planet is as wealthy as they should be.

Poverty is not "created" by capitalism. Poverty is the natural state of man. We are born with nothing, and only our ability to reason and *create* wealth can take us beyond that state of poverty, and only in a free society are people allowed to properly exercise these abilities.

The government of the United States has, from time to time, formed alliances which have led to the distruction of the freedoms local citizens need to effectively create the wealth they need to survive and prosper. I don't think a single person reading this blog would disagree that these actions were wrong and indefensible.

At the same time, blaming all third-world poverty on the United States, because the US is wealthy, makes as little sense as blaming my personal financial troubles on Bill Gates. The problem here is *poverty*, not the difference between poverty and wealth.

If we ever run out of oil, it will not happen overnight; it'll happen gradually over the next 50 to 100 years. Inflation-adjusted gas prices will eventually reach a minimum, and start going up. Eventually, the price of a mile's worth of gas will be higher than the price of a mile's worth of Transportation Method X, and we'll switch over.

And finally, I seriously doubt that *anyone* here is qualified to make predictions about the probable state of humanity 10000 years from now. The Earth doesn't "need" us because the Earth is an inanimate chunk of rock. *People* have needs; rocks do not.

David Mathews March 2, 2006 at 12:12 am

Hello Joel,

The impoverished people of the Third World do not suffer from a lack of wealth, they are lacking the most basic necessities of life while suffering oppression and living under the perpetual threat of violence. I am not in favor of these people becoming wealthy — wealth is an absolutely futile distraction of the most shallow of materialistic souls — but would prefer that these people not suffer oppression, exploitation, or violence.

The rich, obese Americans most certainly do possess too much wealth. Look at the frivolous futility of their lives as they desperately seek for some new distraction to supply a transient sort of happiness. Americans suffer from an overabundance of material possessions combined with an empty insatiable appetite. People caught up in this disease often become obese because they cannot say "no" to the desires of their stomach, and then they often suffer poverty because their obsessive-compulsive consumerism leads them to spend trillions of dollars more than they actually earn.

As to the question of the proper amount of wealth: I say that the ideal state is for humans to possess nothing, want nothing, need nothing … and lack nothing. If humans were wise we never would have ceased living like the animals.

As you say: "Poverty is the natural state of man. We are born with nothing, and only our ability to reason and *create* wealth can take us beyond that state of poverty, and only in a free society are people allowed to properly exercise these abilities."

I can assure you — as a person who spends a lot of time observing animals — their poverty is much better than any & all forms of human wealth. For example, compare the lifestyle of the pelicans at the beach and the angry chain-smoking Infiniti QX-56 driver who cannot possibly endure a five second wait at the McDonald's counter.

I don't blame Third World poverty on the United States. I do blame the United States for the oppression, exploitation and robbery which it routinely commits against the impoverished people of the Third World either directly (through government actions) or indirectly (through the amoral activities of American corporations). America's committed many sins and continues to do so today.

You mention some price mechanism which will solve the oil depletion problem. What you neglect to mention is that millions of people will die while the SUV drivers continue to fill their tanks with gasoline that they can afford (but those impoverished people cannot). The American consumer is concerned about himself/herself only; the consumer could care less about how other people suffer on his/her behalf.

I do believe that I am qaulified to predict the state of humanity 10,000 years from now. I have already stated my prediction: Extinct. Completely, totally extinct and forgotten forever. If you want to dispute this conclusion you will just have to exist for another ten thousand years. If you are unable to do so, you'll just have to take my prediction on faith alone.

You are seriously mistaken when you say that "the Earth is an inanimate chunk of rock." No, no, not at all. Mars in an inanmate chunk of rock, the moon is an inanimate chunk of rock. The Earth, however, is the only chunk of real estate hospitable to life within the nearest billion billion miles, and the only chunk of real estate hospitable to human life in the entire Universe.

Humans are very busy destroying the Earth … and like fools not realizing that when you destroy your own home you also destroy yourself. Humans are behaving in a recklessly suicidal manner.

What is the inevitable consequence of recklessly destructive, suicidal behavior by a species?

Extinction. The Homo sapiens are going to become extinct. This conclusion is certain, inescapable and just.

Thaddeus McMonster March 2, 2006 at 12:52 am

I for one agree with David, wealth is a horrible horrible thing. And David, I want to help you, you, I assume since you have a computer (or at least access to a computer) and an internet connection, that you must have some wealth left.

To help you get rid of this wealth, which is truly burdening your soul, you should give me five dollars.

Just send a check or cash to

Garrett Logan
151 Terrace St Apt #3
Boston MA, 02120

Afterwards, in order to further humanities "just" extinction, you should kill yourself.

David Matthews Clone March 2, 2006 at 1:12 am

"Extinction is the only just punishment for a species which is so violently destructive as to threaten the very survival of its own hospitable planet. The Earth doesn't need humankind, but humans are absolutely dependant upon the Earth."

Kill yourself then.

"If humans were wise we never would have ceased living like the animals."

Scratch that last comment. Why don't you just go to the forests in the Amazon, Africa, or Pacific Rim and live away your life. Talk is cheap.

"I do believe that I am qaulified to predict the state of humanity 10,000 years from now."

You are delusional. How about 100 years from now. 500? 1000? Hmmmm… maybe you are just throwing a wild guess to the wind and 10,000 years is a long enough time that you feel okay with it. I'll go you one step further: in 10,000 years humanity will be alive and well (in your mind raping and pillaging) hundreds of planets in the galaxy. Of course I'm just pulling that out of my A**, just like you are with your "prediction".

"If you want to dispute this conclusion you will just have to exist for another ten thousand years."

Please tell me you're joking – otherwise I'm speechless – oh wait, I just thought of another way: We'll build a time machine, go forward in time and find out you're full of s**t.

"The Earth, however, is the only chunk of real estate hospitable to life within the nearest billion billion miles"

Actually there is quite a bit of debate about Europa and whether it's oceans contain life (Jupiter is ~400 million miles).

"What is the inevitable consequence of recklessly destructive, suicidal behavior by a species?"

We move on to another planet, see above ;) .

"Extinction. The Homo sapiens are going to become extinct. This conclusion is certain, inescapable and just."

I think that sums up your worldview wonderfully. You see humans like Agent Smith of the matrix: "I'd like to share a revelation that I've had during my time here. It came to me when I tried to classify your species. I realized that you're not actually mammals. Every mammal on this planet instinctively develops a natural equilibrium with the surrounding environment, but you humans do not. You move to an area, and you multiply, and multiply, until every natural resource is consumed. The only way you can survive is to spread to another area. There is another organism on this planet that follows the same pattern. A virus. Human beings are a disease, a cancer of this planet, you are a plague, and we are the cure."

Hey – maybe you're right the robots we create to be even lazier are going to kill us all (or at least inslave us). By the way, I just picked out the truly crazy to debunk – pretty much every line you wrote could be torn to pieces.

Joel Bernstein March 2, 2006 at 1:14 am

"What you neglect to mention is that millions of people will die while the SUV drivers continue to fill their tanks with gasoline that they can afford (but those impoverished people cannot)."

I "neglected" to mention them because they have NOTHING TO DO WITH PEAK OIL.

"The impoverished people of the Third World do not suffer from a lack of wealth, they are lacking the most basic necessities of life"

If they had the ability to create wealth, they would be able to purchase the most basic necessities of life, as we do here. That they do not is an incredible tragedy.

"The rich, obese Americans most certainly do possess too much wealth. Look at the frivolous futility of their lives as they desperately seek for some new distraction to supply a transient sort of happiness. Americans suffer from an overabundance of material possessions combined with an empty insatiable appetite. People caught up in this disease often become obese because they cannot say "no" to the desires of their stomach, and then they often suffer poverty because their obsessive-compulsive consumerism leads them to spend trillions of dollars more than they actually earn."

What people voluntarily choose to do with their wealth is their own business, and the consequences of their choices are their own responsibility.

Repeating the same tired stereotypes of the fat lazy overstressed american isn't going to win you many arguments.

"I say that the ideal state is for humans to possess nothing, want nothing, need nothing … and lack nothing."

I say that the ideal state is for people to be able to freely choose a lifestyle that makes them happy, and pursue it.

If that involves renouncing worldly posessions and meditating, wonderful.

If it involves raising and loving a family, perfect.

If it involves nurturing their relationship with God, great.

If it involves riding around in an '83 Camaro while slurping down Big Macs and Coca Cola, that's just fine too.

"I don't blame Third World poverty on the United States. I do blame the United States for the oppression, exploitation and robbery which it routinely commits against the impoverished people of the Third World either directly (through government actions) or indirectly (through the amoral activities of American corporations). America's committed many sins and continues to do so today."

And, like I said, if you're looking for apologists for any of this stuff, you've come to the wrong web site; most of us are just as outraged as you on these issues.

Chris Moore March 2, 2006 at 1:26 am

David:

I recommend you read: "Global Furtune: The stumble and rise of world capitalism"

Though I doubt it will change your mind, at least it will give you a different viewpoint.

Russell Nelson March 2, 2006 at 2:02 am

There is a danger that politicians will harm the price system by restricting oil speculation. Speculation is what will push the price up long before we run out. Of course, politicians will say "Hey, we're not running out of oil — how come we're paying to much for it?" The answer is that the experts have looked, and believe that the remaining oil will be scarce enough to be that much more profitable in the future.

The fact that nobody personally believes strongly enough in peak oil to push the price up says volumes.

99 March 2, 2006 at 2:36 am

Sheesh! The guy sells millions and millions of CDs, hundreds of thousands of $85 concert tickets, and basically becomes, like, a zillionaire, and then he's got the nerve to complain that some people are too wealthy, and that we're all gonna go extinct. Talk about chutzpah. Dave, keep going on like that, and it's your music career that's gonna be extinct!

David Mathews March 2, 2006 at 7:28 am

Hello Joel,

"If they had the ability to create wealth, they would be able to purchase the most basic necessities of life, as we do here. That they do not is an incredible tragedy."

Now this is an interesting statement. Why do the impoverished people of the Third World lack an ability to create wealth — is it because there is not a local McDonald's or Wal-Mart where they could get a job?

Well … the reason why these people are poor is less significant that the realization that 6.5 billion people cannot possibly enjoy the prosperity of Americans. The Earth simply does not possess the natural resources sufficient to support that lifestyle.

For example, the United States' population of 300 million people consume 25% of the entire world's oil supply. What that means is that the remaining 75% of the oil supply must satisfy the needs of 6.2 billion people. Would you say that it is just for Americans to consume so much oil?

The concept of Peak Oil is relevant because at some point — perhaps soon, certainly soon — the world's daily output of oil will diminish. When this occurs, Americans will face a very difficult decision: Either voluntarily limit our own comsumption of oil, or maintain our lifestyle by seizing control over the world's remaining oil reserves.

If we choose the limit our consumption, Americans will in effect sacrifice their wealth and consumption; if the later course is taken, Americans will actively kill the citizens of oil-rich countries in order to maintain an immoral consumer lifestyle.

All the evidence indicates that America has already chosen the evil path. That's why so many Iraqi civilians are dying today; and that's why America has contemplated sending the marines to protect Nigeria's oil industry.

But this struggle is futile. The supply of oil is physically limited. By consuming so much, the world is hastening the day when the resource is exhausted. When that day comes … Americans will become impoverished and they will suffer the same sorts of tragedies which are common throughout the Third World.

Chris Moore March 2, 2006 at 9:52 am

David

"…soon — the world's daily output of oil will diminish. When this occurs, Americans will face a very difficult decision: Either voluntarily limit our own comsumption of oil, or maintain our lifestyle by seizing control over the world's remaining oil reserves."

No. This is the whole point of the blog post. As oil output diminishes, the price of oil will rise such that people (in a free market) will begin to choose alternatives — like driving a more fuel efficient car, living closer to work, using the bus/train, etc. If I recall, the amount of oil used fell in the early 80's (even as GDP was rising) due (arguably) to the high price of oil in the late 70's and the actions people took because of that.

And anyway, oil shale IS a very viable oil resource (the technology exists) that we have "plenty" of, it just takes more money to produce oil from it. Hence a higher oil price is needed to justify doing it. By plenty I of course mean enough to allow man to think of a better way to power our society.

"Well … the reason why these people are poor is less significant that the realization that 6.5 billion people cannot possibly enjoy the prosperity of Americans. The Earth simply does not possess the natural resources sufficient to support that lifestyle."

Maybe, maybe not. If the whole world was brought instantly to the US's prosperity, then yes, problems would arise. BUT, if this occured over, say, 100 years, then I see no reason for worry. Once again, it is because the price of all those scarce resources will go up and then the free market will FIND ANOTHER WAY.

Matt March 2, 2006 at 9:59 am

Mr. Mathews,

Your doomsaying is fine but take it somewhere else. If the "world" is going to be consumed by an oil induced blob of obesity and disaster then I guess we should all just go to the beach and wait. For the rest of us who disagree, we continue to follow and contribute to this blog for its insight and instruction and arguments into and about economics and the world at large. This isn't you so go away.

And by the way, you suggested that "God recognizes that He has made a terrible mistake." How smart are you to think God can make a mistake? In any case, thanks for telling me what God knows and what you know the world's going to be like in 10,000 years.

David Mathews March 2, 2006 at 10:13 am

Hello Chris,

"This is the whole point of the blog post. As oil output diminishes, the price of oil will rise such that people (in a free market) will begin to choose alternatives — like driving a more fuel efficient car, living closer to work, using the bus/train, etc."

The people who can afford these alternatives will choose them, the people who can afford gasoline at $7 a gallon will still drive their SUVs all over town, and the impoverished people of the world will just die. Don't you see … the free market is not free.

The free market will gladly allow the Malaysians to employ child labor in order to produce clothes cheap enough to make a profit at the low prices demanded by American retailers. The free market will gladly allow 11 million people to starve in Africa as long as America's food providers continue making a profit by compelling obese people to remain insatiably hungry. The free market is perfectly compatible with 125 million people living in abject poverty in Nigeria supplying cheap gasoline for the American public's profligate consumer.

"If the whole world was brought instantly to the US's prosperity, then yes, problems would arise. BUT, if this occured over, say, 100 years, then I see no reason for worry."

Ahem … really, now, do you believe that? America's present level of prosperity is only an illusion since we have spent about $10 trillion more than we have earned over the last several decades …

America cannot afford America's present level of prosperity. How then can 6.2 billion more people adopt this profligate and wasteful lifestyle?

If the poor people of OPEC were to begin consuming oil like Americans they would consume all of their own oil and have nothing to export. What impact would that have on America's standard of living?

Matt March 2, 2006 at 10:25 am

Mr. Mathews,

Again, you are just not contributing. Your arguments are the worst I've ever seen in a forum that supposes at least a high school education amongst its participants.

David Mathews March 2, 2006 at 10:26 am

Hello Matt,

"If the "world" is going to be consumed by an oil induced blob of obesity and disaster then I guess we should all just go to the beach and wait."

You really should go to the beach. I live in Florida & have seven different beaches within easy reach. Glorious sandy beaches filled with animals that are not addicted to consumption, wealth, accumulation of possessions, violence, warfare or any of the other vices which are so common among humans.

"And by the way, you suggested that "God recognizes that He has made a terrible mistake." How smart are you to think God can make a mistake?"

God said that He made a mistake in creating humankind a long time ago: "The Lord saw the wickedness of man was great on the earth, and that every intent of the thoughts of his heart was only evil continually. The Lord was sorry that He had made man on the earth, and He was grieved in His heart." (Genesis 6:5-6)

Since that time, humans have only become more violent and destructive. The world does not spend $1 trillion annually on the military because humans are a peaceful animal.

God decided that humankind was a mistake a long time ago. If God confesses His own mistakes, shouldn't humans follow that same example and acknowledge that in the last six thousand years we have thoroughly wasted an ideal opportunity to use these unique talents of the Homo sapiens in a wise and beneficial manner?

Don't deceive your own soul: Whether the economy is good this year or bad, humans are fast approaching our own extinction. Whether the price of gasoline is $5 a gallon or $1.50 a gallon, humankind has a bleak future on the Earth. Whether Iraq becomes a democracy or succumbs to perpetual civil war, the Homo sapiens are very near to the end of their era of dominance over the Earth.

The end is coming; the end is already here … but all is not lost, for the sun will rise again, and life will continue to flourish on the Earth long after the naked ape becomes extinct.

Matt March 2, 2006 at 10:49 am

OK, fine, you're right. The end is coming. Oil is bad. (Which, is some how correlated with obesity.) God makes mistakes. People are evil. And you win. Now shut the hell up and never come back to this site.

Robert March 2, 2006 at 10:54 am

Question: IF the shortage of oil is supposed to bring some difficult times ahead of us, like the article said will happen in 2037, why are the same people not demanding social security reform now, rather then later?

Robert

Chris Moore March 2, 2006 at 12:13 pm

"Glorious sandy beaches filled with animals that are not addicted to consumption, wealth, accumulation of possessions, violence, warfare or any of the other vices which are so common among humans."

Ummm… no. Animals in fact engage in a truly horrifying (to you I suppose) form of competition: win or die. When food or shelter is scare animals are just as violent, possesive, etc. as humans. Furthermore, when it comes time to mate competition can be fatal in many animal species.

Keith March 2, 2006 at 1:17 pm

What's your point David Mathews? If the end is near and we're all doomed, then why shouldn't we just keep doing what we're doing? "The end is already here" so what difference does it make. If you're trying to convince us that we should change, then I'd be curious what you think we should change, and have you ever convinced anybody to change with the rants you've presented here? Should we all abandon our technology and modern ways of living and take up subsistence farming, or hunting-and-gathering? Should we take all of our wealth and give it away until everybody is equally poor? Maybe we should stop doing everything and just pray a lot? Could you at least contribute something more than just ranting "we're evil" over and over again.

Scott March 2, 2006 at 2:02 pm

David Matthews, for someone who speaks so ill about humans and how we're not a peaceful animal it's a little ironic that you have a picture of a lion on your web page. Unless my knowledge about lions is incorrect, don't they "exploit" other animals by killing them for food? Don't they fight with one another for territory?

Also, blaming all the misery on the world on capitalism and free markets grossly overlooks the actual history. Was it not communist China that killed millions of their own citizens? Did not communist Russia suffer from periodic famines? Where would you rather live North Korea or South Korea?

As for the main topic of discussion on this thread, no one is claiming that the absolute physical supply of oil isn't running out, obviously if it takes millions of years to create oil we're depleting the absolute supply from the moment we extracted the first barrel. What is relevant is that the point when oil production "peaks" depends on the price level and availability/cost of substitutes. For thousands of years the main source of energy was burning wood and while that is still done in some places we know burn oil because it is a less expensive substitute. As alternative energy sources become more economical there will be a day when those sources replace oil. I'd be willing to bet that'll happen long before we extract the last barrel of oil on the planet.

faultolerant March 2, 2006 at 4:17 pm

Mr Mathews, I've never seen so many words used to say so little. Ever.

David Mathews March 2, 2006 at 8:25 pm

Hello Robert,

"Animals in fact engage in a truly horrifying (to you I suppose) form of competition: win or die. When food or shelter is scare animals are just as violent, possesive, etc. as humans. Furthermore, when it comes time to mate competition can be fatal in many animal species."

Please … would you care to guess what animal killed 100 million of its own kind in the 20th century & is currently driving millions of species to extinction by overexploitation, environmental destruction and pollution?

The most violent animal on the Earth is humankind. How else would you explain the tens of thousands of nuclear bombs in existence today?

David Mathews March 2, 2006 at 8:37 pm

Hello Keith,

Q: "If the end is near and we're all doomed, then why shouldn't we just keep doing what we're doing?"

A: Because we've caused enough damage.

Q: "The end is already here" so what difference does it make.

A: The difference is: A change in the behavior of Americans would alleviate the suffering of billions worldwide, reduce environmental degradation and pollution, and relieve Americans from the burden of stress which they have needlessly placed upon their own self.

Q: "If you're trying to convince us that we should change, then I'd be curious what you think we should change, and have you ever convinced anybody to change with the rants you've presented here?"

A: I do not expect you to change. That is the reason why humankind's extinction is inevitable.

Q: "Should we all abandon our technology and modern ways of living and take up subsistence farming, or hunting-and-gathering?"

A: I would say that it is essential to abandon technological progress, consumerism, capitalism, development and all other human activities which are either directly or indirectly destructive of the environment. I do not demand that you take up subsistence farming or become a hunter-gatherer … until these become necessary, and at that point you will not have any choice.

Q: "Should we take all of our wealth and give it away until everybody is equally poor?"

A: Yes. You should. Why should you enjoy prosperity while so many billions continue to suffer?

Q: "Maybe we should stop doing everything and just pray a lot?"

A: That's not a particularly bad idea. In addition to prayer, I encourage you to love everybody, live at peace with all, and treat every person you meet with mercy & respect.

Q: "Could you at least contribute something more than just ranting "we're evil" over and over again."

A: Now I have: Love & live at peace with all people; love & live at peace with nature; love & live at peace with God. If you do all these you will make the world a better place.

David Mathews March 2, 2006 at 8:48 pm

Hello Scott,

Q: "David Matthews, for someone who speaks so ill about humans and how we're not a peaceful animal it's a little ironic that you have a picture of a lion on your web page. Unless my knowledge about lions is incorrect, don't they "exploit" other animals by killing them for food? Don't they fight with one another for territory?"

A: If humans were merely as violent as the lions, the world would be a much more peaceful place. The difference between humans and lions: Lions kill what they eat, humans kill everything. And when I say "everything" I really mean … everything.

Q: "Also, blaming all the misery on the world on capitalism and free markets grossly overlooks the actual history. Was it not communist China that killed millions of their own citizens? Did not communist Russia suffer from periodic famines? Where would you rather live North Korea or South Korea?"

A: This question is easily answered: I do not blame all the problems of the world on capitalism. I only blame capitalism for the sins which it has committed & continues to commit.

Q: "As alternative energy sources become more economical there will be a day when those sources replace oil. I'd be willing to bet that'll happen long before we extract the last barrel of oil on the planet."

A: An alternative may or may not exist. The depletion of oil is a major problem but not nearly as significant as the environmental damage created by burning fossil fuels and that problem itself is not nearly as significant as humankind's destructive violent tendencies which threaten the survival of all life on the Earth.

The sooner that oil is depleted the better. Humans have behaved in a foolish manner with all the energy that oil has provided. Look at all the violence of the 20th century and the unhealthy habits of Western civilization today … we humans have chosen the path of misery and sorrow.

Pity, pity, pity poor humankind. An opportunity squandered and now lost forever. May God have mercy upon all of our souls.

Henri Hein March 2, 2006 at 9:56 pm

"Why do the impoverished people of the Third World lack an ability to create wealth — is it because there is not a local McDonald's or Wal-Mart where they could get a job? "

In a sense, yes. See this article for what impact Nike 'sweatshops' have in Vietnam:

http://www.johannorberg.net/?page=articles&articleid=53

"Nike and Coca-Cola triumphed where American bombs failed. They have made Vietnam capitalist."

David, I'm curious what you would have told Tsi-Chi if you had been with Johann in Vietnam.

David Mathews March 2, 2006 at 10:30 pm

Hello Henri,

"David, I'm curious what you would have told Tsi-Chi if you had been with Johann in Vietnam."

I'd need some context in order to have an opinion. All that I can say for certain is that the Vietnam War was a tragic mistake on many levels & that the United States behaved in an evil manner as it sought to protect the Vietnamese by killing them.

Something like two million people died violently in the Vietnam war. If the Iraq war lasts long enough a similar number of people will also die.

Wouldn't you say that it is a good time for warfare to come to an end?

Chris Moore March 3, 2006 at 12:38 am

David:

"I would say that it is essential to abandon technological progress, consumerism, capitalism, development and all other human activities which are either directly or indirectly destructive of the environment."

Please, I'm begging you to stop using electricity (not to mention a computer, roads – certainly not a car, bus, or train, phones, and pretty much every convienence of the modern world) by not posting anything more. It's such a waste of precious electrons, every one of which requires that much more CO2 to be released into the atmosphere… while you're at it, you do realize that your website requires a server that uses power — isn't that evil of you to use power just to show some silly pictures and some quotes…

"Q: "Should we take all of our wealth and give it away until everybody is equally poor?"

A: Yes. You should. Why should you enjoy prosperity while so many billions continue to suffer?"

If you have more than $2.00/day (adjusted for purchase power parity of course) to live on then you are a hypocrite and should be giving your money away to the poor in some other counrty. Giving a little doesn't count – many many people give a "little" – you are advocating much more than that and should practice what you preach (kudos if you do, by the way).

As said earlier: "talk is cheap"

Henri Hein March 3, 2006 at 2:21 am

David:

"I'd need some context in order to have an opinion."

What context did you feel were missing?

"Wouldn't you say that it is a good time for warfare to come to an end"

We are getting our signals crossed. Again:
"Nike and Coca-Cola triumphed where American bombs failed. They have made Vietnam capitalist."
In other words, peaceful trade benefits the Vietnamese — the point is precisely that trade is better than war.

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