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A Peak Oiler Comes Around?

When I first came to The Oil Drum over seven years ago I was looking for information to explain the steadily rising oil price. It has been some ride. In the vastly complex system that is industrial society it is impossible to make predictions about the future, but here, in any case, is my wag. $100+ oil has opened the door to exploitation of more expensive resources and reserves. Society is adapting to the new reality of higher energy prices. Some are becoming more energy efficient, some have installed renewable energy devices at home, some will forgo an expensive vacation they can no longer afford and some have been squeezed out of the labour market, perhaps forever, and will live out their lives on dwindling State handouts, in poverty.

via www.theoildrum.com

I used to read The Oil Drum regularly because it gave me an easy target to show off my econ-ammo. They I stopped reading it for a while because, well, it was just too easy: peak oil theory is wrong–Hotelling (or an extension thereof) was right. Then today, in a moment of boredom, I decided to go back and read The Oil Drum–and I cam across the above quote.

Sounds an awful lot like an economist wrote that.

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  1. Molly Avatar
    Molly

    Dear Prof. Tim Haab,
    As a long time reader, I want to first state that I admire your application of economics to the serious issue of climate change. However, in my humble opinion, and with all due respect, I believe Euan Mearns was not really intending to put nails on the coffin of Peak Oil theory. At the beginning of this article, it was a critique of the Hubbert Linearization model of oil extraction. Yes, this model was applied by some pessimistic people who combined that with some of the ideas of another economist, Thomas Malthus, who were predicting the quick collapse of of our modern industrial civilization. Later on in this article, Mearns is actually giving information that oil depletion is a real issue. The high oil prices have led to more production of unconventional oil, the expensive oil that causing problems right now. Even though some people will become more efficient energy users and still thrive he also states, “some have been squeezed out of the labour market, perhaps forever, and will live out their lives on dwindling State handouts, in poverty.” In this article he also states, “At a speech I made in Vienna last year I made the assertion that Capitalism was founded on growing supplies of cheap fossil fuels. The financial crisis bares many of the hallmarks to be expected with the end of cheap fossil fuels, and the end of capitalism, the loss of ability to pay rent on savings being one of them.” I suspect Mearns was disingenuous when he wrote the title, “Three Nails in the Coffin of Peak Oil.”
    In the reader’s comments, Euan Mearns responds by quoting one person:
    ” ‘You did not put a nail in the PO coffin in this article. Quite the reverse, I think.’
    If many readers reach this conclusion I will be quite satisfied;-) However, the acute problem of 2002 – 2008 appears to have turned into a cancer that may fester for years / decades. The patient is sick but doesn’t know what is wrong. Maybe human ingenuity will find a cure, maybe not.”
    Thank you for your time,
    mollytherealdeal

    Reply
  2. Tim Haab Avatar
    Tim Haab

    Molly,
    Thanks for the comment. I understand Mearns intent. The point I have made a number of times is that the tone of the Peak Oil doomsdayers has changed over time to sound an awful lot like resource economists. The problem is that peak oilers often bastardize what economists say to make it sound as if all economists believe a future without oil will be rosy and better and happy and all that. That’s not what the economic models say (or would say if they could speak). Most economic models of resource depletion simply allows for price adjustments in response to scarcity which creates varying incentives for exploration, conservation, technological improvements and adaptation. Will a world without fossil fuels be better? That’s not something I’m willing (or able) to answer. Will it be different? Yes. Will there be a catastrophic collapse of the human ecosystem? I have my doubts. Why? Because I trust in incentives. I’m an economist afterall.

    Reply

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