I’ve been following the reports about the enthusiastic
reception that Richard Heinberg’s January 10 talk about peak oil and industrial
collapse have received in Eugene (OR). Here’s a related problem that I give in
class.
World oil reserves are 600
billion barrels, and we are using it at 20 billion barrels per year. How long
until we run out? Please write down your answer before you read any more of
this column.
My students do the math, and
they tell me the oil will be gone in 30 years―maybe just 20, if we add growth
in consumption and population. Good try, I tell them, but these numbers are
from 1950. Hmm.
The idea of economic
collapse from resource exhaustion used to be mainstream economics, a long time
ago. In 1798, Thomas Malthus argued that population would soon outstrip food
production, and that mass starvation would result.
During the potato famine,
English politicians used his economics as an excuse not to waste money on
relief for the starving Irish. Stanley Jevons, in 1865, argued that
Actually,
While this embarrassing
failure to explain reality sent economists back to the drawing board,
apparently it has left the peak oil cult untroubled. Their forecasts of doom
and gloom are just a recycled version of Malthus’s logic, which treats humans
as if we are mindless sheep, and which shows no understanding of markets or
incentives.
The new model that
economists came up with starts from sensible assumptions―business people aren’t
idiots, they want to make money, and consumers don’t like to waste money. As
more people use up an exhaustible resource such as oil, the owners see the
scarcity coming and they start demanding higher prices.
That gives consumers an incentive
to conserve, and oil companies incentives to find more oil. Companies that
don’t own oil start to develop alternative energy sources. Combine these
effects and scarcity tends to go away. Add in a little technical progress and
prices will fall, not rise.
Sure enough, measured by how
many hours we have to work to pay for a barrel, the long trend of oil prices
has been downward, except for a few short spikes during wars.
The list of alternatives to
oil is very long. On the production side, there’s solar energy, wind energy,
nuclear-hydrogen energy, coal, tar sands, or just plain drilling more oil
wells. On the consumption side, there’s insulating your house, buying a small
car, or riding your bike. (If you haven’t ridden it since the last oil crisis, lube
the brake cables first. I learned that the hard way.) We don’t use these
substitutes much, yet, because they are still a bit more expensive or
inconvenient than oil is. But they are still out there, waiting for us.
Here’s some evidence of how
painless the transition to these alternatives will be. Since it peaked about
1970,
You are probably surprised
to hear this― unless you are in a business that uses a lot of energy. If you
are, you’ve worked like a dog to make this happen, and you’ve increased your
profits along the way. But for the average person, all this has been done
without much trouble or even notice by you. This is why we call the market “the
invisible hand.”
I don’t understand why
people continue to give predictions of resource exhaustion and economic
collapse so much attention. The history of these predictions is simple: they
have always been wrong. The theory they are built on is also simple, and also
obviously wrong. But then, I don’t understand why people like reading Stephen
King, either. Is it possible that a nice simple story about imaginary scary
things is just a fun distraction for the evening?
What scares me is that with
all the attention they are devoting to oil scarcity and the coming collapse of
civilization, Eugene and its politicians are getting distracted from working on
the many things that markets don’t reliably deliver―such as health care access,
affordable housing, transportation, good paying jobs and education―and which we
rely on good government to help provide.
[
This article first appeared as a Guest Viewpoint in The
Register-Guard,