Okay, so oil is over $100 a barrel, diesel is $4 a gallon and the Chinese are buying BMWs like there was a tomorrow. Is the sky falling or is it all just marketing hype? In the interest of unearthing some truth, we will visit the topic of “peak oil”. What is it? How do we predict it? How do we avoid it?
Economists tell us that we never “run out” of a resource, it just gets too expensive to be used the way we might have gotten used to. Consider whale oil, which used to be a pretty valuable and increasingly hard to find resource. When’s the last time you felt the pinch of not being able to find good cheap whale oil? This is an example of “substitutability”, which says that expensive goods will be replaced by alternatives. Indeed, while good intentions will put a few hybrids on the road and make some people choose lower life styles closer to work, $10 per gallon gas will really incentivise (!sorry!) the masses. Let oil prices rise!
On the other hand,
Pillars of Economic Growth Theory. Technological progress, along with substitutability, is the other foundation pillar of continuous growth theory. It is assumed that with enough money, research will always provide a technical solution to either increase efficiency, or to substitute for some valuable resource which becomes scarce through overuse.
Well, aren’t we going in special directions now? So bring your one-handed economists, your dreamy-eyed optimists and your darkest pessimists as we wallow in the deep pools of “Peak oil” … at the next 6 Apr 2008 Politics and a Pint!
Some light supplemental reading:
- Basing his calculations on the peak of oil well discovery in 1948, Hubbert used his model in 1956 to accurately predict that oil production in the contiguous United States would peak around 1970. [emphasis added]
- Peak oil? Read all about it.
- Roll your own? This company says they can grow their own biodiesel using algae.
- Substitutability – the economists’ answer.
Legal details (in appropriately tiny font):
What: Politics and a Pint
Where: The Contented Cow
When: 6-7:30PM, 6 April 2008
November 9, 2008 at 6:47 pm |
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