Why bother about peak oil?

The amount of text written both online and in print on oil prices, oil production, “Peak Oil”, oil supply projections, oil demand projections etc. amazes me. What is even more amazing is the ease with which forecasters (charlatans?) claim that the world as we know it is coming to an end.

If you are really curious to know more about the pessimistic scenario or “Peak Oil” click the link below


And if you are really curious to know more about the optimistic scenario or “The Myth of Peak Oil” click the link below


I personally have given up trying to figure out. What I do know is the following (I may seem to be leaning towards the optimistic view and probably do):

1. Oil is a commodity. It is subject to the natural laws of demand and supply. There are commodities where demand is elastic and there are commodities where demand is inelastic (basic economics). Now Oil demand may be inelastic in the short run, there is no case where the demand will keep growing and supply will not increase whether the price is $ 35 per barrel or $ 150 a barrel. It is just that the run up has been too fast not giving government  and industries and households enough time to adjust.

It is a given that

– People will drive less and will drive smaller and more fuel efficient cars

– People will fly less and will holiday closer to home

– Families will use energy efficient devices at home

– Industries and businesses will be energy conscious at work.

2. At a time where we are talking about advances in physics (nano technology etc.) and life sciences (genomes and genetically modified crops, cloning etc.) is science so inadequate that it cannot give us reasonably priced renewable energy? Again the answer is that the run up has been too fast. Science is working on solutions but needs some time. The main reason we have been using oil all this time has been that it was easily and cheaply available. In the early part of the industrial revolution coal was the primary source of energy and there were worries at that point in time about “Peak Coal”!!!!

3. The current recessionary environment itself will reduce demand in the short term and the speculative fizz that is there in oil could easily get converted to a bearish sentiment once momentum is on the downward side.

Peak Oil? May be, may be not. Peak Energy? NO WAY. End of the world? Zero economic growth long term? NO WAY.

Leave a Comment.