Remember all the talk about peak oil a few years ago? You don’t hear much about it today. The United States, supposedly almost out of oil, began producing more oil than Saudi Arabia a few months ago.
No one thinks there’s an infinite supply of oil in the world, but the peak-oil proponents were claiming that world oil production was about to peak and then head forever downwards just as China and India were consuming more, leading gasoline prices to inexorably rise to $20, $30, even $100 a gallon. This would force everyone out of their cars and onto mass transit, a prediction that was used to justify all sorts of otherwise ridiculous light-rail lines and land-use regulations.
The Antiplanner scrutinized these ideas eight years ago and concluded that those who held them had no understanding of the laws of supply and demand. For one thing, there are plenty of alternative sources of energy that are economically inefficient today but that could come on line if ever oil prices did rise enough.
More important, all of the peak-oil calculations of oil production ignored tar sand oil and shale oil. When you include those kinds of oil, supplies appear plentiful for a century or more. As this paper shows, recent production of tar sand oil in Alberta and shale oils in the United States lend credence to the Antiplanner’s 2005 conclusion. What no one foresaw was the rapid increase in natural gas production through hydraulic fracturing, derisively known as fracking.
Today, the people who used to cry “peak oil” are now trying to make their predictions self-fulfilling by doing everything they can to blockade the production and delivery of tar sand and shale oil. In fact, the draft supplemental EIS for the latest Keystone pipeline proposal does not find serious environmental effects from the pipeline, at least relative to the more-expensive alternative of shipping the oil by rail.
As a Time magazine writer notes, in opposing Keystone environmentalists are fighting oil consumption by attacking supply, not demand. In this case, the goal of the anti-pipeline groups is to keep the tar-sand oil in the ground, but that’s never going to happen. Although some predict that the extra expense of alternative shipping methods would slow production of Alberta oil fields, the fact is that tar-sand oils are economically extractable so long as the price of oil remains above $40 a barrel. It is currently $92, and no one thinks it will fall below $40 soon.
In a sane world, environmentalists would realize that it is both environmentally and fiscally better to pipe Alberta’s oil to the United States than the alternative, which is to pipe it to Vancouver, then ship it to China, while shipping Saudi oil to the United States. But politics is anything but sane, and this provides one more example of why we should minimize the size of government.
We live in a world of abundant energy, and energy prices fluctuate mainly for political reasons, not because of actual physical limits on supply. It is quite likely that at some point oil will no longer be a major source of energy. But I doubt we will ever reach a point where people will stop driving personal vehicles, partly because their benefits are so great and partly because mass transit uses as much or more energy as individual autos anyway. Given implementation of Obama’s fuel-economy standards, in a decade or so autos will be the greenest form of motorized travel, so those who oppose driving either need to change their tune or come up with another reason why personal mobility is a bad thing.