No Peaking

People are getting worked up about peak oil theory. I’ll reply to some of the deluge of mail in the next day or two but first, three things:

(1) Lawnorder, the blogger at Daily Kos who I wrote about in “Oil and Instinct,” has written a follow-up posting (“Peak Oil Myth and the Easter Island ecological disaster“) in which she corrects a previous (and unintentional) misrepresentation of my perspective on peak oil theory, while still disagreeing with my perspective. I guess this shows that it actually is possible to have a polite blog debate.

As to Lawnorder’s new arguments: I’ll repeat that societies that include significant levels of self-ownership and private property, along with a low-friction exchange system (“money”) tend to have a “price mechanism” that creates incentives for producing, conserving and replacing scarce and desired commodities. Unless the economies of Easter Island and North Korea included this price mechanism they’re not counterexamples. And North Koreans didn’t starve because of a shortage of national natural resources. There may even tend to be an inverse relationship between natural resources and wealth-creation; see for example The Future of Freedom: Illiberal Democracy at Home and Abroad by Fareed Zakaria:

“Wealth in natural resources hinders both political modernization and economic growth. Two Harvard economists, Jeffrey D. Sachs and Andrew M. Warner, looked at ninety-seven developing countries over two decades (1971-89) and found that natural endowments were strongly correlated with economic failure. On average the richer a country was in mineral, agricultural, and fuel deposits, the slower its economy grew — think of Saudi Arabia or Nigeria. Countries with almost no resources — such as those in East Asia — grew the fastest. Those with some resources — as in western Europe — grew at rates between these two extremes. There are a few exceptions: Chile, Malaysia, and the United States are all resource rich yet have developed economically and politically. But the basic rule holds up strikingly well.”

(2) Reader Philip Brydon (letter below) has brought to my attention an article by geologist David Deming, “Are We Running Out of Oil?,” that makes some of the same arguments that I’ve made but that contains information that I didn’t know. Everyone interested in the subject should read this short and readable article.

(3) Republicans, Democrats and peak oil theorists seem to agree that “dependence on foreign oil” hurts Americans. As in Bush’s: “Our dependence on foreign energy is like a foreign tax on the American Dream — the tax our citizens pay every day in higher gas prices, higher cost to heat and cool their homes — a tax on jobs. Worst of all, it’s a tax increasing every year.”

The Theory of Comparative Advantage is hard to understand but how hard is it to understand that oil companies import oil into the USA because foreign oil is cheaper than domestic? If oil companies depended on only domestic suppliers (all things being equal) oil would be more expensive for American consumers, so depending on foreign suppliers is like a tax rebate.

Author: Sam Koritz

I like cheese.