Summary of Part I in this series about Peak Oil
- Peak Oil is coming, very likely sometime in the next 20 years. It could happen today. This will force a major transition in the global economy; as a “crash program” for adaptation will take roughly two decades. We need to start now.
- We need much more data and much better analysis in order to develop national policies to prepare for Peak Oil.
- The rulers of Russia and especially the Middle Eastern states have the missing data needed to accurately forecast the date of peak oil. They might not see it as wise to share this information with us.
- The CIA could have — should have — obtained this data during the past two decades. If this data shows that peak oil lies in the distant future, that would explain the American government’s failure to take even minimal steps to prepare.
Note: these articles do not forecast oil prices or the date of peak oil.
Summary of this chapter
Part I generated a large volume of emails, more than anything else I have written. Here are some frequent comments with my replies. More in part III.
1. We have excellent data and analysis – see The Oil Drum!
I gave gentle replies to the first fifteen or so emails about this, suggesting that more exhaustive work by teams of relevant analysts might be desirable before making national policy on an issue of this magnitude and complexity.
As that seem unpersuasive to some correspondents, I turned to asking…
Do you take your children’s medical tests (e.g., blood work, MRI’s) to “The Medical Drum” website for analysis by folks who say they are doctors, nurses, medical technicians, dentists, geologists, actuaries, and so forth? If not, why would you rely on a blog for data and analysis about one of the major global challenges of this century?
The Oil Drum and similar sites feature articles which range from creative and brilliant to fanciful and even delusional. It’s the nature of blogs. Unfortunately their non-experts readers have difficulty distinguishing the wheat from the chaff in this flood of content.
Who would rely on articles from sites like this as the basis on which to design our national energy policy, directing the expenditure of tens of billions of dollars – affecting the prosperity of 300 million people?
Compare these blognotes with, for example, the thousands of pages of studies required to build a large housing development, to get a new drug approved for human use, or to change a single aspect of Federal tax policy. The difference is several orders of magnitude in depth and scale.
Blogs provide issues such as Peak Oil and 4GW with important source of creativity and energy, gathering data and insights that would otherwise never be tapped. Blogs and the internet are a valuable mechanism improving America’s Observation – Orientation – Decision – Action (OODA) loops.
This is not nearly enough. We need data and tools like those used to manage the US economy – compared to which the resources allocated to this kind of energy research are tiny. These draw on vast time series of data, run through hundreds or thousands of equations. They are not perfect, but the economy might quickly crash if economists had to rely on the sketchy tools used by energy analysts.
Making the comparison worse, economists first developed their predecessors, the National Income Product Accounts (NIPA), in the 1930’s. Since then their worth has been well demonstrated, so the failure to apply these tools to energy is especially odd.
2. Oil prices are rising therefore Peak Oil is immanent!
Here we see the fallacy of looking at a single economic phenomenon (oil) in isolation from larger contexts.
First, oil prices have not soared in terms of real money as they have in US dollar prices. By real money I mean expressed in a currency other than the rapidly devaluing US and Zimbabwe dollars.
Second, the prices of most industrial commodities have increased 2003. When a wide range of industrial commodities rise in price (especially vs. gold) we can examine each individual commodity to determine specific reasons for the rise. Fruitlessly, as there is probably a common casual factor. In this case, all have strong price elasticity to rising global GDP. This is easily understandable, as demand increases far faster than mines can be expanded or new mines (or oil fields) developed.
In the most recent cycle (roughly since 2003) copper has increased slightly more than Brent oil. (The sensitivity of copper prices to economic growth has earned it the nickname of Dr. Copper.) This alone should give pause to those forecasting an immediate peak in oil extraction.
There is another chapter to the typical business cycle. What often happens after several years of very rapid economic growth? Rising inflation. Inflation pushes up prices of most commodities. Along with many other signs of increased global inflation, starting last fall agricultural products began to rise faster than those of industrial metals, especially soybeans and wheat (US corn prices had already spiked due to demand for ethanol).
None of this proves that rising oil prices do not signal the approach of peak oil, but this does suggest the causes of oil’s price rises are more complex than the story told on many Peak Oil websites.
More importantly, this indicates that some of those writing about peak oil suffer from some degree of analytical myopia, failing to put their data in wider contexts of time and the global economy.
Please share your comments by posting below (brief and relevant, please), or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).
For more information about Peak Oil
- When will global oil production peak? Here is the answer! (1 November 2008)
- The most dangerous form of Peak Oil (8 April 2008)
- The world changed last week, with no headlines to mark the news (25 April 2008)
- Peak Oil Doomsters debunked, end of civilization called off (8 May 2008)
Here is an archive of my articles about Peak Oil.
Here are other resources about Peak Oil.