ECO:nomics conference participants debate “peak oil” theory.
On the final day of the Wall St. Journal’s ECO:nomics conference in Santa Barbara, one of the programs featured a debate between two experts over the claim that peak oil extraction has been reached. (Wikipedia defines “peak oil theory” as: the point in time when the maximum rate of global petroleum production is reached, after which the rate of production enters its terminal decline. If global consumption is not mitigated before the peak, an energy crisis may develop because the availability of conventional oil will drop and prices will rise, perhaps dramatically.)
While we have no clue whether we’ve reached “peak oil” production, or not, the fear of inevitably declining oil supplies should continue to create a huge incentive towards alternative fuel development. Once entrepreneurs and businesses realize that demand for oil is forever going to exceed available supply, this will provide investors and developers of alternative fuel supplies protection from being undercut by lower oil prices. (Since demand for oil will forever outpace supply.)
Without having any expertise regarding the nature of global oil supply and demand, it is our personal hunch that much of the reason for high oil prices right now is related to the fact that two oligopolies control much of the global supply: OPEC and big multinational oil companies. It is a fact that OPEC intentionally limits its oil production in order to artificially maintain a higher price for its product. Whether big oil companies collude, is less clear. However, explicit collusion may not even be necessary given the enormous role each individual company has in providing global oil supplies. They could probably affect global prices through discrete decisions to limit production independently. Like we said, it is our hunch that the consolidated nature of this industry plays a role in current price levels. If that continues to be the case, it may be irrelevant if we’ve reached peak oil, since maximum output won’t be reached anyway. Regardless, high oil prices should continue to provide a positive incentive for entrepreneurs and innovators to come up with alternative solutions.
One Response to “ECO:nomics conference participants debate “peak oil” theory.”
By Uncle B on May 10, 2008 | Reply
What ever happened to fusion and the promise of endless, clean energy? Was it just a con to employ and over pay physicists? Has the military looked at spreading its dependence on energy over different sources, or does OPEC dictate to them too? Aren’t OPEC and the big oil companies tempting fate? What if, in a few fast breakthroughs in science and technology they are left with oil they can’t give away at even $25. a barrel, or heaven forbid, oil that has been declared a carcinogen and illegal? Some people believe that the oil folks have already bought up patents for the solution to our energy problems. China doesn’t recognize patent law anyway do they! Maybe they will surprise us with something new, and soon, I hope.