Peak Oil?

Oooh! A new theory! I love new theories that simultaneously take in half of the information and use middle-of-the-road thinking to come up with half-solutions!

So here’s the new one, that seems to, in a nutshell, suggest that current oil prices ($129 US per barrel as of Monday) are related to a theory that we are currently at a peak output of the world’s supply. This is actually sort of correct, but in a round-about sort of way. It is like calling a baseball player a bad hitter because he struck out 150 times: ignoring other things, such as batting average, pitch selection, and common sense.

In truth, we are in the peak era. Production of oil could easily be increased, but there is only so much down there. Currently, Saudi Arabia is the only Middle Eastern country NOT operating at its peak capacity. Prudence would suggest either increasing capacity (not necessarily output) or reducing output in most of these countries to prevent a catastrophic event from derailing consumption needs.

So, peak oil is interesting as an idea, and really seems to be about as true as the question of the degree of effect relative to the weakness of the US dollar. Neither seems to answer the core question: why has the price of a barrel of oil gone up over 400% in fewer than 8 years ($27 in 2001)? Most of the speculation has been based around the last three years, when oil doubled—not the previous four years when it doubled then as well.

Clearly the US economy doesn’t help this, which has been tanking for the entirety of Bush’s time in office, regardless of whether or not we are now capable of using the R-word (shhh: it’s recession! But don't say it out loud!). The economy was bad in 2002 and ’03, not just ’07 and ’08. There is also a secondary issue: the world is no longer centered on US policy. China, Russia, Saudi Arabia, Iran, Pakistan, and India are no longer worried about pleasing the US and are out to serve their own interests. Russia, the biggest national exporter of oil and OPEC, the biggest oil collective, are neither frightened of the US nor willing to rise and fall with the US economy.

Perhaps that is the sad truth that oil speculation has revealed for us today: that not only is the US no longer a superpower of 1, but the rest of the world knows it.

Meanwhile, maybe if we actually spent as much time researching oil alternatives (not ethanol) as we do lobbying other countries and money as we do bribing them, we might be able to get out of this. Or not.

For more info on peak oil, check out this excellent article: "Have we really hit peak oil?"