Tuesday, August 25, 2009

Peak oil? Don't worry so much!

That would be Michael Lynch's suggestion. I may not be as optimistic as Lynch (preface: keep in mind that I'm no geologist or energy specialist, so please take my remarks with the appropriate grain of salt; my reading as a layperson would place the peak somewhere in about a decade to 15 years), but do think he raises some valid points. Since oil, gasoline, and natural gas prices peaked last summer, I've been a bit underwhelmed by the analyses coming out of the "peak oil" camp. The true believers love to point to the drop in oil production this last year, but seem to me to ignore the reasons for that drop: 1) speculators fueled much of the oil bubble of 2007-2008 (and I recall some informed pundits complaining that the price tags had little to do with fundamentals), and when the bubble burst, they went elsewhere, and 2) the global economy has been in the crapper (and was going downhill even before the energy bubble burst). There's too much supply, too little demand, and not enough incentive for oil producers to increase output or to invest in all that much exploration. The oil price increases we've witnessed over the past few months have also been decoupled from those fundamentals (it mainly amounts to speculators hedging against any drop in the value of the US Dollar and of course periodic false sightings of "green shoots").

Basically Lynch suggests that the folks who think we're at or past the peak have failed to adequately understand such phenomena as the rate of discovery, and have in particular failed to realize that upward estimates in recoverable oil in existing oil fields do not get counted as "new discoveries" (according to Lynch those upward estimates have easily kept pace with production). I may be a bit less sanguine than Lynch about the role that political instability can play on oil supply and prices, but at least can see value in separating political instability from potential production. And when it comes to production, Lynch is skeptical of claims that we've already gone through at least half of the recoverable supply of oil.

Basically, Lynch is saying that peak oil is still a ways off, and not to panic. I don't have to be as optimistic as he appears to be to see some value in calmly analyzing the energy situation (rather than engage in handwringing over apocalyptic scenarios), and proactively seeking out alternatives to fossil fuels rather than waiting for a major crisis (by which point it will be too late to do much). I'd suggest seeking to reduce fossil fuel use any way, simply due to the role that all those additional hydrocarbons play in making our planet less hospitable.

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