Inspired, among others, by the typically apocalyptic, ecological maunderings of Jeremy Grantham (the renowned investor here providing us with classic evidence of the general non-transferability of specific expertise from one metier to another), the recent overwrought oil market has brought the Exhaustionists out in full force, each plaintively wailing of the dangers of Peak Oil (as well as Peak Copper, Peak Corn, etc.—though never, thankfully, Peek Freans).
As is always the case at such times, the name of M. King Hubbert has been given a great deal of air, as if the old rhetorical trick of argumentum ad verecundiam should be decisive in this matter.
Yes, to give this particular devil his due, he did accurately predict that US onshore oil production would top out in the late 60s/early70s, so assuring his prophethood for ever, especially since the validity of the estimate became recognised amid the traumas caused by the first Oil Shock.
His other glances in the crystal ball have, alas, not borne out quite so well, however.
World oil production was to reach its apex in 1995, he foretold in 1974: so far he is 16 years and 30% out. Nuclear energy would provide most of America’s need by around the turn of the new century, he assured us: as of 2009 the proportion was under 9%. Solar power was next seen to be the answer: 1970s technology was already deemed to be good enough to serve the entire world’s industrial needs within ‘a couple of decades’ – Oops! US production of natgas would also peak in 1970 at 14 Tcf a year: four decades on and we are rising through almost double that and with no apparent end in sight.
Even more startling, this worthy was indeed a leading light of the crank-ridden Technocratic School which, with an almost Marxian degree of stubborn denial, has been predicting the demise of the Price System—i.e., the repudiation of the process of market exchange—since the mid-1930s and pushing for an unit of energy effort expended to replace money in our reckoning, plainly not realizing that this breakthrough concept is not much more than the long-discredited labour theory of value, albeit at one remove.
At the height of their brief sway, the grey-and-scarlet clad acolytes of this Utopian movement were heard clamouring that they would sweep away ‘production for profit’ in favour of ‘production for use’ (a slogan that also has a certain familiar ring to it) and to cast out the moneylenders and politicians in favour of a rational government conducted by a Platonic elite of scientists and technicians, naturally trusting that one of these latter could never turn out to be either Pol-Pots or peculators and confident that the world and all its people’s needs and aspirations are no more than a big, juicy simultaneous equation just begging to be solved by an inner sanctum of assiduous eggheads.
No wonder that other twisted genius, H.G. Wells took to Hubbert so avidly.
By now you may be thinking that the US Peak thing was a stopped-clock-right-twice-a-day fluke committed by a man who seems to have personified what Hayek called the ‘Fatal Conceit’ of the planners, namely that they—and they alone—can truly know how best to order production and distribution, replacing grubby commercialism with an exact calculus of abstract mass utility as carried out by a hushed order of white-coated Olympians in complete defiance of the individual subjective ordering of wants which each iota of a teeming humanity uniquely seeks to express.
But Hubbert was not the only public figure to try to apply a false, pseudo-scientific rigour to the issue of human fulfilment, nor the only one to declare that ’soon all the oil is going to be burned and all the metals mined and scattered’ or to insist that the only way out of an putative exponential growth trap of our own making is to stop people (in the impersonal abstract, of course) from having too many babies.
But, surely, your author has been recently asked, you can’t see Peak Oil theory as contentious? Is it not a mathematical inevitability, for goodness’ sake? How can you find it within yourself to demur at such trendy millennialism?
Because – oh, let me see – the planet has not yet been fully explored, much less exploited—only those bits of it which have showed the most promise given the prospect of profit (that dirty word!) and the constraints of existing technology? Because reported ‘reserves’ are, in any case, largely an accounting identity, not a hard, geological limit?
Because there is increasing evidence that abiotic, deep oil generation may be a thermodynamic reality, implying, if so, that at least some hydrocarbons would not be just a ‘fossil’ fuel, but an ongoing planetary process, i.e., ‘renewable’ in the real sense of the word?
Because it is not physical oil we want, in any case, but the energy services it provides and the state of the art today—much less that which we can realistically expected to hold good in the future—is such that, where it becomes cost-effective to do so, oil use can be cut dramatically in providing those very same services (think what the widespread US adoption of diesel cars would achieve, or the greater application of light plastics, advanced ceramics, and special alloys in their fabrication)? Indeed, we have already proved this in living memory for the West and Japan did exactly this for nigh on two decades after the second oil shock, all without the need for Green Soviet directives on what sort of light bulb we are permitted to use.
Because, that art will itself advance, the moreso that we allow market incentives to direct resources towards doing just that, meaning we might expect similarly exciting developments to continue in the fields of exploration, production and refining, not to mention in combustion, transmissions, aerodynamics, and tyre hysteresis, etc.?
Because of the phenomenon of shale gas with its enormous potential to confine oil to a narrow, mobile fuel role and even to substitute for it there, given sufficient means and motivation? (Which of the wild-eyed Doomsayers predicted its advent, by the way?)
Because, ditto—and I know no-one will want to hear this after Fukushima (despite the as-yet unquantified nature of the damage wrought there, which may even – so it please the Gods! – turn out to be as limited as it ultimately was at Chernobyl)—we can readily build a great number of new generation, uranium-cycle nukes and, better yet, fail-safe, non-pressurised, smaller-scale, non weapons-producing, thorium ones instead?
Because (admittedly in extremis, given today’s matrix of possibilities), there exist unimaginably vast, ocean-floor deposits of bacterially-generated methane clathrates all over our continental shelves (by one guess, equivalent to twice the known conventional hydrocarbon resource): when needs must, does anyone want to bet on our not being able to find a way to use them?
But, even having made all these objections – none of them exactly exercises in hare-brained futurology – there comes next the stock response: aaah, so you may deny Peak Oil, per se, but what you are admitting at least is the end of cheap oil?
Well, only to a certain point, for the laws of economics surely do apply to oil as they do to everything else to which we attach a value.
But I have yet to have someone tell me that, because an unforeseen burst of demand may require previously unprofitable, less cost-effective productive means to be temporarily applied to satisfy it, we have reached the end of ‘cheap beer’, or ‘cheap socks’, or ’cheap toilet rolls’ and that civilisation is therefore in imminent danger of collapse!
Even were we to close our eyes and allow for a moment that this most improbable of ‘certainties’ does indeed eventuate, we must beware of carrying an engineering argument over to the realm of economics where it is of no actual relevance. The putative end of ‘cheap oil’ does not mean we will henceforth have to live for ever using ‘dear oil’, just that a new dynamic will take over which will rapidly begin to compensate for the change.
After all, we don’t still fill our cars at a mark-up to the price of whale oil, or dispel the darkness from our homes on a beeswax-linked electricity tariff, now do we?
Nor does this possibility of having to find either a complete or partial substitute for oil at some indeterminate future date imply that it is at all sensible to prepare for it by squandering our scarce, present resources on such pitiable, non-sustainable, non-renewable, sub-optimal boondoggles as wind and solar.
Contrary to the Ecostormtrooper hype, we categorise them as such because – apart from the societal blight inherent in the flagrant rent-seeking and fledgling dictatorship which their forcible imposition entails – does anyone really believe that the equipment for collection, distribution, and storage of what piffling and unreliable amounts of energy are captured from such diffuse sources does not need manufacture, maintenance, repair, and replacement, in addition to the provision of a necessarily under-utilised, conventionally-powered back-up capacity and an intrusive infrastructure of access? Are we to ignore the fact that these infernal engines come complete with a huge, environmentally-significant ‘footprint’ themselves – whether it be in the concrete foundations, the rare earth magnet components, the polysilicon, or the composite materials of which each is built?
Nor should it go unrecognised that the subsidy glut in which they wallow actually prevents genuine progress being made, rather than advancing it, by making it highly lucrative for companies to swill deep and long from the public trough in return for churning out these economically sub-marginal and energetically dubious contraptions in vast profusion here, today, instead of them spending time and money seeking ways to make these systems – or any other alternatives which human genius can meanwhile discover – truly competitive and therefore unequivocally beneficial.
If, seized by a sudden fear that the world will one day lack for sufficient bicycles, our rulers summarily decide to tax both their existing makers and their heretofore satisfied users and to funnel the resulting booty to some favoured corporate giant which promises to equip us with a modestly-rejigged shopping trolley and a bargepole to propel it, we have hardly made progress, now have we?
Nor if we cut off every man’s right leg and then set up shop to sell him a prosthetic replacement can the resulting ‘Green jobs’ be said to have advanced the common weal. No. actually, we do not want another bloody Manhattan Project or any Apollo mission phallicism: we want a few more Rockefellers, Fords, and Teslas, left alone to work out how to enrich themselves by serving us instead!
To return to our original theme, the happenstance of a higher price for some good (and actually only a higher relative price, at that) should—if the market is being allowed to work properly—set in train the iterative search for a new balance which we have previously characterised as I²E²S² – that is to say, Innovation, Economisation, and Substitution, followed by Investment guided by Entrepreneurship, funded by Savings.
In this way, if left to their own devices, those despicably venal profit grubbers whom our lofty Philosopher Kings so despise will soon be busily arbitraging away their fleeting excess returns, reducing costs and increasing satisfactions for us, their customers, as they do.
Why do we think that oil—or, more broadly, energy—should prove an exception to this rule? Only, in truth, because the market is NOT being allowed to work.
Because, rather than being a true indicator of genuinely, increased scarcity or a mark of dwindling physical reservoirs, expensive oil may be nothing other than an artefact of the policies of the many governments who routinely suppress, penalize, or clumsily monopolize its production; who simultaneously subsidize its consumption—whether directly, or through general, Provider State, soft-budget outlays, or via the over stimulus of what passes for economic ‘growth’; and who—above all—routinely debase the numeraire in which the price of the stuff is reckoned.
All of these latter are, indeed, compelling reasons to invest in oil (and in any other raw materials where similar arguments apply), but they are in no way a vindication of Hubbert or Grantham or any other latter-day Malthus, crying that poor old Mother Gaia is being despoiled in the pursuit of filthy lucre!
It is much better to forget all that Sierra Club/WWF elitist, anti-mankind, horse manure about ‘the call on the planet’ exerted by us members of the ‘plague species’ and to take a little Bjorn Lomberg, a smattering of Julian Simon, and a riffle-through of Matt Ridley, regarding the minuscule size of the impact which our tiny little ilk – unimaginably outweighed by living forms we cannot even see – can really expect to exert on the vast, negatively-feedbacked rock which we inhabit—and to glory in the sustained quality of our response to the challenges which confront us, even under the far-from-ideal conditions under which we are usually asked to make it.
For example, just as an exercise in contextualisation, consider the following:-
The population of Hong Kong: 7 million. Its surface area: 1,100 km2
The population of the World: nigh on 7 billion, i.e., HK x 1000
1000 x area of HK = 110,000 km2 = the area of Cuba or Iceland
Approximate area of the Earth’s landmass = 150 million km2
Approximate total surface area = 520 million km2
So, were we to build one, vast city of the same population density as Hong Kong to cover the entirety of Fidel’s little fiefdom (not necessarily a Blade Runner vision of hell), this would accommodate all of humanity, and take up just 0.07% of the planet’s land area and 0.02% of the Earth’s surface.
Add in another patch or two for energy generation and maybe another few for growing food – perhaps by building super-efficient, CO₂-enriched, drip-irrigated, skyscraper hydroponics factories, by exploiting the potential of the surrounding oceans more fully, or by bioengineering photosynthetic bugs to grow us pure nutrients – and this would partition dear old Spaceship Earth thus: six or seven bits for us weakling, co-operative mutualists and 4,720 bits for all the unimaginable cornucopia of other species to wax and wane at each other’s red-in-tooth-and-claw expense, undisturbed by human hand.
Not such a bad ratio, you might think, even if you are a Marquis de Sade, equal-rights-for-plants-and-animals (plague bacilli and malarial parasites?), super-egalitarian nutcase.
So, rather than pestering the shoppers outside Oxford Street tube as you pace up and down with your ‘End is Nigh’, FSC-approved, sandwich board about your neck, you should ponder the innate ability of an unhampered, entrepreneurially-biased humanity to discover solutions to its problems.
Nor is this to indulge in some unswerving, fingers-crossed optimism: it is a realistic philosophy based on sound (Austrian) economics and one endowed with a pretty good empirical/historical track record, into the bargain
Yes, if our political institutions were better and ideally much, much less intrusive in their scope –and, yes – if the intellectual gurus who help shape them were not so (a) conceited; (b) statist; (c) given to quack economics; (d) devoted to fashionable, Bloomsbury pessimism; and (e) prone to practice Munchausen-by-proxy denialism on the masses to whom they condescend, we would be much further along this track than we are now.
Indeed, this is the crux of the matter for if there is even a scintilla of truth to the scare stories with which the sinister SPECTRE of today’s Bio-Blofelds bombard us, what we lack is not space or resources but capital, time, property rights, and the free market exchange networks within which to exercise them.
The most pressing of our problems are not climatological or ecological, certainly not geological, but political and we will find no answers to these by dreaming wet dreams of a multi-billion genocide so the blessed residuum can potter about building composting toilets, permanently at danger of seasonal starvation, death by tooth decay, and high childbirth mortality in a cod Iron Age village (as half the Greens do), or of instituting a globally-monitored, strictly-rationed, top-down, totalitarian tyranny (what the other half get off on).
By way of contrast, consider instead that every member of that seven billion strong ‘drain on the planet’ is hard-wired with the best computer in the known Universe, one which its individual possessor is both incentivised and enabled to link up in a massively parallel, distributed process of discovery and improvement as long as he or she has even the smallest vestiges of a market structure to guide them and a certain minimum of property rights to protect them.
Consider, too, that if the proportion to the whole of Mozarts, Michelangelos, and Maxwells is even roughly constant, their likely incidence is greater now than ever it was.
That means that we might even look forward to being liberated from a tedious diet of hip-hop, installation art, and string theory, as well as to paying less to travel more miles at a faster pace in the fabulously-equipped and remarkably inexpensive, new set of wheels, sold to us by the recently–empowered entrepreneurial gentleman to our right.
And some people think we Austrians can never look on the bright side of anything!