The "Peak Oil" Cult
The idea that the world is about to hit some kind of oil crisis, on a grand and even cataclysmic scale, is not new. "Total future production limited to 5.7 billion barrels, perhaps 10-year supply," reported the U.S. government in 1914. Despite numerous and similar warnings of looming end-of-supply scenarios over the decades, by the 1960s the United States was producing that many barrels per day, before hitting 11.3 billion in 1970, and on to 10.6 billion a day in 1985.
It is all part of what Julian Simon called "The long-running running out of oil drama," a near-mystical ritual that has long galvanized global doomsters. We're always running out of something -- coal, oil, copper, trees, housing and land. The latest oil scare, gathering momentum over the last five years or so, is the "Peak Oil" movement. As the price of crude hit $50 a barrel, the idea that the world is on the brink of a major long-term confrontation with declining oil reserves is about to go mainstream.
Peak oil theory is all over the media. A major conference headlining leading peak theorists is scheduled for later this month in Koblenz, Germany. "The end of cheap oil," blared National Geographic magazine last June. Books are piling up by the dozen. Out of Gas, by David Goodstein is new this year. So is The End of Oil, by long-time pseudo-capitalist Paul Roberts. Others have preceded these efforts, all committed to what seems like a remarkably simple idea. The planet contains only so much oil, we've used up almost half if it so far, and once we get to the 50% mark we start heading into consumption-production crises.
In Out of Gas, Mr. Goodstein puts it starkly: "Obviously, we have unintentionally run out of gas. There is no question about that. There's only a finite amount left in the tank. When will it happen?" Mr. Roberts says that, "in short, oil depletion is arguably the most serious crisis ever to face industrial society." Once we tip over that 50% top of the bell curve, the outlook is for shortages, price spikes and major bouts of inflation and deindustrialization.
All very scary, except for the fact that the validity of any of this starts to fade on closer inspection. For all the books and articles on peak oil and looming global catastrophe, the foundations of the theory itself are flimsy and the theoreticians few and far between. Probe the peak oil theory and you quickly end up jabbing the backsides of one or two fabled gurus. Another common element is that all are inevitably riding the familiar anti-growth environmental activist bandwagon.
Perhaps the leading player is Colin Campbell, a retired oil industry geologist, consultant and author who, from a perch in Ireland, is today the high priest of the modern peak oil movement. Through his 1997 book, The Coming Oil Crisis, and an organziation he founded called the Association for the Study of Peak Oil&Gas, Mr. Campbell makes it into all the literature. A visit to ASPO's Web site (www.peakoil.net) takes us right to the heart of the peak oil activism.
It turns out to be a familiar place, full of dire warnings, unsubstantiated claims, and loopy economic analysis. In answer to the question of what the likely effects of hitting the downslope in global oil production sometime his decade or whenever, Mr, Campbell spells it all out. "Simply stated: war, starvation, economic recession, possibly even the extinction of homo sapiens, insofar as the evolution of life on Earth has always been accomplished by the extinction of over-adapted species ... leaving simpler forms to continue, and eventually giving rise to new more adaptive species. If homo sapiens figures out how to move back to simplicity, he will be the first to do so."
Back to simplicity? What might that mean? For the answer, we turn to another link on the ASPO site, to a publication called New Solutions, which examines the global model for a new, simpler "post-industrial" world where all is well and man is in tune with the universe: Cuba. Cuba ran out of cheap (Russian) oil with the fall of Communism, forcing it to the forefront of the peak oil movement. "Lessons from Cuba," it says, include how to turn the bicycle into a national transportation mode and adopt a modern equivalent of ride-sharing (See illustration).
Scratch a Peak Oil activist and you soon end up hearing lessons in how to prepare for the coming cataclysm by adopting policies to create the effects of cataclysm all that much sooner. If Cuba can do it, why can't we? Mr. Campbell, convinced disaster looms, wants us to start preparing now by bring the results upon the planet sooner by imposing high taxes on -- SUVs.
SUVs make standard cameo appearances in most Peak Oil polemics. "It's impossible to predict when what will happen," writes David Goodstein in Out of Gas, "but we cal all too easily envision a dying civilization, the landscape littered with the rusting hulks of useless SUVs."
Inevitably, the Peak Oil movement gets around to Iraq, the invasion of which is seen as a direct product of the looming oil peak. The U.S. entry into Iraq, says Mr. Campbell, is a manifestation of the fact that "people are coming to appreciate that peak is imminent and what it means." Not surprisingly, Mr. Campbell plays a pivotal role in Linda McQuaig's new book, It's the Crude, Dude: War, Big Oil, and the Fight for the Planet. Using peak oil theory and comments from Mr. Campbell, Ms. McQuaig catapults her argument to the grand idea that the U.S. government and the Big Oil firms actually plotted the invasion of Iraq to offset the risks of the peak oil crisis.
The peak oil movement, it turns out, is just another wild hypothesis -- the world is about to hit some kind of oil production level that is half way to total planetary depletion -- as a front for more of the same old interventionist ideologies. We consume too much oil, and we must be punished one way or another. Either global warming will choke us, or oil shortages will play havoc with the economy, or the government will regulate to achieve the same results.
There is, fortunately, nothing in the history of economics and resource depletion to explain exactly how peak oil theory works. On the contrary, the history of world oil and resource development points in exactly the opposite direction. Over time, prices fall and supply increases -- of just about everything, but especially energy. New technology constantly drives improvements in exploration, development, extraction and processing. To pick a couple of examples from Canada's oil history: The pre-tax price of a litre of gasoline, in constant dollars, has dropped steadily over the most of the last 100 years, despite constant warnings to the contrary. The chart nearby shows the general trend. There have been numerous spikes over the years, with the post-Iraq War spike being the latest.
Crude oil prices, thanks to oil sands technology and other developments, will continue to drive energy prices lower and boost supply. So will refining technology. Canada had 38 refineries in 1950 producing 86,000 million cubic metres of product daily. Today, 22 refineries produce 380,000 million cubic metres of product daily. So long as human ingenuity is allowed to flourish, there will be no peak.