Peak Oil News: Energy Alarmism: The Myths That Make Americans Worry about Oil

Monday, June 18, 2007

Energy Alarmism: The Myths That Make Americans Worry about Oil

cato.org


By Eugene Gholz and Daryl G. Press

Executive Summary (Full Text - pdf)


Many Americans have lost confidence in their country's "energy security" over the past several years. Because the United States is a net oil importer, and a substantial one at that, concerns about energy security naturally raise foreign policy questions. Some foreign policy analysts fear that dwindling global oil reserves are increasingly concentrated in politically unstable regions, and they call for increased U.S. efforts to stabilize—or, alternatively, democratize—the politically tumultuous oil-producing regions. Others allege that China is pursuing a strategy to "lock up" the world's remaining oil supplies through long-term purchase agreements and aggressive diplomacy, so they counsel that the United States outmaneuver Beijing in the "geopolitics of oil." Finally, many analysts suggest that even the "normal" political disruptions that occasionally occur in oil-producing regions (e.g., occasional wars and revolutions) hurt Americans by disrupting supply and creating price spikes. U.S. military forces, those analysts claim, are needed to enhance peace and stability in crucial oil-producing regions, particularly the Persian Gulf.

Each of those fears about oil supplies is exaggerated, and none should be a focus of U.S. foreign or military policy. "Peak oil" predictions about the impending decline in global rates of oil production are based on scant evidence and dubious models of how the oil market responds to scarcity. In fact, even though oil supplies will increasingly come from unstable regions, investment to reduce the costs of finding and extracting oil is a better response to that political instability than trying to fix the political problems of faraway countries. Furthermore, Chinese efforts to lock up supplies with long-term contracts will at worst be economically neutral for the United States and may even be advantageous. The main danger stemming from China's energy policy is that current U.S. fears may become a self-fulfilling prophecy of Sino-U.S. conflict. Finally, political instability in the Persian Gulf poses surprisingly few energy security dangers, and U.S. military presence there actually exacerbates problems rather than helps to solve them.

Our overarching message is simply that market forces, modified by the cartel behavior of OPEC, determine most of the key factors that affect oil supply and prices. The United States does not need to be militarily active or confrontational to allow the oil market to function, to allow oil to get to consumers, or to ensure access in coming decades.


Eugene Gholz is assistant professor of public affairs at the LBJ School of Public Affairs at the University of Texas at Austin. Daryl G. Press is associate professor of government at Dartmouth University.


4 Comments:

At 10:22 AM, June 19, 2007, Anonymous Anonymous said...

The problem with this analysis is that it ignores the fact that oil is a limited resource. Historically there is plenty of evidence as to what happens in a country when oil peaks as it did in the United States in 1970, as predicted 15 years earlier by M.K.Hubbert. What happened is a quadrupling of efforts to extract more oil, but a inexorable decline in oil production nonetheless. Oil is limited, and production follows a bell shaped curve. We are near the top of the curve right now, and faith in 'markets' and so forth will never change this reality. Fighting over the remaining oil is unethical. Are we going to continue to kill eachother to scramble for the remaining oil, as in Iraq? Or are we going to make a major effort to wean ourselves off oil now, by moving to solar and wind?

 
At 9:15 PM, June 19, 2007, Anonymous Benjamin Cole said...

Actually, India's oil demand is going nowhere. Up just 0.6 percent in 2006, and was down minutely in 2005. Check BP world stat review, on their website.
World oil demand was up 0.7 percent in 2006, and conservation and alternate fuels are just gaining traction now.
What we are really seeing; Peak Demand. At more than $60 a barrel, we are seeing Peak Demand. Unless prices come down, demand will go down.

 
At 9:16 PM, June 19, 2007, Anonymous Benjamin Cole said...

At more than $60 a barrel, we have seen Peak Demand, not Peak Oil. Check out BP latest world stat review, on their website. Demand is up only 0.7 percent in 2006. Probably will not go up at all in 2007.

 
At 10:14 PM, June 21, 2007, Anonymous Karen said...

I think many countries right now are stocking up on oil as a back up plan in case oil will ever run out. We can't blame them for preparing their country for the big problem

 

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