Wednesday, March 30, 2005

Forecasting the peak

With so many forecasts now put forward concerning the peak in world oil production, how does one sort through them and makes sense of them? It turns out that somebody has attempted the task. A summary is available here. While the result gives us no precision, it should give us no comfort. If the peak is close by, we are simply not prepared for it. Even if it is 20 or 30 years hence, we will need to focus every bit of our ingenuity, political courage, and common purpose to make a successful transition as this report from the U. S. Department of Energy suggests.

(It's worth noting that the oil optimists almost always make the argument that the peak is far away, and therefore, we have plenty of time to prepare for it. They never, in my experience, claim that if the peak is soon, the marketplace will solve everything. This is a tacit admission that the lassiez-faire marketplace solution will turn out to be disastrous under a scenario that includes an imminent peak.)

The authors of the report entitled "Forecasting the availability and diversity of global conventional oil supply" believe that despite the uncertainty inherent in the predictions which range from 2004 to 2053, given the scale and seriousness of the problem, we shouldn't wait to prepare:

The market can be powerful thing, but they [price increases] must be efficient enough to spur development of these alternatives and end-use technologies in time to offset falling conventional production. Given that the oil prices needed to spur this development at the necessary scale [aren't] likely until the time of peak, assuming that markets can ensure timely transitions seems unwise....

The prudence of the precautionary principle seems self-evident here - especially so because most of the oil necessary for the peak to occur in 2037 has not yet been discovered....
For an explanation of why market prices may not signal an impending peak until shortly before it occurs, see my previous post, Faith-based economics II: The case of oil's sudden scarcity.

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