Remember "Peak Oil?" The world was running out of oil, we were told: Prices would soon skyrocket, and we had better find other fuels.

Well, that argument didn't work out so well for environmentalists, did it? As oil reserves and those of other carbon fuels became scarce and prices rose, the law of supply and demand kicked in. The industry invested the profits from those higher prices in new technologies, and the oil barons found even more destructive ways to extract oil and gas-by exploiting the muck from tar sands, inventing hydro-fracking, and despoiling sources in developing countries.

So now, oil is cheaper than it's been in years, about $66 a barrel. Regular unleaded gasoline can be had for well under $3 a gallon.

One of the few things sustaining U.S. consumer purchasing power in the face of dismal wages is close to $100 billion saved in energy costs. OPEC's pricing power has been broken, and the United States is about to surpass Saudi Arabia as the world's largest oil producer.

Whoopee, energy self-sufficiency! Take that, enviro-pessimists.

World daily oil production has surged, from about 75 million barrels in 1999-when peak oil predictions were popular-to more than 90 million barrels today. Estimated reserves keep increasing, as well.

Conservative economists like to crow that projections based on current technologies are invariably too pessimistic

. In 1990, environmentalist Paul Ehrlich lost a famous bet with economist Julian L. Simon, on whether prices of five rare commodities would rise or fall over a decade. Simon was right that high prices and technology would create substitutes, and prices duly fell.

By the same token, technology has allowed more sophisticated exploration of carbon fuels, and falling energy prices. All of which totally misses the larger point, namely that the market can't competently price the environment.

Cheap oil, of course, is a curse. It promotes increased use of carbon fuels at a time when we should be investing massively in substitutes. And the apparent plenty of oil and gas takes the spine out of most politicians.

U.S. Department of Energy

The smart money thinks it's only a matter of time before President Obama (speaking of spine) caves on the Keystone Pipeline. After all, if Canada doesn't pump all that crud in our direction, the Chinese are happy to take it. And there are those tens of thousands of jobs for the Gulf coast. They might as well go to Americans, right?

It's true that a blowout of the pipeline somewhere along the route would be catastrophic, just as it's true that the pipeline symbolizes everything wrong with the current energy path. But we could block that pipeline and still face catastrophic climate change.

Obama, to his credit, did belatedly allow the Environmental Protection Agency to tighten standards on health-destroying smog (ground-level ozone)-more than three years after the White House killed similar proposed regulations-in a craven suck-up to business after the Democrats' 2010 mid-term defeat. Still the new ozone regs are but a baby step.

The fact is that markets price energy wrongly. They price oil and gas based on current demand and supply, and not based on the costs to the planet in pollution, global climate change, sea level rise, and more. This is, as Lord Nicholas Stern famously put it, history's greatest case of market failure.

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Recent events demonstrate the sheer radicalism of the necessary cure. Business as usual is just too convenient, too easy, and incremental change will not save the planet.

Sure, oil production will peak at some point. But by then the earth could be a very unpleasant place. Sorry, folks, but the argument that we are running out of oil just doesn't cut it. If only things were that simple.