Reminder: We Are Never Going To Run Out Of Oil

In a chilling 2010 column, Paul Krugman declared: “peak oil has arrived.”

So it’s really not surprising that the national average for a gallon of gas has fallen to $2.77 this week – in 10 states it was under $2.60 – and analysts predict we’re going to dip below the two-dollar mark soon. U.S. oil is down to $75 a barrel, a drop of more than $30 from the 52-week high.

Meanwhile, the Institute for Energy Research estimates that we have enough natural gas in the U.S. to meet electricity needs for around 575 years at current fuel demand and to fuel homes heated by natural gas for 857 years or so – because we have more gas than Russia, Iran, Qatar and Saudi Arabia combined.

With prices returning to ordinary levels and a few centuries’ worth of fossil fuels on tap, this is a good time to remind ourselves that nearly every warning the Left has peddled about an impending energy crisis over the past 30 to 40 years has turned out to be wrong. And none of them are more wrong than the Malthusian idea that says we’re running out of oil.

Each time there’s a temporary spike in gas prices, science-centric liberals allow themselves a purely ideological indulgence, claiming – as Krugman, Paul Ehrlich, John Holdren and countless others have – that we’re rapidly approaching a point when producers will hit the maximum rate of extraction of petroleum. Peak oil. With emerging demand, fossil fuels will become prohibitive. And unless we have our in solar panels in order, Armageddon is near.

In a 2005 New York Times Magazine piece, ominously titled “The Breaking Point,” Peter Maass warned: “Few people imagined a time when supply would dry up because of demand alone. But a steady surge in demand in recent years — led by China’s emergence as a voracious importer of oil — has changed that.” I can remember sitting through a number of editorial board meetings during the 2000s watching peak oil cranks pull out charts that, with pinpoint accuracy, predicted exactly when this tragedy would hit– even as enormous new deposits were being discovered and advancements in productivity were debunking those claims in real-time.

And while everything is “finite” in a galactic sense, there has never been any consensus on when oil, gas and coal will hit peak production. Probably because we’re never going to run out of any of them. Julian Simon is still right, and spikes in oil’s price only create more innovation and better productivity:

The reason that the cost of energy has declined in the long run is the fundamental process of 1) increased demand due to the growth of population and income, which raises prices and hence constitutes opportunity to entrepreneurs and inventors; 2) the search for new ways of supplying the demand for energy; 3) the eventual discovery of methods which leave us better off than if the original problem had not appeared.

One thing is for sure, the technological advancements we’ve seen in extracting fossil fuels is light years ahead of the progress we’ve made in the state-planned alternative energy infrastructure. Yet, the same people who were skeptics of shale and are now skeptical of methane hydrate believe windmills will solve our non-existent crisis. Probably because progress can often be confused with wishful thinking.

After all, it might not be President Obama’s ideological obstinacy that sinks the Keystone pipeline, but economic reality. Saudi Arabia, the biggest OPEC producer, plans to cut its oil prices to preserve market share and hurt North American shale production. The Canadian Energy Research Institute estimates that the pipeline needs to extract a price of $85 a barrel to be profitable at all. The price is still right but it might not be for long.

So what’s the answer? Proposals to artificially spike energy prices, of course. One wonders why the Left never takes more credit for high gas prices. Isn’t that the objective? There are numerous benefits to high energy prices. For starters, it’s a great opportunity for politicians to get those speculators, predators, gougers and rent-seeking Big Oil executives into congressional hearings where they can be properly berated for an imaginary hold on fungible commodity prices.

But the truth is Democrats should be thanking them. As Steven Chu explained in 2008, “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.” President Obama conceded he favored a “gradual adjustment” in this direction. Now, an energy secretary doesn’t normally seek out ways to make energy more expensive, but these were heady times. There was still hope that Washington would pass cap-and-trade, a contrived marketplace that folds the arbitrary cost of progressive guilt into the price of energy use. Obama turned to other means to get the job done. But after six years of trying, we learned that the laws of economics can’t be circumvented. Which is great news for consumers, bad news for progressives.

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