PEAK OIL….CODA….One final word about peak oil. During my series last week I never reproduced an actual chart of peak oil, so here’s one now. The chart below is from former oil company executive Colin Campbell, and his method of constructing it is simple: he estimates oil production from every possible source, including future production from deepwater and polar oil, and adds them all up. The result is his prediction that global oil production will peak in about 2007 and then start declining.

Now, I happen to think Campbell is overly pessimistic, but that’s not really why I reproduced his chart. Instead, take a look at oil consumption from 1979 to 1982, after the Iranian revolution caused crude oil prices to double. As you can see, world oil consumption dropped by about 15%.

There are two ways you can interpret this 15% decline:

  • Market forces work! Prices went up, consumption went down, and the world didn’t end. It is possible to reduce oil consumption after all.

  • Holy cow! Sure, oil consumption went down, but it took the longest and deepest recession since World War II to accomplish it.

Both of these interpretations are correct. High prices do cause consumption to decrease, and if prices spike again consumption will decrease just as it did in 1979. If consumption were cut 15% today, it would reduce our oil use by about 13 million barrels per day, restoring our spare capacity to normal levels and probably putting off peak oil until 2020 or 2030. This would go a long way toward giving us the time we need to work on alternatives.

On the other hand, it would be nice if we could figure out a way to accomplish this without a deep and painful worldwide recession. (Or maybe a series of them.) That’s the point of supporting a serious energy policy: in return for some moderate pain today it substantially reduces the likelihood of massive pain in the future.

This is why I think peak oil is a serious problem: at some point consumption has to drop, and I’d rather not see it forced on us by economic upheaval.

However, it’s also why I’m not a hyper-alarmist: as bad as the 1980-82 recession was, it wasn’t the end of civilization as we know it. If that’s what it takes to get us to reduce oil consumption and get serious about developing alternative energy sources, we’ll live through it. And I have little doubt that given 20 or 30 years of motivated effort, we will develop alternatives.

An awful lot of peak oil theorists seem skeptical that market forces have any effect at all, and as a result they predict worldwide calamity as soon as production peaks. History doesn’t back that up. Eventually, high prices will cause consumption to drop and will spur both new exploration and development of new energy technologies. If we twiddle our thumbs and wait for a recession to force this to happen, that’s not a future to look forward to. But it’s not a future of bicycles and truck farms either.

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