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Peak oil theory and the green energy fad both arise from a failure to understand how markets work
Half a dozen years ago, the late peak oil fanatic Matt Simmons claimed in his book Twilight in the Desert that the Saudis were lying about their production capabilities. Earlier this year, Jeff Rubin, a former chief economist with the CIBC who had gone off the economics reservation to start preaching at the church of sustainability, took up the claim.
Well, if the Saudis were lying, it might not now matter so much. Their new concern seems to be their ability to sell what they do produce. According to an intriguing piece by the Post’s Yadullah Hussain on Monday, the Saudis are now concerned about the prospective boost in North American petroleum production displacing their oil, whatever the Keystone XL protesters think they might have achieved.
Khalid Al-Falih, chief executive of Aramco, the giant Saudi production company, not only admitted that non-conventional supplies — shale gas and oil — presented a powerful prospective competitor for Saudi oil, he suggested that green alternatives, which need to be heavily subsidized, are a bust, not least because of “shifting environmental priorities.”
How far those priorities might further shift as the result of a new release of climate emails this week remains to be seen. Terence Corcoran demonstrated on Monday that the latest IPCC pre-report certainly further reduces the “settledness” of the science. Meanwhile, Ross McKitrick confirms elsewhere on this page that the IPCC process is a possibly irretrievable mess. The official climate conference that begins next week in Durban is guaranteed to produce little except hefty expense chits.
As if all this wasn’t bad enough for peaksters and warmists, there comes the cascade of news that the end of petroleum may have been greatly exaggerated. Peak oil hysteria has peaked. No longer does an assorted array of renegade anti-economists, loopy investment gurus, and end-is-nigh lefties hold much credibility, even for a doom-craving media.
The peaksters claimed that the world was on the point of reaching an oil production tipping point. After that, the laws of the market — which these individuals never understood in the first place — would cease to function and the Four Horseman would gallop abroad. The solution was much tighter control by governments, and draconian restrictions on personal freedom. Strangely, the statist soulmates of the peaksters were those in the climate alarmist community who complained that petroleum might not run out soon enough to stop the global climate from self-incinerating. The solution this latter group recommended was, er, much tighter control by governments, and draconian restrictions on personal freedom.
The central nonsense of the peak oil case was that peak production of any resource would lead to the end of markets and civilization as we know it. Increasing scarcity merely means higher prices, which promote conservation and make previously marginal supplies viable. They also boost the search for economically viable alternatives.
For the rest of this column, please go to the National Post/Financial Post website: http://opinion.financialpost.com/2011/11/22/peter-foster-peak-oil-vanishes-peak-green-arrives/