Side-bar: Peak Oil Production

10/14/2012 11:00:00 AM
I sometimes come across people talking about what's wrong with the economy who list as one cause the fact that estimates show we are currently at peak oil production around the globe. Its one of those things that sounds bad, and that people think makes sense, but really isn't and doesn't.

What is peak oil production? It means that oil production now is both higher than it ever has been, and higher than it ever will be in the future. If we accept the premise that economic prosperity is directly caused by oil production, then this means that the economy right now is better than it ever has been or will be. In otherwords, while we may worry about the future, we ought to be pretty happy with the economy right now.

But this is not the case. Oil production is up, but aggregate production is not.

Also, quite frankly, the prospect of oil becoming increasingly scarce doesn't frighten me a whole lot. Yes, we use lots of oil right now, but we are by no means dependent on oil. The fact is that we don't even need oil for energy at all. We have tons and tons of alternatives, such as coal (and lots of it), nuclear, wind, solar, hydroelectric, natural gas, etc. Oh, and by the way we can always make more oil from algae. The real concern is not in the energy sector at all: we ought to be far more worried about running out of oil to make plastic than about energy. But even there oil is not indispensable--it is possible to get by with less plastic, possible to recycle plastic, possible to make oil from biomass, and possible (I'm told) to make plastic from other sources of hydrocarbons besides oil.