Mixing renewable Apples and finite Oranges

Is there an editor in America who can write a piece that makes sense? Look how something that ought to remain purely scientific is politicized and played with like football between the Left and the Right. You get a taste of this silly game when you read: “'Peak Oil' Debunked, Again,” an editorial of the Wall Street Journal that also came under the subtitle: “The world relearns that supply responds to necessity and price.” It was published in the Journal on December 5, 2014.

Like the subtitle of the piece suggests: “supply responds to necessity and price” but that's only if (a) the supply is renewable, which means it can be replenished at will, or that (b) the supply is finite but abundant for now. That is, the world will never run out of apples because they can always be planted and replanted. But a country like Indonesia did run out of petroleum because there was a finite quantity of it in that country, and most of it was extracted. The same will eventually happen to the other oil producing countries … each in its own time.

Unable to differentiate between what is finite and what is renewable, the editors of the Journal cite the example of predictions that warned the “world is running out of soybeans, helium, chocolate and tungsten.” Well, it seems that the people who made those predictions did not know any better than the editors who are now quoting them. The reality is that soybeans and chocolate are renewable resources, and as long as someone is willing to pay for them, someone else will plant them and supply them. But when it comes to helium and tungsten, there are only so much of them on this planet. Their natural occurrence will eventually be exhausted, and they will have to be recycled where possible, or brought to Earth from asteroids or other planets.

The question is this: When will exhaustion happen for each finite commodity? The answer depends on having accurate and powerful instruments able to detect exactly how much of each commodity there is on this planet, and how difficult (therefore how costly) it will be to extract them. This is where people like the editors of the Journal get confused. They seem to believe that everything is renewable, and all that is needed is the ingenuity to extract them the way that shale oil and shale gas were brought on stream at the moment that “peak oil” was thought to have been reached.

Well yes, peak oil has indeed been reached if we speak in terms of “conventional” cheap-to-get-at oil. And this is why we started to develop the more expensive, hard-to-get-at oil. But that too will reach a peak someday, and there may be another source of oil to exploit that we haven't discovered yet, or there may not be. In the latter case, we shall have to count on developing another source of reliable energy because it is the one commodity that cannot be recycled. It is also the one upon which our whole civilization stands.

And while the Left and the Right are battling it in America as evident by the give and take that is unfolding between the editors of the Journal and Paul Krugman, jingoism has inserted itself in the debate. Where Krugman has remarked that the emerging economies of the world are pushing the price of commodities up, and asserting that America is a bystander in this story, the Journal editors have replied that far from being a bystander, America has been the innovator. To wit: “U.S. production will surpass Saudi Arabia's 9.7 million barrels a day, and Russia's 10.3 million barrels.”

But that's not all because the editors have a theory as to why “the end-of-oil myth persists.” They say that some people wish to see the end of fossil fuels to serve a larger political agenda. They also say that other people wish to see money poured into alternative energy sources. But while all of this is unfolding among the chattering classes, the tug of war between the American oil drillers (OD) and Saudi Arabia (SA) rages on like this:

OD: You people are trying to have it both ways. You want a high price for your oil but when this gives us the incentive to pump our own and compete against you, you lower the price to keep us out.

SA: You're right. We are playing the game you have played for a long time. You kept your expensive oil in the ground and used our cheap oil to get wealthy. Had we done nothing, our oil would have been exhausted and we would have been forced to buy your oil at a higher price. But we took back our oil, and we're getting for it the high price we'll be paying you when we exhaust ours. In the meantime, we don't want you to ride on our coattails and profit from the high price we're engineering by fixing the levels of production.