Home » Commodities » The Myth of Peak Oil

The Myth of Peak Oil

Peak Oil Chart

Projection of Peak Oil

In continuance of the Myth series, today we explore “peak oil.” Last week, an IEA whistleblower made headlines by stating, “We have [already] entered the ‘peak oil’ zone.”  This has obviously caused some stir among environmental experts and politicians.

What is Peak Oil?

Peak Oil is the period of time in which we start finding fewer and fewer places to extract oil. Imagine a bell curve which represents access to oil, peak oil would be at the very tip of the curve, thus the term “peak oil” (see image at right). It’s at this point, it is said, that oil prices will increase at an exponential rate because finding oil fields will become harder and harder. And since our economic infrastructure is based on cheap oil, it will devastate our economy.

Virtually everything we use is based on oil; plastic, rubber, fuel, etc. If the cost of oil rises too quickly, it could cause a snowball effect of rising prices in virtually every product we use. Thus, the collapse of our very way of life.

The Free Market Solution

While this post is titled The Myth of Peak Oil, it’s actually more about the myth of collapse due to peak oil. Scientifically speaking, peak oil makes sense. There are only so many places we can drill before we eventually run out. And, aside from the Abiotic Synthesis Theory, there is no way to quickly replenish those wells.

However, despite this “doomsday” scenario of running out of oil, the free market has the solution. Or, let me rephrase: the free market is the solution.

The free market has this uncanny ability to adjust to consumers’ demands. If demand for a product increases, the market will adjust their supply accordingly. In this case, demand for alternative fuels will force manufacturers to increase supply in those alternative fuels, be they natural gas, electricity, hydrogen, or whatever. Instead of plastics made from oil, perhaps supplies of plastics made from hemp or other materials would increase. As more of those alternative sources are used, the costs associated with those items will decrease.

Will product prices increase overall after peak oil? Only the free market can tell you that. It is possible the prices will increase. However, unlike what the doomsdayers believe, they will rise gradually, not immediately. Eventually, those increased prices will top off as well, as the costs of alternative sources decrease because of increased usage.

So, in the event that we’ve already reached peak oil, the free market is the only solution for preventing a total economic collapse.

Advertisements

2 Comments

  1. pendantry says:

    ‘plastics made from hemp’? What on Eaarth are you smoking?

  2. Ron Wheeler says:

    I can’t really detect sarcasm, so are you being serious? If so, just visit http://en.wikipedia.org/wiki/Hemp_plastic. It’s not a popular method of making plastic since it’s currently more expensive to make (and illegal to harvest hemp in the US). However, Canada and China are two countries that have been somewhat active in making hemp plastic.

    Whether or not hemp plastic is actually viable long-term or not is up for businesses and consumers to decide. But it is possible to make.

    http://www.hemp.com/hemp/plastic/

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: