Running Out of Oil?
Nicolas Loris /
As recent as last summer an article in The Independent, citing assessment from the lead economist at the International Energy Agency (IEA) warned that “The world is heading for a catastrophic energy crunch that could cripple a global economic recovery because most of the major oil fields in the world have passed their peak production.” The 2008 report urged that we are at a crossroads and we need to transition rapidly to a low carbon fuel economy. It’s certainly not a new argument; it was a consensus in the 1970s that we were running out of oil too. Since oil is a finite resource, as a matter of physics, we will eventually run out of oil says George Mason professor Don Boudreaux. But,
Conventional wisdom, however, often is handicapped by a poor grasp of economics. And among the important lessons of economics is that the supply of resources is less a matter of physics than of, well, economics. First, no mineral, no plant, no geographical location, no anything becomes a resource unless and until human creativity and ingenuity figure out how to put that thing to use in a manner that satisfies human wants. Petroleum was no resource to our ancestors who had yet to grasp the fact that it can be refined and burned in ways that improve the quality of life. In fact, I suspect that whenever that gooey, noxious black stuff appeared in freshwater creeks in pre-Columbian Pennsylvania, natives of that region regarded it as a nuisance.