NYT Krugman: The Planet's Running Out of Oil

Robert Farago
by Robert Farago
nyt krugman the planets running out of oil

"Peak Oil"– the theory that the planet is in imminent danger of running out of oil– is not, as yet, a mainstream media shibboleth. But God knows they're flirting with the idea. After all, it jibes nicely with the dare-I-say-it liberal idea that American is an arrogant gas/oil hog whose energy/foreign policy chickens are coming home to roost. New York Times columnist Paul Krugman provides an excellent analysis of the Peak Oil perspective, outlining the three possibilities: nonsense (it's speculation), maybe (it's the market catching-up with growing worldwide demand) and yes (we're fucked). Krugman's eminently sensible argument takes a swing to the left when he cites billionaire political activist George Soros (of all people) for the speculation theory. From there, it's a short trip to yup, we're screwed, and, by implication, still screwing others. "Rich countries will face steady pressure on their economies from rising resource prices, making it harder to raise their standard of living. And some poor countries will find themselves living dangerously close to the edge — or over it. Don’t look now, but the good times may have just stopped rolling." Damn! That sucks.

Join the conversation
4 of 70 comments
  • EJ_San_Fran EJ_San_Fran on Apr 23, 2008

    Phil, What is the definition of peak oil? It's: the increase in demand exceeds the increase in supply (such that OPEC will dominate the oil market even more than it already does). Note: oil reserves don't appear in that sentence. Oil reserves don't matter if you can't extract them quickly. For instance: Canadian oil sands reserves are huge, but production from those are increasing so slowly that they barely make a blimp in the big picture.

  • Phil Ressler Phil Ressler on Apr 23, 2008
    What is the definition of peak oil? It’s: the increase in demand exceeds the increase in supply (such that OPEC will dominate the oil market even more than it already does). Note: oil reserves don’t appear in that sentence. Oil reserves don’t matter if you can’t extract them quickly. For instance: Canadian oil sands reserves are huge, but production from those are increasing so slowly that they barely make a blimp in the big picture. Reserves ARE supply, just with a different availability horizon. Whose definition do you want to use? Some stipulate *production.* The Oil Drum defines it as: ""...the term used to describe the situation when the amount of oil that can be extracted from the earth in a given year begins to decline, because geological limitations are reached." Notice that can be extracted is not limited to what is produced. Oil that is extractable but not extracted, by your definition, does not factor in Peak Oil. But Peak Oil is nonsense if extractable oil isn't the realm. "...Because geological limitations are reached." A possible two+ trillion barrels stash of shale oil unexploited in the US is not fallow because of a geological limitation. It's untapped because the price of oil hasn't risen enough yet to make extraction economically worthwhile. If the world holds back extractable oil from actual production, for environmental, aesthetic, economic or climate change purposes, then production would be artificially restricted and an artificial Peak Oil could be experienced if demand could not be constricted accordingly. If oil held back had a lead time of more than a year to bring to market, then the Peak Oil problem would be quite temporary. Peak Oil as a dire phenomenon has to be a holistic concept defined by the impossibility of expanding supply to meet intrinsic demand. Otherwise the fear of permanent price escalation driven by uninfluenceable scarcity would be either misplaced or an artifice. Canadian oil sands production is too slow to affect current estimate of Peak Oil because the price doesn't yet make scaled production economic or urgent. Shale oil is almost completely left in the ground today. But at the point prices support exploitation of both, any notion of Peak Oil being a present or past condition disappears and its imminence is shoved forward perhaps by decades or more. Peak Oil alarmists use the production definition as defense of the legitimacy of their fear, but they point to Peak Oil as proof we're running out of petroleum. You can't have it both ways. If you relate Peak Oil to imminently finite supply, then ignoring known reserves makes Peak Oil patently false. If you include known reserves in definition of Peak Oil, then you have to conclude you don't know enough to pinpoint Peak as an imminent or extant condition. You can't even fix any notion of what constitutes "affordable" oil. The world has shown remarkable resilience to wide price swings that are fundamentally unrelated to actual feasible supply. Just because we haven't pumped more doesn't mean the oil isn't there. Price changes everything, and price gets us closer to diversifying energy reliance even if plenty of oil remains available. Peak Oil at at $10? Sure. But at $200, peak is a different place on the calendar because supply expands. True Peak is reached when supply ceases to expand regardless of how high the price goes, due to geological limits, while demand outruns it. Phil

  • Stein X Leikanger Stein X Leikanger on Apr 23, 2008

    @KBW There’s nothing magical about this, we are now producing half the amount of oil we were producing in 1970. The facts are undeniable. Not if you make up new facts, such as 33 billion barrels found off Brazil - when the drill hasn't even breached the salt layer above the suspected reservoir. Or when you keep pointing to Canada and tar sands. Or when you show to oil inside the US, which is there for the taking. Why spend hundreds of billions on Iraq (which Greenspan in his memoir's first edition clearly stated was/is "fought for oil"), when you could use that money to extract all the oil that's there, ready for the taking, inside the US? :-) These are straw man arguments, and quite clearly delusional. Events will reveal the unavoidable truth: we're facing a serious challenge, and it's going to be interesting to see how we tackle it. (And spare yourselves the bother. Greenspan did say that. It was removed from subsequent editions. Here's the tale of the tape: http://www.timesonline.co.uk/tol/news/world/article2461214.ece)

  • Phil Ressler Phil Ressler on Apr 23, 2008
    Why spend hundreds of billions on Iraq (which Greenspan in his memoir’s first edition clearly stated was/is “fought for oil”), when you could use that money to extract all the oil that’s there, ready for the taking, inside the US? :-) Isn't that the best evidence that we're not in Iraq for oil? Greenspan wasn't in the Cabinet. He headed an independent monetary agency. He's not a foreign policy nor military expert, and he wasn't part of the administration that went to war. He's just a once-highly-placed powerful guy who's well-connected and has opinions about events outside his domain. Who cares whether he thinks the Iraq war was fought for oil? Surely the middle east would be geopolitically less important to us if it didn't have oil, but the Iraq war wasn't fought for oil, nor because of the dubious public argument regarding WMDs. The US went to Iraq after 9/11 as a key step in re-vamping a regional policy that after 30 years of escalating terrorism was clearly not working. We had tried benign neglect, episodic engagement, bribery, massive response to an emergency (Kuwait), shuttle diplomacy, more bribery, regime support, regime change. Afghanistan was the ER operation. Iraq began intended corrective therapy. Now, while the execution of the war was outstanding, the occupation was both afterthought and disaster because the war's planners only planned for the war to take out Hussein's state military. Rumsfeld et al didn't plan for taking custody of the country after winning. A victory began to unravel the moment we declined to put enough boots on the ground for occupation, and the unraveling accelerated the moment we stood aside while Iraqis looted their own country. Firing the army only further diminished prospects for timely success. Keeping the occupation force sparse in a misguided effort to limit the war's drain on resources and impact on taxpayers and the electorate has been faulty policy from day one. But the unspoken reason we went to Iraq was to put the American military squarely between Iran and Israel, and to engineer a democratic project in an authoritarian neighborhood. Would oil politics benefit if we were successful? Perhaps. But we didn't plan to nor move to seize control of Iraqi oil, and we accepted risk that other states might turn off the taps in protest. There are myriad initiatives the funds spent on Iraq could have been allocated to. But using money destined for the war and occupation instead for pulling unconventional oils out of the ground isn't one of them. The government has never been able to bring uneconomic energy to market before the market price supported the proposition. It's going to take roughly $200 oil to make shale oil viable for extraction. The Feds aren't going to meaningfully develop that resource with the market price more than 40% below that threshold. The electric car + massive solar and nuclear power comprise a dream combination but government money isn't making that happen sooner than battery and photovoltaic chemistry and economics demand either. Phil