The death knell for “peak oil”
Collapsing energy prices and bearish economic news have rattled equity markets, and the shock may not be over. With the world awash in oil and prices falling toward $26 a barrel, Iran is set to add to the oversupply now that international sanctions have been eased.
It’s as if the whole world were conspiring to bury the tattered remains of the “peak oil” thesis, so popular a few years ago.
As recently as 2009, a headline in The Denver Post announced a gathering of “peak-oil theorists” who insisted the planet was “running out of oil faster than society suspects,” and predicted the resulting spot shortages would “blow up prices, shock economies and destabilize governments.”
Little did they realize that the shale oil revolution in the U.S., already under way, was about to push domestic production to unforeseen heights. As it turns out, the real threat to stability around the globe was an oil price too low to support the budgetary commitments of petrostates such as Russia and Venezuela, among others.
Needless to say, peak oil — the high point of production after which it steadily declines and oil is never cheap again — is no longer on the horizon. Indeed, some experts are saying that huge upward price spikes aren’t likely in the future, absent war, because of immense supplies and the ability of producers to react faster than ever to market signals.
They may be proved wrong, of course, just as peak-oil pessimists were, but their logic at least bears considering.
Peak oil handwringing was popular for most of a decade, with even a somber editorial on these pages 10 years ago highlighting some of the arguments. Suffice it to say that human ingenuity and the profit motive are usually enough to overcome worries over resource scarcity. Or at least that has been true in the case of oil for all of its history: one prediction after another of impending permanent shortage followed by an unforeseen gusher of supply and diving prices.
Prices will eventually recover, of course. They always do. For the sake of Colorado jobs and market stability, we hope a bounce off the floor occurs sooner rather than later, even if peak oil worries have been laid to rest.