For years the environmentalist doomsayers have echoed the line -- "What will we do when the pumps run dry?" -- in an attempt to scare the public into believing that we are facing an impending energy crisis and at current population and economic growth rates the earth will be sucked dry of its last drops of oil in the next 40 to 50 years. Although their oil forecasts are a bit radical, their assessment of our inefficient energy consumption is right on target.
From the geologist's perspective, any non-renewable natural resource is "finite" in the sense that the earth holds a limited amount of fossil fuels and no economist, no matter how dedicated he is to the forces of supply and demand, has the power to subject decomposed plants and animals to over one million years of extreme heat and pressure to instantaneously create more fossil fuels. However, the real question which remains is -- WHEN exactly will we reach that point of "finiteness" and IS IT EVEN POSSIBLE in a free market system for us to ever exhaust the earth's oil reserves?
Although no one knows for sure exactly when we will devour those last few drops of oil, the question of "when" simply doesn't matter since the forces of the free market will never allow us to reach that point of exhaustion-- we will have already enhanced our oil drilling technologies and/or switched to alternative energy sources.
In his book "Population Matters," Julian Simon, Professor of Business Administration at the University of Maryland and author of numerous works concerning resource consumption and population economics, notes that the history of England's transition from firewood to oil exemplifies how impending scarcity leads one to develop new technologies and discover alternative energy sources.
As a result of deforestation in Seventeenth Century England and fears that the scarcity of firewood would hurt the country's iron industry, coal was developed as an alternative energy source. Later, in the mid-19th century, fears that coal was now becoming scarce led to the development of oil. This scenario so beautifully portrays the process by which resource scarcity inevitably leads to further technological advances and the discovery of new and more abundant resources.
Certainly when one considers that the United States consumes 17.6 million barrels of oil daily and that the world's current known oil reserves are predicted to last for only 40 to 50 more years, one begins to accept the doomsayers' hypothesis. However, "known reserves" are not static -- they vary with current technologies and economic conditions. As known oil reserves become more scarce and prices rise, we will either switch to a cheaper, alternative energy source or be willing to incur an increase in the price of oil. As long as the demand for oil continues to increase at its current rate, companies will be willing to invest more money in research and development and "known reserves" will be replenished.
On July 3 the New York Times reported that the Shell Oil Company and three partners recently announced plans to construct a $1.45 billion floating platform which will be anchored to the floor of the Gulf of Mexico by 4,000 foot-long cables. Although the 150,000 barrels/day that this platform is expected to pump is only a small fraction of the country's daily consumption, it will lead others in the industry to respond to the competition and invest in exploration and develop similar platforms in the Gulf which will in turn increase domestic production.
Not only are these new floating platforms one example of the latest technological breakthroughs in the industry, but oil companies have also been able to locate never before seen oil pockets deep within the earth's crust through the use of three-dimensional seismic exploration. In light of these new advances, how can one refuse to be optimistic and not stop for a moment to celebrate the remarkable achievements of mankind and our power to overcome adversity and progress to new heights!
But my faith in the free market system to solve environmental concerns only goes so far. For those of us who are confident that market efficiency will continue to provide us with cheap and abundant energy sources, we must also address the obvious contradictions we face in our inefficient consumption of energy.
In a piece published on February 15, NY Times reporter Agis Salpukas reaffirms that not only have more Americans switched to driving trucks and utility vehicles which are much less fuel efficient than cars, but we are driving more miles at faster speeds (since many states have recently raised their speed limits) which makes vehicles even more inefficient. Unlike the early-1980's when trucks were driven by only 20% of Americans, close to 45% of Americans are now driving luxury utility vehicles which on the average receive 5-10 mpg less than passenger cars.
Certainly I am not suggesting that individuals should not have the liberty to choose their own vehicles, but I do believe that since we live in a society which continually strives for economic efficiency, we too should be striving for efficiency in our energy consumption. (Automotive fuel consumption is just one of many examples of inefficient energy use in the U.S.)
If all along you have been heeding the doomsayers' shouts that in the next 50 years we will run out of oil, you have reason to calm down. The brilliance of the human mind and our ability to develop new technologies will surely provide us with the means for discovering untouched oil reserves deep within the earth's crust and developing new alternative energy sources. However, if we continue to bask in the glory of the free market system, we must continue to strive for efficiency in all of our actions, including our consumption of energy.
