How many times have you heard it?
The world’s reserves of oil will be depleted by 2050, 2080, the next century, five weeks from Tuesday.
I’m not going to get into endless debates about how much oil is still in the ground here.
The fact is that anyone who thinks that oil (or any other commodity) can actually run out doesn’t understand economics. Economics, as is well known, is the bastard spawn of Human Psychology and, err, we’re not too sure about the father, some say he might have been a statistician, other accounts vary. But its matriarchal lineage at least suggests why those of a left-leaning bent are easily drawn to simplistic nostrums – the past century is strewn with evidence that socialism attracts those impaired with a pathological inability to understand fundamental human nature (or basic economics).
I don’t doubt that demand for oil will increase very sharply and likely very soon. The West shows no signs of voluntarily kicking its dependence on black gold and the rapidly growing Far East economies, particularly China and India, require oil to fuel their very expansion not to mention the demands of their increasingly wealthy populations.
But this is not going to result in the oil wells or petrol pumps abruptly running dry one morning, because for one thing the supply of oil is surprisingly elastic and subject to political machinations.
What will happen is that the price of oil will rise. There will continue be oil – for those who can afford it.
Oil, oil everywhere but not a drop to burn.
Eventually oil will price itself out of the market. A critical mass of people will no longer be able to pay the going rate and will be forced to abandon oil and all that relies upon it.
When this happens, oil will become forevermore irrelevant to these disenfranchised populations and “alternatives” will be forced to emerge.
What form these alternatives might take is anyone’s guess. Maybe an affordable replacement fuel will be developed or discovered.
Perhaps society will reorganise to keep the movement of people and goods to a bare minimum – even our present technology could go a long way to achieving this (think working at home, getting food and other goods delivered rather than everyone all going to offices and shops).
It could get extremely nasty of course. We might discover that there simply is no viable alternative to oil – the collapse of society, mass starvation, genocides and/or global war all being very possible consequences.
But however it pans out; the world will not actually run out of oil.
It will simply find that it can no longer afford it. Now some might argue that effectively this amounts to the same thing – no available oil – but there is a difference.
If the price of oil did not rise as ever more people consumed it then indeed it would one day just run out. The Manana effect would keep us all dancing the Tango of Tomorrow till there really was not a drop left.
Not gonna happen.
Despite the best efforts of many a Communist regime, the principles of supply and demand remain alive and kicking. We are not going to metaphorically walk off a cliff like Wiley Coyote; the oil problem is going to creep up on us relatively gradually and very, very painfully.
We will face no choice therefore but to address the issues as they begin to pile up. Passively waiting for the big crunch is not a realistic scenario.
Like steam, coal, sails, horses, wood and whatever else has underpinned all societies that went before, oil is not going to disappear from our world. Our dependence on it will though.
Ironically, the price of oil will eventually return to what it once was – almost nothing. The customer always sets the price and once we have been forced to abandon oil as a viable energy source we will value it accordingly.
