They're either ignorant, or desperate for attention. "It is not the earth's capacity to deliver more oil" that is at threat, points out Jérémie T.A. Rostan, "but our capacity to extract more oil from it." The worldwide problem isn't too little oil, it's too much politics.
With about a half-a-century's worth of proven oil reserves, the problem is not in bringing on new production. Resources are ample. "The problems are not so much below ground as above it," i.e., "not geological, but political." The problem is that governments forbid access to resources that they themselves fail to manage properly, and they impose barriers on private companies' investments in surplus oil production capacity — i.e., to the satisfaction of consumers' energy needs.The political problem effects both supply and demand.
Demand is rising in developng countries, true, but it is rising fastest in places that actually subsidise fuel prices -- "those emerging nations that also subsidize fuel prices, such as China, India, and — increasingly — the oil-producing nations themselves." In contrast, the data in BP's review show that 'consumers in Europe and North America are already responding to high prices by moderating demand'." (The same demand story is recorded here in NZ, where the price of petrol rose 7.3% and diesel rose 16.2% over the three months to May, while the value of fuel sales only rose 0.1% [ref, TVHE], and fuel taxes fell not a jot.)
Meanwhile, in the face of all this demand, and contrary to Economics 101 which tells us that all thing being equal greater demand leads to greater supply, worldwide supply is actually falling.
The recent upward trend of oil prices, [explains BP's chief executive Tony Hayward] is mainly accounted for, not by speculation, but by falling production. "Production by the Organisation of the Petroleum Exporting Countries," he writes, "fell by 350,000 barrels of oil a day last year."
In fact, global oil production started a downward trend in 2005. Now, the question is, how on earth is it possible that global oil production responds as weakly as it does to such strongly rising prices — $135 for a barrel of oil in 2008 being nearly twice the price of a year earlier.
No, it's not peak oil. It's peak politics. Notes Rostan,
Sadly, far less than 10% of the world's oil reserves are in countries that allow private companies to operate freely. This means that the latter and, through them, consumers, are denied access to far more than 90% of the world's oil reserves. State-owned companies control more than 65% of the world's oil reserves — e.g., in Saudi Arabia. As for the 25% left, they are mainly situated in countries such as Iran, Russia, Venezuela, etc., where, because of above-ground political factors, private Western companies have the greatest difficulties working efficiently...
This is the reason that Economics 101 is not able to work. All things are very far from being "equal." It's not Big Oil that's screwed the pooch, it's big politics. Oil companies are being prohibited from exploring and drilling for new oil, and the production of 90% of the world's existing fields is controlled by thugs like Chavez, Putin, Ahmedinejad and the House of Saud.
The thugs have different, if not perverse, supply incentives. The incentive for politically-driven oil producers is not to produce more oil when demand rises, but to produce less. The less that's produced, the more power the thugs have. All things in politics are very much not equal -- like Winston Peters on steroids, they like being the centre of attention, however they have to do it.
Just to conclude, then, with your lesson for today: It is not the earth's capacity to deliver more oil that is at threat, but our capacity to extract more oil from it." In other words: it's not peak oil, it's peak politics. The market can solve the energy crisis, but only if it's allowed to work.
Tell Jeanette and Helen next time you see them.