Peak Oil A Long Way Off

by Stuart Shapiro

Environmentalists have typically given two rationales for cutting back oil consumption (aside from national security, which isn’t exclusive to environmentalists). First are what economists cause externalities such as pollution and climate change. Second is the argument that we will run out of oil, that “peak oil” consumption was near. George Monibot convincingly destroys the latter argument.

A report by the oil executive Leonardo Maugeri, published by Harvard University, provides compelling evidence that a new oil boom has begun. The constraints on oil supply over the past 10 years appear to have had more to do with money than geology. The low prices before 2003 had discouraged investors from developing difficult fields. The high prices of the past few years have changed that.

Maugeri’s analysis of projects in 23 countries suggests that global oil supplies are likely to rise by a net 17m barrels per day (to 110m) by 2020. This, he says, is “the largest potential addition to the world’s oil supply capacity since the 1980s”.

Environmentalists have done themselves a disservice by crying wolf on peak oil. As the price of oil goes up, it becomes more lucrative to extract the vast reserves that are harder to get. Because “peak oil” has been proven wrong, the public is less likely to believe warnings about climate change and other pollutants. And that is a tragedy because this is why we really have to cut back on oil (and coal).

About Stuart Shapiro

Stuart Shapiro Stuart is a professor and the Director of the Public Policy program at the Bloustein School of Planning and Public Policy at Rutgers University. He teaches economics and cost-benefit analysis and studies regulation in the United States at both the federal and state levels. Prior to coming to Rutgers, Stuart worked for five years at the Office of Management and Budget in Washington under Presidents Clinton and George W. Bush.

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