Peaked Oil, OPEC, and other shenanigans

So everybody’s heard of Peak Oil at this point, even if some people are still in denial. But that denial is getting progressively tougher to maintain. Even the Wall Street Journal (review here), which has historically denied it completely, has finally fessed up to “plateauing oil”, and a “limit looming on production” – they can’t keep up the farce that oil production will continue to increase indefinitely anymore.

If people were content with leveling off (which they’d refer to as “stagnation”), it wouldn’t be that big a deal. Gas prices are high, but they wouldn’t continue to get higher. But instead, the overriding theme is “bigger-better-faster-more”, which means that the demand for oil will continue to increase. When demand is high and supply low, prices go up. Simple economics, and it doesn’t require more than half a brain to see it.

So not only does the price of gas continue to increase, but the price of everything else that relies on oil to move around the country increases. These days, buying local requires you to go to certain stores, or at least certain sections of a store, and usually to pay more. But as the cost of moving stuff increases, local goods will become cheaper and more prevalent.

But that’s another post. I’m just dealing with the oil here. A couple weeks ago, Bush implored Saudi Arabia to increase oil production. They told him to stuff it, and to get the US economy and foreign policy under control, because those are the factors that are really driving up oil prices. (The economy obviously isn’t helping, and the foreign policy thing may well be true, but I don’t know enough about politics to speak on that.) Now the US Secretary of Energy is making the same plea, likely with the same result.

But seriously, what motivation does OPEC have to increase production just to reduce cost to the rest of the world? The CIA’s World Factbook says (under Economy, halfway down the page), “High oil prices have boosted growth, government revenues, and Saudi ownership of foreign assets, while enabling Riyadh to pay down domestic debt.” It’s a win-win.

But the truth is that Saudi Arabia can’t increase production. We’re entering the Tough Oil Era. We’ve already pumped all of the “easy oil” out of the ground, and what’s left is getting progressively more difficult to get to, whether because it’s in hazardous environments, logistically inaccessible, or just scattered in small, economically inviable pockets.

It’s not OPEC’s fault that they’re not increasing production. It really is getting tougher, just to maintain production, let alone increase it. But it’s safer to let the rest of the world think they’re being snobbish than to admit that they can’t increase production. Once people realize that dipomacy is ineffective, then they start looking at military strategies. So all the Saudis are actually doing is buying time. But really, that’s all any of us are doing, trying to put off the crash a bit longer.