To further complicate things, we can replace oil in different ways depending on cost and alternatives, which also depend on time. Toss in a wide variety of different priorities, and it becomes apparent why many predictions we've made tend to be inaccurate.
As for "we may find a better use down the road" -- sure, but for the purposes of resource planning, that statement is completely useless. You have to pick a probability, time scale, and value for your position to have meaning from the perspective of resource planning, and not coincidentally those are the exact prerequisites for taking a market position on the subject.
There are many things markets do poorly, but cutting through the bullshit, forcing you to formulate a meaningful position, and rewarding/punishing you appropriately is something they do very well.
Here's the difference: the river is not being treated as an unlimited resource, it's being treated as a free resource. Nobody genuinely thinks the river can dilute unlimited toxic waste, but someone does genuinely think they won't be held accountable for killing the fish. In contrast, nobody in the oil business could expect to "get away with" ignoring peak oil, because they could not expect their customers to buy products that they were unable to produce from oil that did not exist.
Markets do not address global warming, but markets do address "peak oil," and the staggeringly bad suggestions that get passed off as wisdom every time people start talking about "peak oil" type problems remind me why we put up with markets in the first place.
"Historically" we have been caring about such things for about one or at best two centuries, most of them with primitive technological means to gauge resources supply, so I'm not so convinced about said "track record".
It's not like we got it wrong for millennia. It's more like some warned ahead of time after we've started looking relatively recently historically, and because they got it wrong, we assume like the people in the boy and the wolf story that no such thing is ever possible (or possible to predict within some accuracy).
The crack in the dam for me was when I started reading about all the discussions of peak coal decades and decades earlier. Obviously we didn't move off coal in the 1850s-1910s due to mass shortages. So what happened? And how are current arguments for peak oil trying to improve, and avoid the old mistakes?
But the arguments weren't new. They were just the same, "this thing is finite and we're currently using it."
Where do these arguments come from, why are people so passionate about them?
I started to realize humanity has a really strong pessimism bias. I remember making that suggestion to a friend of mine, pumping gas some Saturday. I mentioned that maybe this whole peak oil thing was overblown. And he pointed to the pump and said, "Yeah, but you don't seriously think we're ever going to see gas slip below $4 a gallon again. That's pretty damning evidence right in front of you."
I said I guess not... only for gas to slip to the $2s shortly after and stay there for years. Meanwhile, consumption for vehicles itself seemed to be peaking.[0]
> oil is limited and not renewable, so peak oil is inevitable long term, period
This is the basic, prima facie case for all "peak X" arguments. Seems reasonable. So if there's a fallacy or bias floating around in here, where is it?
I think there are a few missteps. My biggest concern is how we jump from "finite" to "will inevitably be exhausted [on a time horizon that matters]."
There are lots of things that are technically finite but in no practical danger of exhaustion on timescales we should care about.
- There is currently a fixed amount of accessible uranium in the ground. By the time we use it all, the tectonic plates will have shifted such to reveal new deposits, that's the scale we're talking about.
- There's a fixed amount of energy in the moon-Earth orbital system, and tidal power (and to some extent wind power) exhausts some of it every time we use it to generate energy. I'm not worried about the moon crashing into the Earth.
- There are a fixed number of accessible diamonds, but our technology and skill at extracting them keeps outpacing our ability to use them all, so cartels have formed to artificially inflate the price.[1]
- Humanity keeps building new skyscrapers, but there are a fixed number of hectares on which we could build skyscrapers. And yet I'm not worried about South Dakota ever filling up with people and looking anything like Coruscant.
What's missing from the analysis then?
Scale, for one. I was shocked when I first read that we could store a thousand years of all American garbage in a landfill that would be only around 35 miles square, in a country with hundreds of millions of square miles of empty space.[2]
Maybe a bit of calculus as well. To know when a thing will be exhausted, we have to calculate the burn rate, the rate of innovation, and feedback systems like pricing that can alter outcomes. It's not sufficient to just jump to "there's only a fixed amount of X on Earth, therefore, soon no more X." That skips like eight steps in the analysis. Some of these are impossible to precisely estimate, but that's not an excuse for simply omitting any placeholder values from the analysis.
If we look at historical examples of resources that humanity extensively relied on, we find things like animal fats for light, literal horse power for locomotion, wool for clothing. A lot of animal products in that list.
We displaced all those things really rapidly, not because they were exhausted, but because we found something better. Electricity, combustion, cotton. But those aren't one-flip stories. The history of artificial light is a great example, we progressively moved from technology to technology, decreasing the work it takes to artificially light a room by stupendous orders of magnitude from one iteration to the next.[3]
It's reasonable to extrapolate then that we're going to do something similar for oil. But how? Where will these ideas come from? Well, we can already see the seeds planted for that in electrification of vehicles and continuing efficiency gains for renewables. Most of the leaps in efficiencies are black swan events though thta no one saw coming. Other times they're simply dedicated improvements to efficiency through applying existing knowledge, like Borlaug's green revolution in agriculture.[4]
Even though these are unexpected or seem pedestrian at first glance, this class of innovation keeps happening and leading to revolutionary changes. Maybe we'll still use oil for some things, just like we use kerosene and wood fired cooking when camping. It's contribution to humanity is primed to drastically change though, and not because of some apocalyptic moment where we suddenly can't find any more.
> hacks like fracking
Fracking is an interesting test case in the history of oil, not for what it reveals about innovation, but for what it revealed about the abundance of oil. At $4 a gallon, we assumed oil was scarce, that the middle east was running out. At $2 a gallon, well, it gets more complicated. Kleptocratic authoritiarians are indeed struggling to get the same returns they once had. Saudi Arabia has shown it is more than capable of producing at this price. Some analysis suggests Saudi Arabia would be capable of enduring $10 per barrel for extended periods.[5] There is so much easy oil in Saudi Arabia it's pretty unfathomable.
But on the tech more broadly, I worry this is moving the goalposts. The way we avert peak anything is through new technologies. It'd be like saying, "see, we were right to predict peak kerosene--it was only because of the inevitability of peak kerosene society resorted to 'hacks' like the invention of the modern electrical grid!"
I'm pulling a lot here from Jane Brox's history of artificial light, Brilliant, but if you look at other "history of tech" books[7][8][9][10][11] you get the same universal takeaway -- we systemically underestimate the compounding power of human ingenuity, or how massively small innovations will impact the course of things.
[Cont.]
The famous test of this is the Ehrlich bet.[12] Paul Ehrlich predicted the population boom would make commodities vastly more expensive over a ten year period. He lost the bet. Defenders have quibbled that if he had run it slightly differently, he could have won, that this might be down to timing. But research that bases commodity prices in hours worked to extract or generate, it's far more clear -- the amount of work we're having to do to get access to "finite" commodities is rapidly decreasing over time. How can that be? How does something fixed get steadily cheaper, across all these categories of commodities simultaneously?
The only explanation that fits the facts is that human ingenuity continually outraces scarcity, and that combination makes abundance naturally emerge.[13]
I know most neomalthusians find this... unpersuasive. But hopefully you can admit that it's at least not crazy to think this enduring trend, which persists pretty much everywhere we've measured it, will continue. That maybe this trend won't be suddenly displaced by an admittedly seemingly logical outcome that has simply never actually been observed.
> As long as X resource is cheap, we use it for whatever BS we make. When it gets rarer and pricier, sure, higher prices will regulate its use towards more serious stuff. But by then we'd already have lost huge, non recoverable, and often non recyclable either, quantities of it to BS uses.
There's an important separate question here in determining the proper discount rate for scarce goods. How much should we use them for society's goals right now, and how much should we reserve for 10 or 100 years? That's a really important question and I'm not sure we have a firm answer.
There are arguments to be made that future generations tend to be so much better off than previous generations so that we should not really worry about them. My grandparents spent something like $3500 on their first house. If the had the chance to go back in time and not buy it, but give me $3500 today, it would be a monumentally bad decision. They'd have to command a massive rate of return for that to be as meaningful to me as it was to them (I'm not sure there's any amount I'd take to deprive my loving grandparents of homeownership... maybe if I could like eradicate malaria in a country or save some huge number of lives with the money I'd have to consider it, but it'd certainly be more than $3500).
On the other hand, there are counterarguments that we should defer to future generations far more than we currently do, or that new trends like population decline or environmental issues might make some of these trends reverse.
One of the neat things is that if you think society is making the wrong call, you get a vote. You don't get to veto all of society, because there are reasonable differences of opinions. But if you think we're hastily exhausting oil, you just can hoard oil, and sell it at a handsome profit in retirement. You don't even have to physically possess it, you can just buy futures contracts.
If you're right, you'll not only be hugely rewarded as it gets more scarce and valuable, but your purchase will have slightly nudged up current prices to deter some of the most frivolous uses. If you really believe we're heading to peak oil, you might have a moral obligation to do this.
I would strongly recommend you do not. Most of the world thinks it's not going to turn out that way, and they've been right decade after decade, with small exceptions when cartels and wars have artificially interfered with supplies.
Maybe the pessimists will actually be right this time. I would not bet on it.
[0] https://www.bloomberg.com/news/features/2019-02-28/this-is-w...
[1] https://priceonomics.com/post/45768546804/diamonds-are-bulls...
[2] https://www.straightdope.com/columns/read/2346/is-recycling-...
[3] https://openlibrary.org/works/OL20272240W/Brilliant
[4] https://allthatsinteresting.com/norman-borlaug-green-revolut...
[5] http://graphics.wsj.com/oil-barrel-breakdown/
[6] https://openlibrary.org/works/OL20272240W/Brilliant
[7] https://openlibrary.org/works/OL6038624W/How_We_Got_Here
[8] https://openlibrary.org/books/OL24080190M/The_master_switch
[9] https://openlibrary.org/books/OL23276740M/The_box
[10] https://openlibrary.org/works/OL1958850W/The_Singularity_Is_...
[11] https://openlibrary.org/works/OL792952W/The_ascent_of_money
[12] https://yalebooks.yale.edu/book/9780300198973/bet
[13] https://www.instituteforenergyresearch.org/uncategorized/new...
Ever heard of the inductivist turkey?
"This turkey found that, on his first morning at the turkey farm, he was fed at 9 a.m.
However, being a good inductivist, he did not jump to conclusions. He waited until he had collected a large number of observations of the fact that he was fed at 9 a.m., and he made these observations under a wide variety of circumstances, on Wednesdays and Thursdays, on warm days and cold days, on rainy days and dry days.
Each day, he added another observation statement to his list. Finally, his inductivist conscience was satisfied and he carried out an inductive inference to conclude, “I am always fed at 9 a.m.”.
Alas, this conclusion was shown to be false in no uncertain manner when, on Christmas eve, instead of being fed, he had his throat cut. An inductive inference with true premises has led to a false conclusion". (Bertrand Russel)
(I though there's also a Black Swan NSS theme in this, but on a second thought the eventual exhaustion of limited resources is hardly an unforeseeable Black Swan -- whether people have bet on them being exhausted and lost a billion times in the past or not).
I'm quite fond of his version:
"We know that all these rather crude expectations of uniformity are liable to be misleading. The man who has fed the chicken every day throughout its life at last wrings its neck instead, showing that more refined views as to the uniformity of nature would have been useful to the chicken."
Notably, Russell does not abandon induction in that work, he seems to retreat to a probabilistic, almost Bayesian conception of it (along with a resignation that it seems the best we can do, but a passionate closing defense that it's good enough).
I'm very comfortable with that same probabilistic confidence approach here. (Hence the "bet" language.)
Humanity has frequently abandoned scarce resources upon discovering superior substitutes, while seldom abandoning them through exhaustion. Theories of economics and measures of human progress, while not being ironclad rules, provide rough explanations as to why this keeps happening.
So, sure, happy to concede it is not a foregone conclusion that humanity will always outgrow scarce resources. Nothing is ever 100% certain. But our certainty should generally increase with our observations of a trend, so it seems highly probable for any particular case.
It remains generally unwise to bet against all well established trends, the mere possibility of wrung necks notwithstanding.
Or, as Russell closed the work:
"That some risk of error remains must be admitted, since human beings are fallible. Philosophy may claim justly that it diminishes the risk of error, and that in some cases it renders the risk so small as to be practically negligible. To do more than this is not possible in a world where mistakes must occur; and more than this no prudent advocate of philosophy would claim to have performed. "
It's not a fallacy that we treat resources as limitless, and neither is peak oil. This or that peak oil announcement might be premature, but oil is limited and not renewable, so peak oil is inevitable long term, period. Already we have started to resort to hacks like fracking and lower EROI oil to get by.
>Nobody treats resources as if they’re limitless.
Plenty do. We consume and build stuff like there's no tomorrow. That we will adjust prices and production when we hit hard limits doesn't mean that we already take those into account and shape our use accordingly (based on actual priorities).
And of course we have tons of local (not overall market) cases where resources are treated like limitless without going into peak oil and such. E.g. a river that a factory uses as a dumping ground until the waters are toxic and everything in it dies is exactly an example of a resource treated as limitless.
As long as X resource is cheap, we use it for whatever BS we make. When it gets rarer and pricier, sure, higher prices will regulate its use towards more serious stuff. But by then we'd already have lost huge, non recoverable, and often non recyclable either, quantities of it to BS uses.
>If these conditions changed and wood for some reason became rare and expensive, it wouldn’t be used in the same way we use it now.
Which is a moot point, if by then we have exhausted say 80% of a resource for the previous frivolous uses, and we still need it for more serious uses going forward.