Re:Peak Oil Perspective
by thrownaway2424 on Monday September 09, 2013 @04:07PM
(#6355803)
Oil will never "run out" it just becomes more and more expensive.
Well, the debate often gets off track, but the definition of the term "peak oil" is "when production stops increasing due to market demands and starts decreasing due to geologic control".
In other words, "when does long-term demand outstrip long-term supply?" The concept isn't to blame, it's just misinterpretation of it in the popular media.
At any rate, as you pointed out, the interesting question is "what does rising oil price do to the economy?".
Re:Peak Oil Perspective
by nostrademons on Monday September 09, 2013 @04:49PM
(#6356084)
In a free market, long-term demand will never outstrip long-term supply. Why? Because prices will rise to equalize them. As prices increase, long-term demand drops, and long-term supply increases, until they eventually equilibrate.
The problem with this description is that neither long-term demand nor supply is fixed but depends on long-term expected price.
In normal usage in economics the "long-term" refers to an equilibrium where supply matches demand. Demand never outstrips supply but instead drives up prices until a new equilibrium is reached at a lower quantity and some current petroleum users are forced into alternatives.
This is the essence of economics: the study of the allocation of scarce resources. Notice "study" as this is a completely natural process.
Re:Peak Oil Perspective
by randomdata on Monday September 09, 2013 @04:20PM
(#6355890)
Where I would say that peak oil is about exactly the points you raised, and has nothing to do with running out of oil. The "peak" refers to the point where oil becomes so expensive that demand wanes and production starts to decline.
"Peak" in peak oil, at least as I understand it, refers to "peak rate of extraction." Or at least that's what Wikipedia says.
Re: "peak price" -- the punchline is that demand is almost inelastic!
Re:Peak Oil Perspective
by randomdata on Tuesday September 10, 2013 @06:24AM
(#6359165)
They are one in the same, really. The rate of extraction is driven by demand, which directly equates to price (supply and demand). As oil becomes harder to find, it becomes more expensive, but extraction rates can continue upward until the very last drop if people are willing to pay the price.
Inflation-adjusted, the price of a barrel of crude oil was $23 in 1960, and has been averaging almost $88 in 2013. What does that do to, e.g., suburbs designed around 1960's oil prices?
Most of the interesting questions when it comes to oil have nothing to do with "what happens when it runs out?" The fun stuff is before then.