BizzyBlog has officially hit the wall when it comes discussions of “record high” oil prices and “peak oil.” A quick definition of “peak oil” is this: “the belief we’re going to run out of oil all of a sudden and the world as we know it will end.”
Oil prices and “peak oil” dominate much of business news coverage. Along with the “housing bubble” (to be dealt with in another post in the future), they seem to be the only business and economics topics that break out from the financial pages to the front pages of American newspapers and the lead stories in TV newscasts. Especially as there is plenty of good economic news, even really good news, that deserves more attention, it’s getting very tiresome.
The breathlessness of the reporting about the oil price and supply situation has become nearly comical. My e-mail box is plundered daily, sometimes multiple times a day, and even occasionally once every 15 minutes, by “Breaking Business News” from CNN telling me that oil is up, down, or steady, that supplies are higher or lower, blah-blah. Guys, I subscribed to your e-mail service to get late-breaking news about the entire economy, not an oil-price ticker tape.
The oil obsession meter went into the red last weekend with The New York Times Sunday Magazine piece called (oh no!) “The Breaking Point.”
It naturally repeats the falsehood that the barrel price of oil and the gas price at the pump are at “record” levels, when on an inflation-adjusted basis they aren’t, and would have to go up in the neighborhood of 20% to get to record levels. A rare reference to that truth can be found in the eighth paragraph of this Associated Press report.
But the piece’s main purpose is to convince us that the supply of cheap oil is diminishing, that oil prices are likely to shoot to stratospheric levels in a relatively short time period, and that (of course) governments must “do something.”
The article reflects a fundamental lack of faith in the ability of the markets to adjust on their own. Just one example cited earlier by BizzyBlog: the “we’re running out of landfill space” preoccupation of the 1980s turned out, thanks to human ingenuity, to be a myth. Operators got more garbage into less space, and are continuing to do so. Crisis solved.
As to oil, economics blogger Freakonomics notes that the sky-is-falling crowd has repeatedly erred, but refuses to learn (bolds are mine in this and other excerpts):
One might think that doomsday proponents would be chastened by the long history of people of their ilk being wrong: Nostradamus, Malthus, Paul Ehrlich, etc. Clearly they are not.
What most of these doomsday scenarios have gotten wrong is the fundamental idea of economics: people respond to incentives. If the price of a good goes up, people demand less of it, the companies that make it figure out how to make more of it, and everyone tries to figure out how to produce substitutes for it. Add to that the march of technological innovation (like the green revolution, birth control, etc.). The end result: markets figure out how to deal with problems of supply and demand.
The incomparable Thomas “Four Hands” Sowell agrees (esteemed economist Walter Williams, no publishing slouch himself, gives Sowell this appellation because of prolific writing output). Sowell says it’s simply a matter of having the will to produce:
Today production is being held back …. by political hysteria whenever anyone suggests actually producing more oil ourselves. Organized nature cults go ballistic at the thought that we might drill for oil in some remote part of Alaska that 99 percent of Americans will never see, including 99 percent of the nature cultists.
People used to ask whether there is any sound if a tree falls in an empty forest. Today, there are deafening political sounds over oil-drilling in an empty wilderness.
Nor can we drill for oil offshore, or in many places on land, again for political reasons. Nor can we build enough refineries or even build hydroelectric dams as alternative sources of power.
Many of the same people who cry “No blood for oil!” also want higher gas mileage standards for cars. But higher mileage standards have meant lighter and more flimsy cars, leading to more injuries and deaths in accidents — in other words, trading blood for oil.
Apparently the only things we can do are the things in vogue among nature cultists and the politicians that cater to them, such as windmills and electric cars. That is why we would be better off if the government did nothing and let people adjust their own energy consumption individually in their own ways as the prices of gasoline and fuel oil rise.
Freakonomics goes further and calls the the oil price obsession “the media’s new version of shark attacks”:
So why do I compare peak oil to shark attacks? It is because shark attacks mostly stay about constant, but fear of them goes up sharply when the media decides to report on them. The same thing, I bet, will now happen with peak oil. I expect tons of copycat journalism stoking the fears of consumers about oil induced catastrophe, even though nothing fundamental has changed in the oil outlook in the last decade.
Unfortunately, The Freak is probably right.
Of course, sudden shocks, such as supply cutoffs by hostile countries and the like, could cause big price swings, and I won’t discount the potential negative consequences of a major supply disruption. But that’s not what the doom-and-gloom people are worried about. They think we’re sleepwalking towards disaster regardless of world events. They’re wrong, they’re incredibly annoying, and I’m not going to get sucked into it. While of course you should do everything you can to conserve energy and keep your spending on it under control, don’t be duped by the Chicken Little crowd.
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August 26, 9PM: Outside the Beltway Jammer.
August 27, Noon: Wizbang Carnival participant.
