Why (and How) We May Survive Peak Oil

I’ve written a fair bit recently about declining oil production, price volatility, economic crisis and painful adjustment to some kind of post-oil economy. My thesis, and it’s supported by considerable detailed research – including a major report (PDF link) Robert L Hirsch prepared for the US Defense Department that found the transition will take two decades and be extremely disruptive – is that our civilization is making a very big mistake by ignoring peak oil and defering whatever coordinated steps we may take to prepare for the coming time when the rate of oil production goes into permanent decline.

So-called “cornucopians” argue that we have nothing to worry about and that market forces will bring supply and demand into balance whatever happens to the rate of oil production.


The big problem with this dogmatic optimism is that there’s simply no guarantee markets will bring supply and demand into balance by delivering new sources of energy to market and providing new technologies to improve energy efficiency.

Peak oil implies not just high prices (which would provide unambiguous price signals to innovate) but extreme price volatility: wild swings in energy prices as the marginal cost of producing an additional unit of energy skyrockets, and the resulting super-spike in prices stalls economic growth.

In such a volatile environment of spikes followed by recessions, investment in new technologies actually slows due to a tightening of capital markets and the increased risk of soft or unreliable demand.

Raise the Hammer