Kurt Cobb: The problem of induction and the blindness of fools

The problem with the future is that it’s not always like the past. In fact, were this statement not true, history would indeed be “bunk” just as Henry Ford once said. But, of course, history is a chronicle of what changed and therefore led to a future that was different from the past.

So, it is puzzling that such an obvious truism is so easily dismissed when it comes to the future of oil and energy in general. Enter one Porter Stansberry, an investment newsletter writer, who knows that “peak oil is an economic impossibility.” In the linked interview he likens oil to copper. We have found substitutes for copper, namely optical fiber, so we will certainly find substitutes for oil in the quantities we need at the time we need them. He insists though that we won’t need them for a very long time.

Stansberry is correct when he states that “[i]t does not naturally follow that a limited supply of oil would limit our production of energy.” There are certainly many other known ways to extract energy from the environment. Perhaps some of them such as widespread deployment of thorium-based molten salt reactors might validate Stansberry’s observation. But then he states:

The idea that we would lose the ability to create energy in an economic way, in my mind, is absurd. The entire history of the human population is nothing but falling prices for valuable commodities-not measured in dollars, but measured in real terms. I have no doubt in my mind that by the time I’m dead the price of energy in real terms will be far less than it is today.

Here he makes sweeping general statements about the past. It is not true that commodity prices have been falling in real terms for all of human history. There have been sustained bouts of rising prices. It is true that real prices for many commodities have been on a roughly downward trajectory from the beginning of the industrial revolution. This is in part due to the rising availability of cheap fossil fuel energy used to obtain those commodities, whether it is metal from ever lower grades of ore or rising farm productivity largely abetted by fossil fuel inputs such as nitrogen fertilizer from natural gas and pesticides and herbicides from petrochemicals.

Energy Bulletin