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World Oil Price Peak Disputed


Rising oil prices have many consumers and business people wondering how long it will be before the price of a barrel of oil or a liter of gasoline returns to "normal." But some resource experts believe current prices are the new normality and tight supplies of petroleum are here to stay.

Tom Whipple writes and edits for an international energy newsletter outside Washington, D.C. In the past year he has written over 50 columns about the likely impact of what has been called "Peak Oil."

“What 'Peak Oil' means is that we are about halfway through all the oil under the earth."

More importantly, says Whipple, most of what is left will likely be far more difficult to extract than has been the case up to now. "It really does not matter too much how much is under the earth if you cannot get it out and get it to your gas station."

Whipple says that means energy prices are likely to remain high until alternative fuels can be developed, and/or human activities altered to lessen our dependence on petroleum. That transition -- the "Peak Oil" transition -- could take decades. And in the meantime? "Nobody really knows what is going to happen -- nobody has any idea what the world is going to look like as we transition from the oil age to, call it the 'post-oil age,' because it has never happened before."

But not everyone agrees with the Peak Oil theorists. Myron Ebell is director of energy and global warming policy at the Competitive Enterprise Institute, a Washington D.C. think tank that studies market forces. "I think that from the resource standpoint we care certainly about not running out of oil. I do believe that there are a lot of political obstacles to producing oil in the world."

He says one example of political obstacles that hold down U.S. oil production is the refusal of Congress to allow drilling in places where there are thought to be large oil reserves, in Alaska and off the Atlantic and Pacific coastlines.

But if the "Peak Oil" theorists are right, vast patterns of social behavior may be about to change. For example, the theory suggests Americans are likely to cut down on "non-essential" driving, and to carpool more often as oil supplies tighten and prices continue to rise.

Discretionary air travel is likely to decline as well, say the theorists, posing a major challenge for today's airlines.

Mr. Whipple says, "Right now we are seeing an awful lot of the world's airlines encountering a great big problem. A number of the smaller ones are really on the verge of re-structuring themselves."

The International Air Transport Association reports the combined fuel bill for all the world's airlines topped $92 billion last year, up 50 percent from 2004. Whipple says it is not hard to imagine future airfares increasing exponentially in response.

Even in areas such as landscaping and recreation, Americans and many others are likely to alter their purchasing decisions, and their behavior, in response to higher prices. Whipple says once people accept that oil price hikes are here to stay, their entire worldview is all but certain to change as well.