Peak Oil And Generic Economic Doom

Having grown up in the 70s, I have vague memories of hearing words like “inflation” and “energy crisis” whenever my parents watched boring grown-up shows like The News. That’s why I refuse to gripe about gas prices: because I don’t want to turn into my mother.

I will, however, gripe about peak oil, since they never said anything about it. Jackson over at the Art of the Possible wonders how high we can expect gas prices to rise, and was surprised to learn that his worst-case scenario is my best-case one:

I have suffered something of a failure of imagination. Now that I think about, a truly catastrophic increase in the price of oil is the only reasonable scenario to consider when one is trying to imagine a worst case scenario. I personally don’t regard that as the likely scenario, but it is a reasonable scenario, and certainly one that policy makers should consider. During the chat, when I offered what I felt was a fairly bad scenario, Jennifer saw it as a “best case scenario”:

(07/16 08:14 PM) Jennifer: My main concern regarding peak oil involves personal transportation. The majority of Americans live in situations where daily life is impossible without a form of cheap, fast individual transport enabling folks to travel dozens or even hundreds of miles in a day. And where personal transport is concerned, there’s no viable replacement on the horizon for the internal combustion ngine. Mass transit only works if a large number of people live and work in the same general area.

(07/16 08:15 PM) jackson: Jennifer, suppose for a moment gas goes up to something like $6 a gallon and stays there for 10 years. What changes do you think people will make?

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(07/16 08:18 PM) Jennifer: If gas goes up to $6 a gallon there’d be a shift to more fuel-efficient cars (as we’re seeing already), and far-distant suburbs would become less desirable places to live (ditto), but frankly I think “gas reaching $6 and staying there” is a scenario so best-case as to be implausible. I suspect gas will continue getting more and more expensive. And government will continue making things worse; despite everything, there’s still plenty of snob-zoning laws forbidding high-density housing and so forth.

Supply declines aren’t the only way oil can hurt America’s economy. It’s only been a couple of years since I learned about the oil bourse: for nearly four decades, the US dollar’s been artificially propped up by being the only currency used to buy oil. If you’re Japan buying oil from Saudi Arabia, you don’t use yen or rials; you have to buy dollars first.

If you stand on a street corner and ask everyone who passes “Do you think it’s a good idea to have our currency’s stability dependent on a substance whose supply is largely controlled by religious fanatics who tend to hate our guts?” every last one of them will say “no.” Unless they work for the government.