A few years ago, some experts predicted the world was about to reach a peak in global oil and gas production to be followed soon by marked decline. It would cause “war, famine, pestilence and death” – the biblical Four Horsemen of the Apocalypse.
Another version: “war, starvation, economic recession, possibly even the extinction of homo sapiens.”
Or, peak oil and gas “represents a mortal threat to the U.S. economy” and we “could plunge into a new Dark Age … in an overheated world.” This one lamented that it might well exacerbate “global warming” and thus it called for higher energy taxes and increased limits on coal alternatives.
Besides the extravagant rhetoric typical of environmentalists, the Politically Correct and other statist liberals, even when these advocates admitted that things might not turn out as badly as they foresaw, it was important that their Draconian prescriptions be followed anyway. Those were increased taxes, public spending, regulation and control of people’s lives, especially by big governments and international means — meaning reduced liberty and economic freedom. As usual with such folks, the diagnosis is asserted quickly as certain, and the real point is the absolute necessity, stringency and urgency of the remedy.
In 2006, a young professionals group in Reno asked me, as an economic, policy and technical analyst and energy expert, to debate these matters with a peakist. He gave a saner version of the litany than the foregoing quotes, but still inferred that the results of using typical assumptions in the peak model made oil/gas production declines, the resulting economic and social dislocations, and the need for statist action nearly certain.
I explained that, as a young university energy research engineer at an institute affiliated with the limits-to-growth folks in the 1970s, I drank the same kool-aid, which was first made then. In fact, I had remained pretty much a statist San Francisco PC lib whose deepest convictions were as an enviro and alternative energy booster – until, ironically, going to graduate school at
Stanford (about as PC as any place) in 1987 helped open my eyes and make me a limited-government conservative.
A key problem for peakist claims – as with dire warnings of the population bomb, nuclear winter and global warming – is that they are based on simplistic extrapolation of temporary trends via formal computer models and input assumptions unsuited to support such predictions, much less the policy prescriptions advocated to fix them. More than that, I explained, those analyses assume away the most important countervailing facts: human creativity resulting in continuing technological progress, productivity gains and business innovation; and the normal adjustments made by people in economically free societies to the incentives and constraints they face.
So, the Energy Crisis of the 1970s was not only not a first, but was wrongly conceived as a crisis and a reason to turn the world upside down by collectivist efforts toward “energy independence,” etc. England faced an intractable energy crisis – the cutting of forests mostly for fuel – in the 17th Century before technological progress produced coal as a better alternative. In the 18th Century, whale oil became dear before petroleum was discovered in Pennsylvania in 1859. Etc.
I explained that, while I could not precisely predict future developments, they would include – even without government action – more efficient ways to use oil and gas, alternative fuels to greatly displace them, alternative technologies to deliver existing goods and services with less energy use, changes in the mix of goods and services consumed by folks that substitute less energy-intensive options for more energy-intensive ones, etc. They might even include new oil and gas resources and cheaper ways to produce them. The important thing is that we have always benefitted from such developments and it’s predictable that we will continue to do so.
Not only have the alternative and substitution trends continued, but spectacularly in the half-dozen years after that event, slant drilling and fracking and other ways of exploiting tight oil and gas formations exploded. They not only made previously recognized low-grade resources economically recoverable, but also led to huge increases in recognized reserves and resources. Contra the energy-crisis foolishness of yesterday, America is now within seeing distance of becoming a net exporter of at least natural gas!
America leads this revolution because we protect private property rights and assure most economic incentives that are key to the oil/gas revolution and development of other alternatives.
Some other countries also have fracable resources in the ground – but they lack the development incentives and gathering and processing infrastructure we have developed under our superior property-rights and economic-freedom regime.
The ultimate lesson in all this is that the limits-to-growthers, enviros and other PC liberal statists are fundamentally wrong at the deepest philosophical, intellectual and analytic levels. Their dogma fails to square with the facts of history, especially the fact that people enjoying liberty and economic freedom buttressed by the rule of law and private property rights do remarkable things that government planning, command and control can’t match.
Resources are finite, but only in a trivial sense. The actual limits of energy and material resources are way beyond the levels needed when they are employed with the full creativity and infinite variation in getting utility from them that people can devise. If any resource is meaningfully limited, it is human creativity, and that only because our statist collectivist strictures suppress it.
Life need not be the grim retreat to primitivism in a state of nature that their false religion worships. It can be an exciting endless adventure of creativity, productivity, growth, possibility and human flourishing if we embrace liberty, opportunity and economic freedom.
(Ron Knecht of Carson City is an economist, law-school graduate and Nevada higher education regent.)