Followup to We Will Never Run Out of Oil

[Q:] While agreeing with all of the fundamental principles you raise in "We Will Never Run Out of Oil" I think that to draw from them the conclusion that 'we will never run out of oil' is inaccurate. True, the reduction in supply will push up price, meaning less is consumed and natural reserves will be depleted slower. Also true, manufacturers will tap into the growing need in the market for hybrid or non-oil consuming vehicles (and, presumably, capital machinery used in industry which currently runs on petrol and similar oil based fuels). However, your conclusion that governments should not research new fuel sources, I do not agree with. So long as a government's fiscal position is healthy and a government spending policy was being considered anyway as a possible fiscal expansion, R&D in this area would have the triple benefits of stimulating the economy by creating jobs, laying the scientific framework of renewable fuel sources for the private sector to follow when demand conditions allow it, and slowing the depletion of oil (and hence staving off its price increase).

The word 'never' is misleading when used to describe when we'll run out of oil. Fossil fuels are non-renewable - at least not for another few million years. Although the short term supply can be an upward sloping curve on the relevant diagram, in the long term it is vertical at the absolute level existing beneath the ground - say 5000m barrels - and this curve is moving left every time oil is extracted. Perhaps only ever so slightly moving, but moving nonetheless. Even if prices rise the more this curve moves (as oil wells dry up) it NEVER moves to the right. A more accurate statement would be 'we will not run out of oil so long as a replacement is found that satisfies demand sufficiently before oil reserves are exhausted'. To put this statement any other way misleads because it doesn't sufficiently express the assumption upon which your conclusion is based. When your conclusion is then drawn upon to influence readers' opinions on which direction their government's industrial policy should take, I think that to even potentially have a misleading statement is unappropriate.

[A:] Thanks for your letter.

Other than my article on the FairTax, no article has generated more controversy than "We Will Never Run Out of Oil". I'd like to take this opportunity to clear things up.

Firstly, saying "We will never run out of oil", is not at all misleading. It's the absolute truth. We will switch from using fossil fuels well before we have extracted the last drop of oil out of the ground. Economics, not science, will determine this.

What is misleading is to suggest that the long term fossil fuels supply is fixed. While my argument does not depend on this to be false, it's clearly not true that the absolute level of fossil fuels is fixed. There are ways of manufacturing fossil fuel substitutes, for instance Tyson Foods has "develop[ed] a gasification facility that is saving fossil fuels by turning chicken litter into an efficient and environmentally clean way to power a Tyson Foods plant located in Temperanceville, Va." While these methods are not current widely in use right now, expect to see more of these put into place as the price of fossil fuels increases due to shrinking supply.

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