Ooops, I did it again! Well, at least, this is the second time I've done it. I diverted yet another Catallarchy thread into a discussion of Peak Oil. (I didn't blog the first time.)
Thing is, philosophically and empirically speaking, free-market libertarians have the most to lose from the Oil Peak. I mean, aside from the minor issue of the catastrophic human cost of a hard landing. If the predictions of Peak Oil doomsayers are true to any extent, then it means that the natural world can generate events to which the free market cannot adapt in time to save itself. Of course, this is not the same as a run-of-the-mill natural disaster, where it can be argued that the market can function to rectify the overall aftermath, given some period of time (I'm being charitable here, bear with me). In that case, the market resumes immediately, one would expect. In the case of Peak Oil, there would be no energy to sustain the market with, because it couldn't plan/signal far enough ahead to save itself.
Anyway, I bring you my customary sample comment from that thread in response to Micha Ghertner (his comments also quoted too):
Further, the Peak Oilers aren’t claiming that there is tiny chance that we will run out of oil, but if we do the costs will be great, so great that we should spend money on prevantative measures which will cost less than the catastrophe multiplied by the low risk. No, the Peak Oilers claim that the chance is enormous, verging on the inevitable. And markets show why they are wrong, or at least not believable enough to be worth listening to.
Two problems with this:
1. This presupposes a belief in the ability of markets to use information efficiently to plan ahead for catastrophe, which is, if you restate the peak oil position, quite exactly what they are challenging. It’s worth noting that Matt Savinar’s (IMO too specific) Life After The Oil Crash scenario of collapse actually doesn’t seem to depend directly on the peak but instead on the what he believes will be the reaction of the market upon realization that the peak has arrived but that they didn’t plan for it. In other words, the market will realize too late and will act too drastically. I mean, the whole argument is specifically that the markets will not react when there is sufficient lead time to physically implement alternatives. So your response here assumes the opposite from the get-go—not logical.
Now why would someone claim that the market wouldn’t encode the correct information. Peak oilers have a panoply of explanations for this, from cultural factors to game-theoretic ones.
2. The fact is (and this may actually be positive news) is that information does appear to be percolating through the market about the problem. You may notice that the price of long-term futures was, a few months ago, much less than the price of short-term futures, as speculators seemed to assume that the high price was a temporary phenomenon. Well, now the market no longer believes the Saudi oil officials: long-term futures are now at parity with the high price of short-term contracts. The question is, can it reach a level high enough (but not too high), early enough, to create the transition necessary for the actual peak, whenever it comes, to have much less of an effect than it ordinarily would on the North American and Chinese economies in particular.