[extropy-chat] Re: peak oil debate framed from a game theory standpoint ?

[Hal Finney]

Here are a few more thoughts about Peak Oil.

For those who have not run into it, although there are many variants,
the most virally virulent version of Peak Oil says that we are within
two or three years of the fall of Western civilization.  This may seem
absurd on its face but I will lay out the argument briefly.

It is suggested that we are reaching a peak in oil production such that
no reasonable amount of money, or perhaps no amount of money whatsoever,
can increase production levels.  While the world's oil wells still have
lots of oil, it is becoming harder and harder to extract.  Existing
technologies to increase the rate of extraction work for a few years
but then the fields "die" and the rate of production begins to fall
by 10 to 20 percent per year, and no known technology can change that.
There is nothing, in this view, that can increase the rate of production
of oil to overcome the declines that are appearing in more and more
countries around the world.  Only Saudi Arabia claims to have the ability
to increase production, but Peak Oilers generally believe that Saudi
Arabia is lying.  Oil analyst Matt Simmons published a book this year,
Twilight in the Desert, analyzing Saudi oil fields in detail and arguing
that they are near their own peak.

This supposedly inexorable decline in oil production levels runs head-on
into rapidly growing world demand for oil.  China in particular, but
also other countries like India, are expanding their oil consumption at
a rapid rate.  And of course Western countries, especially the U.S.,
are also continuing to use more and more oil every year.  Although the
West has improved its oil efficiency in many ways, the current economy is
fundamentally dependent on oil for growth, and in the present situation,
economic growth will be impossible without increasing the supply of oil.

The collision of these two trends will, it is claimed, produce
catastrophe.  Oil prices will skyrocket to unheard-of levels, hundreds of
dollars per barrel.  Most people will simply be unable to afford gasoline
or heating oil.  Airlines and other forms of transport will go bankrupt
and business failures will be widespread.  The economy will enter a
permanent state of decline that will make the Great Depression look mild.

Worse, even essentials like food and pharmaceuticals are highly dependent
on oil, and with the explosion in the price of this crucial commodity,
the world will see a rapid spread of famine and disease.  This produces
what Peak Oilers call the "great die-off" and many of them expect it
within a few years.

Once things stabilize, in a decade or so, we will have a permanently
poor world, reduced to an early 19th century level of technology
and productivity, subsistence farming without the benefit of modern
fertilizers or equipment.

This may seem like an astonishingly implausible scenario, but it is widely
believed among the Peak Oil community.  See sites such as dieoff.org or
lifeaftertheoilcrash.net for more details about the impending disaster.
BTW, Matt Savinar, author of the latter web site, will be on the Coast to
Coast AM radio show tonight, syndicated in many cities across the U.S.
He's one of the most extreme Peak Oilers and a big supporter of this
apocalyptic scenario.

Of course, not everyone concerned with Peak Oil buys into this whole
picture.  There are a range of beliefs.  Some see this scenario playing
out, but not for a decade or more.  Others think that the impact will be
limited to a permanent state of economic depression, and don't accept the
great die-off.  People also disagree about just when the peak will occur.
Some see it as 10 to 15 years off, others out 5 years or 2 years, and
yet others think it's already happened and we are beginning to feel the
first effects.

Needless to say, this is not a very Extropian image of the future!
And if you look closely you can see some inconsistencies and flaws in
the assumptions that this scenario is based on.  Nevertheless the Peak
Oil community devotes enormous efforts to analyzing every scrap of news
about oil supply and demand levels all over the world, and in fact their
predictions do hold up pretty well against recent trends.  As oil reaches
each new price level, Peak Oilers take it as vindication and confirmation
of their views.  There was a time when $50 oil was unimaginable.  Then $60
oil was unimaginable, then $70.  Today $80 or $90 oil is unimaginable.
What will we be saying by the end of this year?

I will write more about this soon...

Hal