This is not the end of Oil
The current spike in gasoline has folks all a flutter about this being the end of the oil economy, the death of the combustion engine, etc. It ain’t happening folks.
I will wager $100 with anyone who wants to, that we are not seeing the end of the oil economy. I have no take on whether or not that end will someday come as chaos or as a great boom of scientific achievement, creating new tech that gets us past oil. I’m just saying this isn’t it yet, not even the beginning of it. I have doubt that we’ll see it in the next 50 years, even with the industrialization of China and India. The current oil prices are artificial, as artificial as the stock bubble I started screaming about ten years ago. Oil is currently valued by fear, speculation, and mania, with a little help from the instability that Bush created in the middle east and several OPEC nations that are happy to keep the prices up. I studied the oil economy as part of my graduate research. It’s been a huge part of the political picture in Latin America, bigger than it has been here, for the last century. Subsidized Soviet oil let Castro break free of the U.S. The lack of it was one major factor that kept Jamaica from being able to do so. A belief that the expensive oil of the late 70s and early 80s would last forever, bankrupted Mexico when oil came back down, utterly destroying the peso in the process.
I don’t know what it is in people that makes it so easy to look at what’s going on right now and decide that it’s going to go on forever. During the height of the stock mania, there were well respected pundits and stock analysts saying that the NASDAQ would reach 10,000 and the Dow would reach 36,000. Between 20 and 30 years ago, people were saying most of the same stuff about oil that’s being said right now. It didn’t come to pass then, it won’t come to pass now. I can’t even count how many times in my life I’ve heard pundits say that we’ve reached a point where they’re not going to find anymore oil. That hasn’t even happened yet and I don’t think it’s going to happen too soon.
Don’t get me wrong. I’ll be really happy if this starts a permanent trend toward hybrid engines and clean diesel turbo engines. That’d be great. But right now, even with the trendiness and hype, those kind of cars only make up about 2% of the U.S. market. But there were plenty of predictions in the 80s that gas prices and fuel economy regulations were going to spell the death of the V8 for all but luxury vehicles.
If you follow the news heavily, you’ll see that our leaders don’t believe the hype on this either. They know that oil could be brought back down if the psychology changes and right people decide to do it. They’re more worried about trying to prevent a return to the really cheap oil and gas of the late 90s than they are about bringing down gas prices right now. We have heavy hitters in the U.S. policy apparatus talking about things like a regulated floor price for oil on the international market and stealthier versions of the same thing for domestic gasoline prices. I’m inclined to believe that with a return to $1.50 gas, hybrids and conservation and all of that would go back to being a fringe part of the market again, the same way that compact cars and family sedans with 4 cylinder engines dropped market share during the cheap oil and gas era of the 1990s up through the attack on Iraq.
