Running out of gas: this time the wolf is coming.

• Author: Campbell, C.J.
• Position: Predictions of energy crisis

In the not-yet-named era in which we now live beyond the Cold War, a philosophically edged disagreement has arisen among our literati and social seers as to just how dangerous the world really is. Much of the discussion seems to turn on temperament or historic intuition rather than evidence. But of all the dangers cited by the more pessimistic among us - unconventional weapons proliferation, clashes of civilizations, global warming and environmental despoliation, rampant ethno-nationalism, and the rest one almost never hears of the possibility of a major, world-wrenching energy crisis. And yet such a difficulty is at least as likely as any of these other would-be terrors. Given the false alarms that have been raised in the past, this assertion is certain to be received with considerable skepticism. It is an assertion I intend to justify in what follows.

The world is using up its geological endowment of oil at a prodigious rate, and that rate will increase as newly wealthy countries, particularly in Asia, enter the industrial phase of economic growth - as indeed they will, recent hiccoughs notwithstanding. At the same time, and despite astounding advances in the science of geology and in techniques of finding fossil fuel deposits, discovery rates of new oil reserves are falling sharply. For every four barrels used, only one is found. The lines of discovery, consumption, and extraction are bearing down on one another and will inevitably cross, probably in the year 2003; at that point, the world will pass its peak production of oil, meaning that more than half of the world's finite supply of conventional oil will have been extracted and consumed. When that happens - and 2003 is only five years away - both the developed and developing countries of the world will increasingly be faced with politically difficult and, ultimately, hugely expensive problems of adjustment. The international political problems facing the United States will be shaped in particular by the fact that as the world proceeds down the slope of oil production, five Middle Eastern countries will increasingly gain relative share. The last time that happened, in the 1970s when their share was about 36 percent, there was, in point of fact, hell to pay. Soon - in all probability by the year 2000 - that share will stand at around 30 percent.

Before proceeding to show why we will soon come to and pass peak production and to suggest what the implications may be, we might ask why it is that so few people seem concerned about the energy balance. Two mutually reinforcing reasons come to mind: one broadly historical, the other having to do with political psychology.

The Deja Vu Factor

The first reason not to worry is that we are thought to have already "been there and done that." The oil shocks of the 1970s, which had profound if temporary economic consequences and alerted the world to the issue of resource depletion - as embodied, for example, in the pronouncements of the Club of Rome - are widely considered to have been assimilated and put to rest. All things considered, the energy crisis turned out to be short-lived and, as Americans even remotely educated in the matter know, the price of gasoline at the pump is no higher today, adjusted for inflation, than it was before 1973.

Common wisdom has it, too, that the shocks were largely artificial, by which most people mean politically induced. There is much truth in this. In 1973 certain Arab oil producing countries restricted the sale of oil for a few weeks as an economic weapon in the Yom Kippur War, and prices escalated fivefold. During 1978-79 the fall of the Shah prompted panic buying that drove prices briefly to almost $50 a barrel. But as politics can turn sour, so can they turn sweet. Saudi Arabia's economic and political interests have largely coincided with those of the United States since the late 1970s. As the major swing producer, with large reserves and excess capacity, the Saudis have helped push the price down and keep it down for most of the last fifteen years. Meanwhile, the likelihood of another Arab-Israeli war on the scale of 1973 - providing a pretext for another embargo - has been rendered remote by the Egyptian-Israeli peace treaty of 1979 and further achievements in the peace process since then. Even the 1980-88 Iran-Iraq War, it is often noted, failed to have a major influence on oil production and export despite the fact that the battlefield was literally only an artillery barrage away from major oil terminals and facilities.

A form of economic common knowledge has reinforced the complacency afforded by these broadly political observations. As everyone knows, new industrial efficiencies and efforts at conservation have helped ease the energy problem for the longer term, and many believe that a shift away from old-fashioned industrialism in much of the world will reduce even further the ratio of energy input to productive output. There have been significant new discoveries of oil since 1973, too. Many prominent economists have therefore come to act as though the world's oil endowment is effectively infinite.(1) When the world runs low on "conventional" oil - that is to say, easily recoverable oil - it is assumed that price signals will stimulate efforts to recover more expensive reserves. Those same price signals, in turn, will stimulate research and development into other energy sources and into technologies that can lower the price of non-conventional fossil fuel recovery - for example, the process of extracting oil from tarsands and shale. The alarmist view aired during the 1970s, that the world was running out of oil, is now dismissed by most economists and many laymen alike as having been quite silly - an almost perfect example of creating a scare by crying wolf. And in a way it was; in the 1970s the world had used no more than about 20 percent of its conventional oil endowment.

Prevention is Harder than Cure

Human Psychology mixes with the logic of democratic politics to produce the second reason for downplaying energy issues: namely, that it is much easier to react to a diplomatic crisis or a socio-economic discontinuity than it is to prepare for one. If government analysts were to predict an oil crisis or a market convulsion leading to a doubling of price within three or four years, then the governments for whom those analysts labor would be forced either to reject expert advice or to make painful choices about how to cope. It is much easier to ignore...