vestments have been a profitable component for any portfolio and I believe
that soon people are going to see them as a must,” says Mike Swanson,
a fund manager who also writes a regular online column on energy
investment.9
So, whom should you believe if we are really running out of oil? You
should know from the outset that whenever experts talk of an oil peak,
what they generally mean is that from then on, production will gradually
slide down the slope toward the last drops at the rate of about 2 percent
annually. Those who reject the oil peak theory have a lot of faith in technology;
they argue that new technologies—and higher prices—are going
to make it possible to suck oil out of unconventional places. For instance,
they say, extracting oil from tar sands was once thought to be prohibitively
costly, but today oil from Canadian tar sands sells for $20 per barrel
or more. Indeed, Canada puts its reserves at 300 billion barrels, higher
than even Saudi Arabia, but much of that is unrecoverable. That’s a fair
point. But in my view, there is no denying that oil is a finite commodity,
and even new sources would only prolong the downward slide for so long.
That’s why along with debate about oil peak, there should be proposals
to promote renewable fuel sources—the so-called “green energy.” As anyone
might expect, wind and solar power are the darlings of people who
are environmentally conscientious. But they only provide supplemental
solutions that have limited impact at a time when we need adequate and
lasting solutions. We could line the Atlantic coast with windmills and still
not make much of a dent in electricity demand. Solar and wind power are
unreliable sources. If we were to switch en masse to hybrid cars, the cut in
oil consumption would be dramatic. But those vehicles are not in large
supply and are relatively expensive. Biofuels—diesel-like liquids from
corn or garbage—are promising, but would require a mass switch to
diesel car engines and a new distribution infrastructure.
Should we revisit nuclear power? That may be necessary. Europe and
Japan, where oil products are more expensive, produce most of their
electricity from nuclear power plants. The United States, where people
are averse to nuclear power, produces less than 20 percent of its electricity
from it. Although modern nuclear designs have few safety problems,
the disposal of spent nuclear fuel is a political hot potato. There is currently
a very strong opposition to dumping nuclear wastes in the Yucca
Mountains of Nevada.
What is the way forward? There’s no shortage of advice on that from
THE END OF AN ERA? 25