So many annoying things have been said recently about high oil prices that it would be hard to rate which one is the most annoying. Could the winner be found in statements made by members of Congress while they were busy vilifying major oil company executives during recent hearings? Could it be found among the predictable responses from those executives which emphasized opening more public lands and offshore areas to oil drilling? Perhaps speculators should be blamed, or better yet, a conspiracy of speculators. There is, of course, the staple argument that the fall of the dollar is driving oil prices higher even though the dollar's decline--about 12 percent in the last year--doesn't even come close to approximating oil's rise of more than 100 percent.
My nominee for most annoying thing said about high oil prices is the catch-all phrase which incorporates the ones listed above, namely, that high prices are due to "above-ground factors." Certainly, the poor state of the world's oil infrastructure is partly to blame. And, the lack of investment in new capacity by major oil exporters such as Iran, Venezuela and Mexico is another problem.
But the oil infrastructure of the world is by definition both an above-ground and below-ground system. And, so by definition the level of oil production is influenced by technological developments, war, civil unrest, energy policy, investment decisions and a host of other human actions. But simply saying above-ground factors are limiting oil production is not the equivalent of having a magic wand that will 1) make all of these factors disappear, 2) prevent a peak in world oil production from coming earlier because of them, or 3) prevent the debilitating effects on world society that would result from a peak, whether blamed on above-ground factors or not.
So, what's motivating the frequent refrain that were it not for unfavorable above-ground factors, the world would continue to be awash in oil for many decades? Perhaps the most explicit pronouncements about above-ground factors come from Cambridge Energy Research Associates (CERA), the worldwide energy consulting firm. An example would be a 2006 press release from CERA entitled "Peak Oil Theory--'World Running Out of Oil Soon'--Is Faulty; Could Distort Policy & Energy Debate."
What is not obvious from this release is CERA's motivation for wanting to warn the world about "faulty" peak oil analysis. The release states that "the 'peak oil' argument is based on faulty analysis which could, if accepted, distort critical policy and investment decisions and cloud the debate over the energy future." In what way and for what purpose the peak oil argument might distort policy, the release does not say. But CERA's words demonstrate that stating that above-ground factors are limiting oil supply is not merely an observation. Rather, it is part of a propaganda strategy supporting a policy agenda which almost certainly reflects the views of CERA's clients, many of whom are major oil producers.
What is that policy agenda? Here is what the release says:
It is likely that the situation [i.e., limits on oil production] will unfold in slow motion and that there are a number of decades to prepare for the start of the undulating plateau [rather than a sharp peak]. This means that there is time to consider the best way to develop viable energy alternatives that would eventually provide the bulk of our transport energy needs and ensure that there is a useable production stream of conventional crude for some time to come....
The last sentence may require translation. CERA is essentially saying that because it believes that oil supplies can continue to rise to meet demand (provided above-ground factors don't interfere), the world ought to continue to power itself using oil. Not surprisingly, this would be the preferred course for many of CERA's clients who have large, existing inventories of oil in the ground which they want to be able to sell over the coming decades. However, why such a course would be particularly advantageous for the consumers of oil is not addressed.
Also behind CERA's above-ground-factors argument is a disdain for anything other than market solutions. CERA's chairman, Daniel Yergin, is author of "The Commanding Heights: The Battle for the World Economy," a paean to free-market capitalism and a critique of government intervention into the economy. The above-ground-factors argument, of course, makes liberal reference to government regulation, taxation and energy policy as obstacles to the greater flow of oil.
Finally, the above-ground-factors argument allows CERA to explain current high oil prices while making the case that these prices don't have to remain high. This is a crucial element of the argument. If the expectation that prices will remain high becomes entrenched, an analysis of their cause will do little to persuade energy users not to begin a transition away from oil.
CERA suggests that its view of future oil production--namely, a continuing rise in production into the 2030s with a decades-long plateau to follow--ought to be adopted because:
Corporations, governments, and other groups, including nongovernmental organizations, need to have a coherent description of how and when the undulating plateau will evolve so that rational policy and investment choices can be made....
Apparently, there is only one rational forecast (CERA's) and only one rational response, namely, to continue to burn oil for decades to come. How convenient for CERA's clients!
By inference then, warnings about a near-term oil peak could "distort" public policy and corporate decision-making by encouraging both government and business to move away from oil as an energy source. Both geologic constraints and above-ground factors such as instability in the Middle East (where most of the remaining oil lies); low investment in oil production in such oil-exporting countries as Iran, Russia, Venezuela and Mexico; limitation of production in Saudi Arabia; and civil unrest in Nigeria might lead oil-consuming nations to embrace government programs and subsidies for energy conservation and the deployment of alternative energy sources. Despite what CERA believes, wouldn't these policy choices actually be the rational ones given all the uncertainties surrounding future oil supplies?
Perhaps what CERA and many other members of the above-ground-factors chorus are really thinking is something like this: "If only the whole world would cooperate with our free-market ideology, then the producers of oil and other fossil fuels would have ample time to sell off their existing and anticipated future inventories of such fuels." It is this kind of thinking that simultaneously ignores the climate change implications of burning the earth's existing inventory of hydrocarbons and downplays the geologic constraints on oil and other fossil fuel supplies.
The agenda behind the above-ground factors argument is often obscured by vague and misleading language like that found in the CERA press release cited above. What propagators of this message seemingly hope to accomplish is a sort of paralysis among policymakers designed to head off any serious conservation measures or transition to a renewable energy economy. These propagators know that the above-ground-factors message plays into our desire for continuity in our lives and also into the widely, if unconsciously, held cornucopian belief that the natural world will give us whatever we want, if only we will let it. As long as energy stringency can be blamed on anything but geologic constraints and as long as above-ground constraints can be made to sound temporary, those spewing this message may succeed at achieving public policy paralysis.
On the other hand, if policymakers, businesses and the public can be convinced that geologic constraints are real and that above-ground problems may very well be ongoing, then it may be possible for the world to move more quickly toward fossil fuel alternatives. To start that journey, however, all three groups need to break through the paralyzing propaganda now surrounding the above-ground-factors argument so that they can see clearly the real risks we face in energy.
Essentially, the above-ground-factors crowd is saying that it is premature to begin a wholesale restructuring of society to run on renewable energy. But the only people who would really be hurt if the world completes such an energy transition before it absolutely has to are the purveyors of fossil fuels and the consultants they hire.