My Turn: It's not yet the end of the oil age

Posted: Wednesday, November 14, 2001

John Jensen reads a book about the "impending world oil shortage" and concludes that the CBJ tourism poll is a complete waste of time because in a few years there will be no fuel to get tourists here. Not having read the book, it sure sounds like a big leap of faith to reach this conclusion. But I don't think I need to read this book to conclude that Jensen has jumped into an intellectual chasm. I tend to stay away from books predicated on the notion of imminent doom. The science is usually pretty bad, but good science is not the point here. These books, written to earn a couple of bucks, prey on people's fears - in this case, the irrational fear of running out of petroleum.

It seems like just yesterday that the Pennsylvania state geologist declared in 1874 that the United States had only a four-year supply of petroleum. The fact is, reserves are costly to locate and develop, and it's rational to not want to bear these costs too far in advance of resource development. In other words, why spend a dollar today to discover a new reserve when you can spend that dollar tomorrow when it is worth less?

There will no doubt come the day when petroleum is economically, though not physically, exhausted. There will, however, be no shortage. Any first-year economics student will tell you that governments, not markets, create shortages. I envision the following scenario. Some individual somewhere in the world will be the only person standing in line to buy that last, very expensive (at least in terms of today's dollars) barrel of oil. At precisely that moment, the age of petroleum will come to an end, just as the iron, bronze, whale oil, kerosene, etc. ages came to their ends, only to be replaced by some other age.

The irrational fear of running out of petroleum often prompts irrational policy-making. Economic exhaustion of a non-renewable resource is not necessarily sufficient ground for exploration in ANWR. There are a host of other considerations that need to be explored before drilling in ANWR is undertaken. For example, the well-being of future generations, the effects of fossil fuel consumption on the quality of the ambient environment, and the irreversible nature of resource extraction all must be seriously considered.

Has humankind used nature's crude endowment too rapidly? It's hard to say for sure. One can make the argument that our ancestors probably used too little, and recent generations have probably used too much. Maybe, then, we're right about where we should be. I don't know if I'll live long enough to witness the demise of the petroleum age; I probably won't. I'd sure like to see it, though.

Ashley Ahrens, Ph.D., is an assistant professor of economics at the University of Alaska Southeast in Juneau.



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