Economics and Oil

I've heard a lot of talk lately about the oil "peak." Supply is a bell-curve and now we're on the declining side of things. Instapundit has links which demostrate why this is untrue.

To put it simply, while the total supply of oil on earth may be fixed (still up for debate actually) the accessible supply of oil on earth is not. Various ecologists have previously predicted the oil peak and have generally gotten the year wrong. People were saying that oil would be gone in 20 years for most of my lifetime and the critical year was continuously revised upwards as new deposits of easy oil were found.

The problem is that generally their calculations were based on a huge faulty assumption. To put it simply, most resources are not bounded by their amount on earth. There is lots of oil, steel, or gold out there. More than we'll ever need. Resources are bound by the ease at which they can be extracted from the ground.

Aluminum was as precious as gold in the Napoleonic era, which is why Bonaparte himself had aluminum flatware. It is also why there is an aluminum pyramid on top of the Washington Monument. Now we make whole cars out of the stuff. The difference is that now we have a good refining process to turn bauxite into refined aluminum. As the price of oil edges higher, companies are getting ready to pounce on a lot of new sources for oil like tar sands. We just haven't hit the break even point for those sources to make business sense. But it's coming, oh yes it's coming.