For over five years I have been questioning the scare-writings of those who subscribe to "peak oil" hypotheses. Surely as world oil supplies dwindle, the supply curve will shift to the left and prices will be bid upward. The higher prices will reduce the quantity demanded. And surely, in anticipation of such price increases, people will step up exploration activities and and speculators will hold oil off the market now in anticipation of earning higher profits in the future. For example, see this for my earlier writing on the subject; also this.
In today's NYTimes, Michael Lynch develops these same themes. It seems people continually need to be reminded about the importance of incentives, expectations, speculation, and the basics of supply and demand. Lynch writes,
While peak-oil advocates have in the past ridiculed optimistic industry expectations, the evidence continues to confound them. Over recent decades, the consensus estimates of the amount of recoverable oil on the planet have roughly doubled. And recovery rates — the percentage of those reserves that we are technologically able to collect — have grown from 10 percent a century ago, to 25 percent a half-century ago, to an estimated 35 percent now. In some areas, like the North Sea, the figure is above 60 percent.
There are several other reasons to remain calm about Saudi reserves. Officials there have discovered approximately 70 major oil fields that they have left untapped over concerns that increased Saudi production would cause global oil prices to collapse.
He quite sensibly adds,
None of this is to say that importing Saudi oil — or any oil — is desirable in and of itself. Oil remains a political commodity, and price fluctuations can create economic havoc, so the more good choices we have for meeting our energy needs, the better. But we should not let a false panic over disappearing oil reserves lead to rushed government investments in “technologies of the future” that, all too often, end up only wasting taxpayer money.