The 2005 government report entitled Peaking of World Oil Production: Impacts, Mitigation and Risk Management, by Hirsch, Bezdek, and Wendling, is a sobering tally of the current picture of oil production and consumption in the world today. Often referred to as the Hirsch Report, the authors take a “now shot” of the global oil production scene and speak directly to the matter of mitigating the approaching economic disruption that must usher an unprepared nation into a future of peak and declining oil production.

If you read the Hirsch Report and pay attention to current events, you may be gripped by a kind of cognitve dissonance, or a haunting sense resembling a schizophrenic episode of contradictory voices in the collective consciousness.  While the global warming showboat is paddling up and down the Mississippi blowing steam and calliope music, nationalized oil producers are failing to answer calls for increased production in reply to a dramatic ramp-up in petroleum demand. Some call for increased exploration and others call for drop in replacements for petroleum. All the while, evidence accumulates that the ecosystem suffering from consumption and waste generation.

As with any discussion involving economics, it is possible for people to speak imprecisely when discussing supply and demand. Econobrowser takes Hirsch to task in this manner. It seems that many of us confuse demand with desire.

Supply equals demand today, supply will equal demand in 2025, and supply will equal demand in 2050. Whatever Hirsch means by “peaking of world conventional oil production,” it certainly isn’t the condition that “production will no longer satisfy demand.”

Our news media, now almost fully morphed into a perverse mix of gibbering Bill O’Reilly clones and entertainment news programming, prattles endlessly about the hurtful gasoline prices and truncated vacation plans. Government makes flatulent noises about more drilling, but hardly a peep about reduced consumption.  Where is the journalist corps? Who is asking the tough questions?

In isolation, either climate change or an exponential oil shock are more complex than nimrods leaders in the Bush administration can process. Together, these stresses add up to a major challenge to the way we live.  Maybe the situation is more complex than any nation can reasonably respond to. With global prosperity comes global demand for resources.  Western nations have built a house of cards based on cheap petroleum. Instead of wage growth in the past 20 years, we have been given easier access to credit. Instead of increased savings, we have found ways to burn up discretionary income.

A major part of what has to happen to adapt to the new reality of petroleum scarcity is a remodel of our infrastructure. We need more passenger rail lines and terminals with the necessary right-of-way issues taken care of. Workers need to live closer to their place of employment. The airlines have to figure out how to operate profitably with reduced passenger miles. We must upgrade our electric power distribution system to accommodate the increasing reliance on electrical energy. If wages do not change, we must adapt to having less discretionary income to spend. 

But a remodel of infrastructure will require that we adapt to living nearer to it. In the past, a proposal to build a power plant is met with a chorus of outrage or “concern”. It used to be called NIMBY- Not-In-My-Back-Yard.  The latest acronym is BANANA- Build-Absolutely-Nothing-Anywhere-Near-Anything. New power transmission lines and generating plants will have to go up and it will have to happen somewhere. People naturally fret about real estate prices and their view from the dining room window. I foresee more exercise of eminent domain in the future.

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