Oil: What can't go on forever, won't
There has been much buzz in the media this past week about the relatively sharp spike in oil prices. I’ve been frustrated by how the majority of coverage has focused on the (very real) possibility of oil company manipulation, as if we’re searching for a convenient villain in the process. The Bush Administration’s policy response to the price spike has been storyline #2, even though truthfully there’s little a president can do to affect oil prices over the short-term. Sadly, there’s been little coverage of how U.S. oil prices compare to the other G7 counties (they are much lower), except for a brief fact check I saw on CNN International (and even that focused on other countries’ high taxes, without explaining the good policy reasons for them). Even worse, there’s been no coverage of the likely long-term trend in oil prices over the next decade or two. Global supply will remain relatively constant, or at best slightly increase; this is not because of technological limitations like a lack of refinery capacity, but simply because there’s a finite supply of the stuff and what’s left is harder to extract. Global demand, on the other hand, will continue to grow rapidly, as nations like China and India industrialize.
The clear implication is that oil prices will continue to rise over the long-term. In this context, the current U.S. government policy of seeking to maintain steady, low prices seems quixotic. It would be far more honest if the U.S. committed itself to expecting steady 5% annual increases in oil prices. The U.S. economy could absorb that sort of gradual annual increase in prices, as we all slowly adapted, whereas a rapid huge price spike could be very damaging.
Yet the press mentions none of these weighty issues. This seems to be a general problem: the media focus on particulars, not on the underlying trend. Global warming is another great example. There is much discussion of whether this or that hurricane was caused by global warming, an attribution that’s almost scientifically impossible to make. In contrast, the long-term, gradual trends (e.g., glacial melt and sea level rise) that keeps us scientists literally up at night, get little press (Andy Revkin being a notable exception).
Maybe this is just human psychology. We focus on what is nearby in space and time, and forget what is distant. It may also be the failure of environmental scientists like myself to find a good, compelling narrative. It’s just challenging with such a grand process: we’re recreating Noah’s flood by burning fossilized sunlight! Perhaps the best summary was what was once said by Herbert Stein, a conservative economist who served under Nixon and Ford: “What can’t go on forever, won’t.”
