Although a lot of libertarians are Global Warming skeptics, the sheer scale of the consensus among climatologists is enough–at least tentatively–to command my respect. As for arguments that solar cycles are more important than CO2 levels in their effect on global temperature, I don’t know enough science to sort it all out. But given what’s at stake, and the consensus among climatologists, it seems to me that the sane thing to do is operate on the assumption that anthropogenic global warming is a fact.

What I don’t understand, though, is how infrequently the talking heads draw a connection between Peak Oil and climate policy. If you look at the range of estimates for reductions in oil supply over the next generation or so–one-half to two-thirds–it looks awfully similar in scale to the environmentalists’ targets for reducing CO2 emissions.

It seems pretty clear to me that we’re going to have an enormous reduction in total energy consumption, and in CO2 emissions, over the next generation–and the Kyoto Protocols will have very little to do with it.

The cute blonde actress in the American Petroleum Institute’s infomercials (a lot more mercial than info, in my opinion) can say all she wants that “Fact is a growing world will require more, 45 percent more by 2030…” But fact is, they’re not gonna get it.

Peak Oil is a fact. None of the proposed solutions, from shale and tar sands to “drill, baby, drill,” can survive much scrutiny.

It doesn’t matter how large those oil reserves are that the oil industry’s propaganda keeps telling us about. What matters is the rate at which the oil can be extracted, and the increasing energy cost of extracting it.
And the “fact is” that, in recent years, the amount and cost of drilling required to extract a given amount of oil has escalated enormously.

The biggest new oil reserves whose discovery is so breathlessly reported in the mainstream press amount to maybe a month’s production from the old fields about to go offline in the Persian Gulf. What about the enormous offshore oil reserves where those liberal tree-huggers won’t allow drilling? Well, their total capacity is about half that of the offshore reserves the oil companies are already sitting on, and haven’t bothered to develop. And if they were fully developed, and running at full capacity, they’d probably make about three cents difference on the gallon in the price of gasoline.

The same hard truth applies to all the other proposed solutions, like shale and tar sands. The low-hanging energy fruit has already been picked, and it costs more and more in energy terms to extract what’s left.

The drop in oil prices since last summer doesn’t affect the validity of the Peak Oil hypothesis. Peak Oil only says that the rate of oil extraction is peaking, not that the price will never go down. In fact, the peaking of oil supply will result in the same boom-and-bust cycle that characterizes real estate markets, as Henry George noted over a century ago. Real estate speculators will hold land off the market in anticipation of a future price rise, just as the oil companies sit on those untapped offshore oil reserves. The amount of drilling and exploration has actually dropped considerably in response to the lower prices, which means that when demand gets back to Summer 2008 levels the price rebound will be even more vicious.

And if a fluctuation of a few percentage points in demand can cause oil to fall from $140 to $40 a barrel, imagine what will happen when the supply falls by half or more over the next generation!

So we can count on the coming astronomical increases in energy prices, through the good old-fashioned laws of the market, to spur people to increased energy efficiency without any help from the government. We’ll see most of the long-haul truckers abandon their rigs, and most airline routes shut down. In manufacturing, we’ll see a radical shortening of supply and distribution chains and a relocalization of production. We’ll see trucked-in out-of-season produce become a luxury good, and vegetable production in backyard gardens and in local market gardens increase by an order of magnitude. We’ll see people gradually moving closer to where they work, and an explosion of production in the informal and household economies as suburbanites move production closer to where they live. We’ll see housing contractors discover the market value of passive solar heating and cooling technology. We’ll see the recycling of industrial waste heat become economical.

In short, we’ll see all those eighty percent reductions in energy inputs that Amory Lovins and the folks at the Rocky Mountain Institute like to enthuse about (I highly recommend Natural Capitalism), become good business sense.

And it will all be done by the free market, because people motivated by old-fashioned self-interest will follow an economic law older than the internal combustion engine: when something costs more, people use less of it.