I’m fascinated with natural resource economics, though certainly no expert. I took a natural resorce economics class from a terriffic teacher in grad school. So much to learn in this area.
Anyway, gregor wrote a pretty cool article a while back pointing out that if we don’t use the last of our cheap oil to build the next generation of stuff to produce power using more expensive ways , we’ll be screwed and we’ll have to revert to coal-based technology for a long time. I thought it was an interesting way to look at the problem.
Just picking a nit here … I’m not sure I like this definition, from the original post: “oil ‘crunch’ (when demand exceeds production)”
Demand is a function of price, so if demand exceeds production, the price will change, then demand will change, then demand no longer exceeds production. Does that mean the oil crunch is over? No.
Most mainstream articles avoid talking about dynamic price changes and the effect on peak oil, but you can’t really model peak oil without it.
I think “oil crunch” (i.e. “peak oil”) is where physical limitations forcibly reduce how much oil can be extracted per day. As Rich said – it is a flow issue. There are also some dynamic cost issues associated with the concept of peak oil as well. That is – as davelj said – if the price of oil increases enough to justify new extraction methods then peak oil could be delayed because production capacity would be increased. Also, any “crunch” would be mitigated as demand would come down.
I think Americans are so wasteful and spoiled on cheap oil that when crunch time comes, we’ll find it quite easy to live using less oil. That combined with the price-related dynamics of the market suggest to me that any real major oil crunch is 20 years or more down the road.
Peak oil may come sooner than that, but the nasty effects of it will come much later, if ever.
