209. THE ULTIMATE PEAK OIL HERESY
The doomerosity scale runs from 0 (peak oil will be a non-event --Marshall Brain) to 8 (back to the stone age --Richard "Olduvai" Duncan). Virtually everyone in the peak oil community falls on that continuum, disagreeing only about the severity of the coming economic slump.
But notice that the doomerosity scale doesn't cover the whole range of possibilities. What if peak oil is very much NOT a non-event, because it causes a boom rather than a bust? Why are we so sure that the economic impact of peak oil will be non-stimulative?
Think about the economics of retrofitting and change-overs. For example, consider the switch from video tape to DVD. People are always saying "It's those damn companies. They change the format so you have to buy the new player." You hear similar complaints about the upcoming switch to digital TV, which will make conventional TV sets obsolete. "It's just a conspiracy by the TV manufacturers to boost sales." In these contexts people see changeovers as a form of growth, at least in terms of corporate sales. You could say the same thing about the conversion of the telecommunications network from copper to fiber optic. That involved a hell of a lot of jobs -- i.e. employment growth.
It seems that peak oil discussions often end up with a pessimist saying: "We're screwed. The only way out would be to retrofit the whole society, build new power plants, replace the vehicle stock, rebuild cities, deploy electric car charging stations, refurbish train lines, install energy saving equipment everywhere etc... And that's impossible." But what if it isn't impossible, and that's exactly what we do? What if peak oil gives a massive boost to the economy, and starts driving up other stocks, just like it is driving up the stock of Boeing? What if that trend becomes so obvious that people start saying: "Wow! Business is going gangbusters with this peak oil thing." Betting on that outcome might be quite lucrative because it's so contrarian, and so few people expect it. Meanwhile, the people invested in oil might be left holding the bag, watching their oil stocks droop as sales of conservation products and alternatives skyrocket. They'd be like a guy who knew whale stocks were peaking, and was positioned to clean up in the futures market when the price of whale oil went through the roof.
Anyway, it's good to think through all the possibilities. Why are we so sure that peak oil will cause a bust rather than a boom?
-- by JD