Topic: Decline of the West
If you’re old enough to remember the Carter-era energy crisis, this story should provoke a contemptuous smile: US poised to become world’s leading liquid petroleum producer.
In the late 1970s such a headline was unimaginable. As far as the nation’s elites and opinion leaders were concerned the era of limits had arrived. The end of oil was upon us—necessitating price controls, rationing and (of course) shared sacrifice. Lugubrious lectures by President Carter spread gloom throughout the land. Price controls were duly put in place. But liberals were not satisfied. With his trademark pomposity the late Senator Ted Kennedy demanded a nationwide gas rationing program, to be administered (of course) by the federal government. And if Jimmy Carter had been reelected in 1980, gas rationing would surely have followed. Then as now the Left’s motto was: Never to let a crisis go to waste.
They were all wrong, of course. Price controls failed disastrously, depressing oil production and exacerbating shortages. But this was merely a detail. Where the elites and the experts really blew it was in supposing that the actual end of oil was just around the corner. They thought that oil production had peaked and was set to decline. This had to be, they explained, because, you see, the world’s oil resources are finite. There’s only so much of the stuff!
Today we can see how very wrong they were and it’s fortunate indeed that the election of 1980 brought Ronald Reagan to power. During the campaign he was asked what he’d do about the energy crisis and his answer was: remove price controls on oil. Was that all? Yes, that was all. You’ll not be surprised to learn that Reagan was widely mocked for his ignorant, simplistic view of the issue. What a dunce! But one of his first actions on taking office was to abolish those Carter Administration’s price controls on oil and gas. Production increased, the pump price of gas began to fall, and the era of limits was over—just like that.
There was an obvious lesson to be drawn from this episode but liberals and lefties did not absorb it. Having bewitched themselves with the idea that oil was running out, they embraced it with quasi-religious fervor. An abiding characteristic of the Left is its attraction to crisis and catastrophe. Looming disaster demands action, does it not? And is not government the only entity with the expertise and resources necessary to cope with disaster? Thus “peak oil” became an article of faith in left-liberal circles and it was always just around the corner.
Now it’s true of course that the world’s supply of crude oil is finite. How finite, though? Well, nobody has the slightest idea. Peak oil predictions based on proven reserves of oil were always bogus. Far from being a hard number, “proven reserves” is an estimate based on a variety of factors including price and technology. Not all oil is created equal. In the case of an oil field where the cost of extraction exceeds the profit point, that oil will stay in the ground and will not be counted as part of proven reserves. But if the price of crude rises, or if new technology lowers the cost of extraction, that oil will be added to proven reserves.
These factors—technology and price—are also the drivers of America’s twenty-first century energy revolution. The former both lowers the cost of extraction and aids in the discovery of new reserves. The latter determines how much of the world’s oil is classed as proven reserves. And so today, the world’s proven reserves of oil are somewhat higher than they were in 1980, with America sitting on a large percentage of the total. Who would have believed it, back in the gloomy late Seventies? Ronald Reagan, maybe. But not Jimmy Carter—he’d have scoffed at the idea! That tells you all you need to know about the former president and the elites who backed his play.