Recently, we've heard reports that the rapid decline in the price of gasoline, which is a reflection of the drop in crude oil prices, has brought about a sudden crisis in the petroleum production industry.
For decades, we've heard that world oil reserves of easily extracted petroleum would "peak" sometime in the current century, then begin to decline, while demand, which has been steadily increasing, continued to climb--leading to catastrophic increases in price.
At the same time, experts in oil reserve data have noted that as prices rose, the viability of less easily obtained petroleum sources, i.e., shale oil, would likely increase. As we've seen, these predictions have proven true.
The burgeoning shale oil extraction industry has increased American petroleum production, to the extent that we now produce annual totals which rival Saudi Arabia and the former Soviet Union.
The attractions of an increase in production are sold on the market competition which results in remarkable declines in prices at the pump. Any decrease in oil prices has a positive effect on the economy as a whole, which depends to such a large degree on the transportation network that runs off of petroleum use.
We were also told that were America to become "less dependent" upon foreign oil sources, our standing in the world economy, and in the foreign policy sphere, would improve. Any decline in our dependence upon Middle Eastern oil, would improve our bargaining position in price competition, and make us less "vulnerable" to political pressures occurring in that part of the world.
But as we have seen, protecting our interest in maintaining the flow of reasonably priced Mideast oil, was not the only priority. The flowering of Islamic terrorism has demonstrated that religious and political considerations may trump mere commercial interests. We may be able to get by for the time being, by coddling the Saudi royal family, but Islamic radicalism may eventually complicate our access to the oil fields throughout much of the Mideast.
Official estimates put America's shale oil reserves at a level which would make them viable for another two and a half decades--or roughly until the early '30's--at which point they would begin to decline. That's assuming, it should be noted, that exploitation proceeded at a smart clip, an assumption that might founder on regional resistance to fracking or other destructive extractive practices.
However, the sudden price drop we're presently experiencing has had the ironic effect of truncating the whole shale equation. Many companies are suddenly in the red, as the price of crude drops below their break-even point. The viability of fracking was posited on the high price of crude on the world market, but with the sudden surge in supply, brought about by the new methods, the price has dropped.
The delicate balance between supply and demand has meant that the transition from easy extraction to difficult will have contradictions that aren't easily overcome.
In the context of global warming, we're obliged to consider not just the long-term advisability of rapid over-exploitation of the earth's resources, but the more immediate problem of excess burning. We'd be advised to save a little, going forward, instead of finding excuses to forge ahead into an unknown in which both supply and price precipitate us over yawning scarcity, bringing about a world-wide economic decline.
In the overall picture of energy use and reserve, we need to see shale oil exploitation as a temporary phase, not as a long-term solution. It isn't going to measurably lengthen the time upon which mankind depends upon oil as a primary energy source. It might enable us, given current use levels, to keep using it generously for another century, at most. But then what?
As the market-patterns sail along, riding wave and trough in tandem, we may be seduced by each successive small condition, to think that a new paradigm is spreading out around us. But these "blips" are nothing more than minor variations.
As readers of this blog know, my priority has always been to suggest moderation in population growth, rather than promoting economic growth--with its attendant profligate confiscation of resource--as a way to slow the birth rate. Population is always used by apologists for exploitation, as the bottom line--more mouths to feed, more jobs to create, more cars to sell, more water, more food, more sewage, more pollution, more crowding, more conflict--for justifying expansion. But each iteration of supply leads inevitably to more demand, so that promoting one, without moderating the other, only makes the problem worse. We've been using that model for at least a hundred years, and look where it's brought us. The simplest way to slow demand is to reduce it. Period.