Peak Oil: Where Art Thou?

Unrecognized by many, technology has significantly been improving on the way we do things. This includes finding new and adding to the existing resources that are deemed useful to society.

The chart found below is an example.

True, while oil prices are currently hovering at $80, technology is fast catching up on how unconventional oil is being found.
According to the Economist, (bold highlights mine)

``BP, A big British oil company, announced a round of efficiency measures and cost cuts on Tuesday March 2nd aimed at increasing annual profits by $3 billion over the next few of years. But BP and the world's other big oil companies face similar problems when it comes to boosting profits. Few big new oil fields that are easy to reach and cheap to exploit have been discovered in recent years. This has driven firms to seek oil ever deeper below the sea. In 1947, Kerr-McGee built the world’s first offshore oil well that was completely out of sight of land, drilling 4.6 metres into the seabed off the coast of Louisiana. This year Shell's 22,000-tonne Perdido rig is set to begin operation. Standing nearly as tall as the Eiffel Tower, it is chained to the seabed 2.4km metres below and is capable of extracting oil at a maximum depth of 2.9km."

I'd propose that the problem of high oil prices isn't due to the "perceived" scarcity of oil (or peak oil), but instead with over 90% of proven oil reserves held by governments, the problem is one of the access to these reserves as shown below.

Chart from the US EIA

In short, while government intervention adds to the inaccessibility factor in the supply side, government inflationism (too much printing money, subsidies, etc...) has been prompting for artificially increased demand, which compounds on the market distortions which results to high (and prospectively higher) oil prices.

To consider, technology has materially improved, in spite of the tremendous restrictions and contortions plaguing the oil marketplace.

Had free markets been allowed to function, we'd likely see the wonders of the price mechanism work by having more supplies sooner than later. In addition, markets are likely to discover feasible oil substitutes rather than government imposed options via subsidies.

As Professor Don Boudreaux explains, (bold highlights mine)

``Petroleum was no resource to our ancestors who had yet to grasp the fact that it can be refined and burned in ways that improve the quality of life. In fact, I suspect that whenever that gooey, noxious black stuff appeared in freshwater creeks in pre-Columbian Pennsylvania, natives of that region regarded it as a nuisance.

``So economically, the Earth's supply of nonrenewable energy resources was, back then, much smaller than it is today. Human creativity and effort turned a nuisance into a resource.

``Human creativity and effort also are at work finding not only substitutes for oil, but also new supplies of oil. Each success on this front increases the supply of oil. The reason is that oil deposits that remain unknown are economically nonexistent.

``The same is true of oil deposits that are known to exist but are currently too costly to tap. Oil in the Earth's crust that is out of reach with existing technology is no more of a resource today than is oil on Pluto. But if and when human creativity discovers cost-effective techniques for extracting that oil, it then -- and only then -- becomes a resource. In effect, more of the resource "oil" is created.

``Of course, as a matter of physics, there is indeed only a finite amount of oil in the Earth. But we have no idea how much. And our ignorance of this physical fact is economically relevant."

In short, access to resources is a function of how the market values them, which can only be determined by the price mechanism.