Univ. of California physics prof Tom Murphy’s blog – Do the Math – has a lengthy and stimulating discussion about peak oil data (and the analysis of such). I’m grateful to Joss Winn for sharing the link via Twitter.
One of the aspects I found interesting about the analysis was the plot of oil production as a function of price:
On the left-hand side, we see a familiar correlation of price and production: if spare capacity exists, higher prices stimulate increased production. But something dramatic happens at about 84 Mbpd. Increasing the price by a factor of three is insufficient to budge production by more than a few percent. There appears to remain a slight positive slope (economics still works in the normal sense), but the thing is incredibly inelastic.
Essentially, given the finite nature of the resource and issues to do with extraction, the market reaches a point where higher prices are unable to drive greater production volume. Given our dependence on oil (and slow pace of change away from oil) , this might be seen as problematic, to say the least.
Murphy also links to a Mother Jones article about work by James Hamilton – Oil Prices, Exhaustible Resources, and Economic Growth [pdf]. I’ve not had a chance to read it yet, but it looks interesting.
