My column for this week is up at Forbes, and inevitably, deals with the State of the Union address last night.
But the portion that really floored me was Obama’s taking credit for the increase in US oil and gas production over the last several years. It is certainly true that, against all predictions of peak oil, new technologies have helped drive a surge in US hydrocarbon production. Combined with a recession-driven drop in demand, America’s oil imports as a percentage of its total use has dropped to 45.6%, the lowest level in over 15 years.
This surge in energy production is a fabulous reminder of how markets work. For years I have written that the peak oil folks were missing something fundamental by performing an overly static analysis. They looked at current “proven” reserves of oil and gas and projected forward how many years it would take for these to run out. But oil and gas reserve numbers only make sense in the context of a particular set of technologies and pricing levels. As hydrocarbons run short, rising prices tend to spur both innovation and new, more expensive exploration activity. Oil and gas companies are once again proving Julian Simon’s addage that the only true scarcity is human brain power, and they should be given a lot of credit for the recent production boom.
The one person who deserves no credit for this boom is Barack Obama....