So where did it all go wrong for peak-oil alarmists? Interestingly, for better ‘experts’ than Monbiot, it was their abject failure to understand either energy or the economics of energy. A double failure that led inexorably into a state which economist Mike Munger rightly terms: “peak idiocy”. Munger’s thesis bears repeating:
“Of all the idiotic things people believe, the whole “peak oil” thing has to be right up there. It is literally impossible for us to run out of oil. We have never run out of anything. And we never will.
If we did start to use up the oil we have … three things would happen.
1. Prices would rise, causing people to cut back on use. More fuel efficient cars, better insulation on houses, etc. Quantity supplied goes up.
2. Prices would rise, causing people to look for more. And they would find more oil, and more ways to get at it. Quantity demanded goes down.
3. Prices of oil would rise, making the search for substitutes more profitable. At that point alternative fuels and energy sources would be economical, and would not require government subsidies, because they would pay for themselves. The supply curve for substitutes shifts downward and to the right.