It's interesting to observe the 'Peak Oil' debate, because it is a concern that unites both environmentalists and capitalists. See my previous posts here .
The latest organization to weigh in on the debate is the US Military, who say “By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day.”
Maybe they're more concerned about the cost of fighting wars than the consequences of climate change, but the consequences of oil shortages on the world economy are very real.
Of course, the usual response in the UK to high fuel prices is to whine about the amount of tax on petrol and the effect on the poor put-upon motorist. This is counter-productive. Reducing the amount of tax on petrol simply puts off the evil day when we're actually going to have to address our over-consumption. It's a bit like giving a new credit card to someone who is heavily in debt.
It would be better to increase fuel taxes as it gives a clear signal to businesses and individuals that they should choose lower-emitting vehicles, drive less and choose more sustainable forms of transport.
Of course, we could wait for the market to do the job for us, but the problems with this are:
1. It takes time for the economy to adapt. If the US Military report is correct, we could have a crisis in 2015. The service life of a vehicle is 10 years plus, so the vehicles we buy today will still be in use in 2020. It will be bad for the economy to have to scrap vehicles 5 years before the end of their life simply because as a country we didn't invest in lower-emitting technologies while we had the chance. Similarly, it will take years to invest in low-oil infrastructure.
2. As the oil price increases, an larger and larger share of our national wealth will be diverted to the oil-producing countries, which are generally not the most savoury regimes.
3. The oil price may not rise in a gradual, smooth, linear manner. A sudden price shock could cause real problems for any economy that is dependent on cheap oil.