As everyone knows, oil prices have fallen sharply and “unexpectedly” over the last few months, though this is not really unexpected to anyone who believes in markets or technological progress. But confidence in markets and technology does rule out a lot of liberals and virtually all environmentalists. As such, it’s fun to recall his Krugmanness declaring four years ago that “peak oil” was here to stay. In “Our Finite World,” Krugman demonstrated that what’s finite is his intelligence and imagination:
Oil is back above $90 a barrel. Copper and cotton have hit record highs. Wheat and corn prices are way up. Over all, world commodity prices have risen by a quarter in the past six months.
So what’s the meaning of this surge?
Is it speculation run amok? Is it the result of excessive money creation, a harbinger of runaway inflation just around the corner? No and no.
What the commodity markets are telling us is that we’re living in a finite world, in which the rapid growth of emerging economies is placing pressure on limited supplies of raw materials, pushing up their prices. And America is, for the most part, just a bystander in this story. . . Conventional oil production has been flat for four years; in that sense, at least, peak oil has arrived.
Some “bystander” the U.S. has turned out to be. We’re soon to become the world’s number one oil producer again. Krugman’s cat better find a safe place to hide.
Maybe, like his soul-brother Gruber, this is a typo. Maybe Krugman meant to say “pique oil,” because environmentalists are all upset about falling oil prices. Most economic models suggest falling oil prices will add one-half to one percent to U.S. and global economic growth over the next year or so. For hard-pressed American consumers, it’s like getting a tax cut. So what do liberals want to do? Why raise the gas tax, naturally. Moreover, falling oil prices are bad news, don’t you know? So sayeth The New Yorker, because. . . well, you can guess:
[M]any people who have long argued that our addiction to oil and gas is destroying the planet, so did the much discussed concept of “peak oil’’—the theoretical moment when half the world’s oil reserves had been consumed and fossil fuels began to become scarce. The date of peak oil is hard to pin down, but most suggest we passed that point a decade ago. In a Times column titled “The Finite World,’’ Paul Krugman said that the magic moment had arrived in 2010. . .the drop in oil prices comes at a terrible moment. Last month the Intergovernmental Panel on Climate Change reported that our only chance to halt the rising temperature of the Earth, and to prevent the calamity that rise will cause, would be to eliminate fossil-fuel emissions by the end of the century. . . cheap gas has become like an industrial form of crack.
Rather than awarding a group Green Weenie, let’s go with the Green Doom-Monster instead: