8 ms·

Ask HN: What do you think of "Peak Oil?"

12 points by rbranson 16y ago

As fellow hackers, scientists, engineers, what do you think will be the impact of so-called "Peak Oil?" How do you think the exhaustion of available oil reserves will affect hacker culture and/or greater human civilization?

nostrademons 16y ago
Oil will gradually rise in price until it becomes more expensive than readily-available alternatives (solar, electric, more fuel-efficient, etc.) At that point, everyone will switch to the alternatives, demand for oil will sink (leaving its price at an oscillating plateau), the sudden cost-effectiveness of technologies like solar and better batteries will result in greater investment in them, and we'll switch to a new declining cost-curve as greater R&D pays off in better energy technologies. Eventually we'll be paying less for our solar energy than we're paying for gas now, and will wonder how people in the early 21st century ever got around. It's started happening already - the oil price spikes of 2007 were a harbinger of things to come, and they led to a widespread consumer shift from SUVs to hybrid, and the development of things like Tesla Motors.
- arghnoname 16y ago
  Oil prices seem to be quick to spike, so I would expect it to behave more like a step function than something more continuous. It seems certain price levels have to be hit to sufficiently dampen demand. If the spike is bad enough you get recession (or depression) which kills demand, and if it isn't big enough the initial investment of alternatives is too high. Also, if Saudi Arabia or wherever "run out of oil" I'd expect political instability to result there, but also, it not to matter as much. Before running out there, I'd expect it to matter more. I look forward to some facets of our crazy lifestyles changing (less exurbs and McMansions) but it'll definitely crimp GDP somewhat, more or less depending on the derivative.
  - nostrademons 16y ago
    I actually expect it'll look like a sawtooth wave, trending upwards. Oil has very high inelasticity in both demand and supply, so small supply changes have large effects on price. Changes in demand happen over much longer timescales (i.e. people's car-buying purchase cycles), so it takes longer for prices to go down. The OP asked for the effects of peak oil specifically though, not for actual oil prices. In the short term, oil supply is ruled by geopolitical concerns. We bomb Iraq, the price goes up. Putin decides to flood the market with cheap oil, the price goes down. Chavez starts saber-rattling, the price goes up. World enters recession, the price goes down. The Hubbert curve is what's left when you subtract out all the random political noise. And that slopes gradually down. So if we're limiting ourselves to the effects of Peak Oil only, the trendline for price is going to move slowly, even if the price in any given month gyrates wildly.
- stretchwithme 16y ago
  Yep, as a thing gets scarcer, its price goes up and people begin to re-evaluate its use. Gold is a lot scarcer than oil and we are in no danger of running out. But I don't think the oil price spikes of 2007 were a harbinger of this. The supply of oil is relatively stable compared to demand. Demand is affected by all kinds of things. Since prices of many other commodities spiked at the same time, the dollar had declined, gold had tripled, its far more likely that the Fed's cheap money overheated demand. And China's building boom probably had a lot to do with it too.
- david927 16y ago
  Oil will gradually rise in price Really? No one -- not you, nostredemons, nor anyone else -- can make such a claim with authority. The simple fact is, we don't know. No one knows. The peak oil opinion is that reserves have been vastly overstated and technology has made extraction termendously efficient at the detriment of a gradual decline in supply. So they're arguing the opposite. We also don't know how much of the 84 million barrels a day that we're currently consuming is price elastic. So the question isn't a simplistic, "Will we switch if the price gets high?," but the much more interesting, "if it starts to rapidly decline, will we have enough elasticity in demand to withstand the decades it would take to replace that energy with alternatives?"
  - nostrademons 16y ago
    The question is "what do you think of peak oil?". Of course I don't know exactly will happen. But I can certainly make an educated guess based on what I do know.
niels_olson 16y ago
Isn't this what Quora is for?
philipkimmey 16y ago
In general society, the concept of "peak oil" is a given. People involved in oil/energy generally believe it's a myth. I personally believe they have too much of a horse in the race to accept that oil is not limitless, but to this point they have been proven right that new sources of oil will crop up. In asking a question like this, I think it's worth considering the possibility that "peak oil" is little more than a myth, even if us tech people don't buy into the concept.
- nostrademons 16y ago
  Umm.... My sister is an exploration geologist for one of the major oil companies. Within the industry, peak oil is very widely recognized, and the general consensus is that it will happen within the next 10 years, and probably already happened a few years ago. The myth is that we're all going to be doomed because of peak oil, they'll be widespread societal chaos, and it'll lead to the death of Big Oil. At least over the near term (~next 40 years or so), peak oil generally means more profits for the oil companies, as they control an increasingly scarce resource. Over the long term, they are potentially screwed, but good luck finding a CEO who cares what will happen in 50 years, so their efforts to finding a solution have been rather halfhearted...
  - jerf 16y ago
    "good luck finding a CEO who cares what will happen in 50 years" Assuming you mean that as some sort of slam against CEOs: Project that slam backwards. If a CEO in 1950 had "cared" about 2000, would that have improved his decisions? 50 years really is too far away to plan, and the gulf between 2000 and 2050 will probably make 1950 to 2000 look smallish. I'm not a huge fan of "next quarter, the world ends" thinking, but expecting 50 Year Plans is not the solution. (Even 5 Year Plans have a certain... reputation.)
    - nostrademons 16y ago
      I don't mean it as a slam on CEOs. I mean it exactly as you do: that it is in no decision-maker's rational interest to project plans out to 50 years, and so anyone you can find that's made it to the CEO office simply...won't. This occasionally means that humans make rather regrettable choices that could totally have been avoided in hindsight, but I don't see a way to fix that without them making other regrettable choices that could only be seen in hindsight. I think it's fairly obvious that there will be a problem with the oil industry in 50 years; however, I have no idea what a possible solution to that problem will be, and I doubt anyone could until a few years have gone by.
Tycho 16y ago
I figure there must be a lot of oil in the Pacific...
dfrankow 16y ago
Commenters so far are talking about oil as a fuel. Petroleum is spread throughout our lives. Agriculture is driven by it (fertilizers). We use it to make plastics. Moving our economy from oil looks to be a major undertaking. Read this book by a petroleum geologist for a sobering view: http://www.amazon.com/Beyond-Oil-View-Hubberts-Peak/dp/product-description/080902957X http://www.amazon.com/Beyond-Oil-View-Hubberts-Peak/dp/produ.... He is most convincing about why we won't find more oil, less so about economics (because he's not an economist, presumably).
- nostrademons 16y ago
  Right, but oil is also fungible. If you remove the portion of it that is used as fuel, you have much more left over to supply the chemical, plastics, and fertilizer industries. 72% of domestic oil consumption is for transportation [1]. If we eliminate that use, then the amount of oil needed to power all other usages is less than 1/3 our total oil consumption. You can get pretty far down the Hubbert curve before total production is less than 1/3 what it is today. [1] http://www.eia.doe.gov/emeu/aer/pecss_diagram.html http://www.eia.doe.gov/emeu/aer/pecss_diagram.html
- dnautics 16y ago
  also fertilizers don't come from oil per se, but from energy (mostly the haber process, but also transportation of phosphates, etc), so that's definitely fungible.
whyme 16y ago
Peak Oil is only important when you look at the downstream effect. To me, the real question becomes - who has the oil, who needs the oil and who controls the oil?. The U.S. has made a habit of equating it's political and economic stability with it's ability to continue pulling in oil at stable prices which, in my opinion, is the reason for many of it's recent wars. There's is no shortage of oil world wide, but regardless of quantity the price shifts for consumer countries will continue to impact their economy and continue to cause these wars. It would be nice to see alternative technologies become cheap enough that the US dependency goes away, but then you have another question to ask yourself, what will the countries who currently capitalize on Oil profits do? What will the geopolitical landscape look like then?
- dnautics 16y ago
  Doesn't peak oil mean that the effects of global warming (as caused by carbon dioxide) are effectively capped?
  - arghnoname 16y ago
    No, but it helps. Even with zero oil. power production from other fossil fuels adds greenhouse gases to the atmosphere (assuming no attempt at sequestration).
  - whyme 16y ago
    No, It's the maximum point in global production throughput. From which point, supposedly, our oil reserves will continuously decline and demand will continuously and progressively exceed supply. The hype generated from this is along the lines of the world tanking, political instability, and so on.
born-to-think 16y ago
For years, we've been aware that innovations in alternative energy have been bought up by oil companies and quietly, quickly disappeared. Who DID kill the Electric Car and all that? That Peak Oil is even a concern to us now is partly due to the oil companies having invested in keeping us dependant. As a STARTING point, I'm all for getting back off them (by whatever legal means . . . or other are available) all non-oil related technology patents they've bought and hidden away. In the next 10 - 50 years, we may see the oil companies start to go down . . . but damned if they're taking us with them !!
- jseliger 16y ago
  For years, we've been aware that innovations in alternative energy have been bought up by oil companies and quietly, quickly disappeared. I don't believe this is true. Do you have any citations to support it?
  - borsukh 16y ago
    I believe he was talking about this for example: http://fuel-efficient-vehicles.org/energy-news/?p=690 http://fuel-efficient-vehicles.org/energy-news/?p=690
dstein 16y ago
IANAEconomist, but I believe the impacts of Peak Oil will ultimately be overshadowed by "Peak (American) Capitalism" in a similar same manner that the Real Estate bubble was overshadowed by the global financial bubble that created it. By any measure, we are not out of the financial crisis, the Federal Reserve has only bought time by printing money. In general, I think capitalism, as we know it, is coming to an end and there's no easy way to get through it. The conversion from an oil-based economy to a hydrogen/solar economy is going to have to happen during a period of prolonged depression for America, and prolonged economic rise in Asia.
taliesinb 16y ago
I'm surprised no-one here has mentioned the excellent book "The Limits to Growth" (http://en.wikipedia.org/wiki/The_Limits_to_Growth http://en.wikipedia.org/wiki/The_Limits_to_Growth). It's a book I can't recommend highly enough, even though the first edition was written almost 40 years ago (it was last updated in 2008). The basic concept is a system of differential equations called "World3" that allows for the analysis and qualitative understanding of the multitude of interactions between the various bio-geo-chemo-physical systems that couple us to our planet. While it doesn't strive to make actual concrete predictions, it does enumerate a bunch of different possible trajectories that are all consistent with the most current scientific models, and with policy choices we as a species might make over the next 50 years. And the conclusion is pretty much that we are doomed. Sadly. It seems likely (especially with the failure of Copenhagen) that we just are not politically capable of the level of co-ordinated activity needed to prevent a massive 'overshoot' beyond sustainable human population and consumption levels. Carl Sagan talked about the potential for the human race to snuff itself out. He might have been thinking about the Cold War at the time, but it seems the real war is the one we have we are waging on the very systems that support our continued existence on earth.
- zoomzoom 16y ago
  For an alternate perspective, read "the next 200 years" by Herman Kahn.
- bryanlarsen 16y ago
  Considering how completely wrong the book has been predicting the last 40 years, I think it's pretty safe to ignore it. The air, water and soil today is significantly cleaner now than it was 40 years ago, population is now predicted to start declining within 50 years, et cetera.
Mz 16y ago
I think that, as with any big change, if people will go ahead and start adapting voluntarily it doesn't necessarily have to be some huge crisis. Some do-able means to adapt: live closer to work, shop closer to home, walk more, car-pool, etc. Some companies are actively trying to encourage more car-pooling, living within walking distance of work, telework, etc. It looks to me like a drop in the bucket compared to what will be needed but I'm still glad to see it. The real challenge is trying to make sure such things don't wind up being "a day late and a dollar short".
keith_erskine 16y ago
Your supposition is incorrect. The planet is awash in oil. The only limitation is cost of extracting it. For example: the Bakken oil reserve in North Dakota is estimated to be in the 100's of billion barrels. Unfortunately, the oil is trapped in shale which limits the amount that can be extracted _today_. That problem gets reduced every year that new extraction technology comes on line. I think you're making the error of equating "energy" with "oil". In an economy that relies on moving people and stuff around, new cheaper ways of supplying the energy will always be found - it's in our nature. Example: New York state has huge natural gas reserves. If you converted all the buses in New York to run on CNG, the state would still be be a net-exporter of natural gas.
david927 16y ago
I was bullish on the price of oil when it was $20. For the world's most traded (and important) commodity, any jump in price is significant. It's now $90/bbl. That's huge. And I'm still bullish. I still think it's underpriced. Why? Because, while we'll never run out of oil, it will get much more expensive to get what's left. The price of extraction after a certain point in a reserve (around half-way) goes dramatically up; the technology we've invented in the last decades has increased our ability to get to pockets of the cheap/easy-to-get-to reserves; and no large reserves of (cheap/easy-to-extract) oil has been found since the 1970's. I'm surprised at the confidence in this thread, but humans have a terrible capacity for forseeing change. Taleb's Black Swan is about this. He has a great example: every day of a turkey's life is a reinforcement that the farmer feeds and cares for it, until the last day. For the turkey, it's a black swan; for the farmer, it's not. Whatever you think of the future of the price of oil, above all don't be too confident. Don't be a turkey.

12 points by rbranson 16y ago

nostrademons 16y ago

Oil will gradually rise in price until it becomes more expensive than readily-available alternatives (solar, electric, more fuel-efficient, etc.) At that point, everyone will switch to the alternatives, demand for oil will sink (leaving its price at an oscillating plateau), the sudden cost-effectiveness of technologies like solar and better batteries will result in greater investment in them, and we'll switch to a new declining cost-curve as greater R&D pays off in better energy technologies. Eventually we'll be paying less for our solar energy than we're paying for gas now, and will wonder how people in the early 21st century ever got around. It's started happening already - the oil price spikes of 2007 were a harbinger of things to come, and they led to a widespread consumer shift from SUVs to hybrid, and the development of things like Tesla Motors.

arghnoname 16y ago
Oil prices seem to be quick to spike, so I would expect it to behave more like a step function than something more continuous. It seems certain price levels have to be hit to sufficiently dampen demand. If the spike is bad enough you get recession (or depression) which kills demand, and if it isn't big enough the initial investment of alternatives is too high. Also, if Saudi Arabia or wherever "run out of oil" I'd expect political instability to result there, but also, it not to matter as much. Before running out there, I'd expect it to matter more. I look forward to some facets of our crazy lifestyles changing (less exurbs and McMansions) but it'll definitely crimp GDP somewhat, more or less depending on the derivative.
- nostrademons 16y ago
  I actually expect it'll look like a sawtooth wave, trending upwards. Oil has very high inelasticity in both demand and supply, so small supply changes have large effects on price. Changes in demand happen over much longer timescales (i.e. people's car-buying purchase cycles), so it takes longer for prices to go down. The OP asked for the effects of peak oil specifically though, not for actual oil prices. In the short term, oil supply is ruled by geopolitical concerns. We bomb Iraq, the price goes up. Putin decides to flood the market with cheap oil, the price goes down. Chavez starts saber-rattling, the price goes up. World enters recession, the price goes down. The Hubbert curve is what's left when you subtract out all the random political noise. And that slopes gradually down. So if we're limiting ourselves to the effects of Peak Oil only, the trendline for price is going to move slowly, even if the price in any given month gyrates wildly.
stretchwithme 16y ago
Yep, as a thing gets scarcer, its price goes up and people begin to re-evaluate its use. Gold is a lot scarcer than oil and we are in no danger of running out. But I don't think the oil price spikes of 2007 were a harbinger of this. The supply of oil is relatively stable compared to demand. Demand is affected by all kinds of things. Since prices of many other commodities spiked at the same time, the dollar had declined, gold had tripled, its far more likely that the Fed's cheap money overheated demand. And China's building boom probably had a lot to do with it too.
david927 16y ago
Oil will gradually rise in price Really? No one -- not you, nostredemons, nor anyone else -- can make such a claim with authority. The simple fact is, we don't know. No one knows. The peak oil opinion is that reserves have been vastly overstated and technology has made extraction termendously efficient at the detriment of a gradual decline in supply. So they're arguing the opposite. We also don't know how much of the 84 million barrels a day that we're currently consuming is price elastic. So the question isn't a simplistic, "Will we switch if the price gets high?," but the much more interesting, "if it starts to rapidly decline, will we have enough elasticity in demand to withstand the decades it would take to replace that energy with alternatives?"
- nostrademons 16y ago
  The question is "what do you think of peak oil?". Of course I don't know exactly will happen. But I can certainly make an educated guess based on what I do know.

niels_olson 16y ago

Isn't this what Quora is for?

philipkimmey 16y ago

In general society, the concept of "peak oil" is a given. People involved in oil/energy generally believe it's a myth. I personally believe they have too much of a horse in the race to accept that oil is not limitless, but to this point they have been proven right that new sources of oil will crop up. In asking a question like this, I think it's worth considering the possibility that "peak oil" is little more than a myth, even if us tech people don't buy into the concept.

nostrademons 16y ago
Umm.... My sister is an exploration geologist for one of the major oil companies. Within the industry, peak oil is very widely recognized, and the general consensus is that it will happen within the next 10 years, and probably already happened a few years ago. The myth is that we're all going to be doomed because of peak oil, they'll be widespread societal chaos, and it'll lead to the death of Big Oil. At least over the near term (~next 40 years or so), peak oil generally means more profits for the oil companies, as they control an increasingly scarce resource. Over the long term, they are potentially screwed, but good luck finding a CEO who cares what will happen in 50 years, so their efforts to finding a solution have been rather halfhearted...
- jerf 16y ago
  "good luck finding a CEO who cares what will happen in 50 years" Assuming you mean that as some sort of slam against CEOs: Project that slam backwards. If a CEO in 1950 had "cared" about 2000, would that have improved his decisions? 50 years really is too far away to plan, and the gulf between 2000 and 2050 will probably make 1950 to 2000 look smallish. I'm not a huge fan of "next quarter, the world ends" thinking, but expecting 50 Year Plans is not the solution. (Even 5 Year Plans have a certain... reputation.)
  - nostrademons 16y ago
    I don't mean it as a slam on CEOs. I mean it exactly as you do: that it is in no decision-maker's rational interest to project plans out to 50 years, and so anyone you can find that's made it to the CEO office simply...won't. This occasionally means that humans make rather regrettable choices that could totally have been avoided in hindsight, but I don't see a way to fix that without them making other regrettable choices that could only be seen in hindsight. I think it's fairly obvious that there will be a problem with the oil industry in 50 years; however, I have no idea what a possible solution to that problem will be, and I doubt anyone could until a few years have gone by.

Tycho 16y ago

I figure there must be a lot of oil in the Pacific...

dfrankow 16y ago

Commenters so far are talking about oil as a fuel. Petroleum is spread throughout our lives. Agriculture is driven by it (fertilizers). We use it to make plastics. Moving our economy from oil looks to be a major undertaking. Read this book by a petroleum geologist for a sobering view: http://www.amazon.com/Beyond-Oil-View-Hubberts-Peak/dp/product-description/080902957X http://www.amazon.com/Beyond-Oil-View-Hubberts-Peak/dp/produ.... He is most convincing about why we won't find more oil, less so about economics (because he's not an economist, presumably).

nostrademons 16y ago
Right, but oil is also fungible. If you remove the portion of it that is used as fuel, you have much more left over to supply the chemical, plastics, and fertilizer industries. 72% of domestic oil consumption is for transportation [1]. If we eliminate that use, then the amount of oil needed to power all other usages is less than 1/3 our total oil consumption. You can get pretty far down the Hubbert curve before total production is less than 1/3 what it is today. [1] http://www.eia.doe.gov/emeu/aer/pecss_diagram.html http://www.eia.doe.gov/emeu/aer/pecss_diagram.html
dnautics 16y ago
also fertilizers don't come from oil per se, but from energy (mostly the haber process, but also transportation of phosphates, etc), so that's definitely fungible.

whyme 16y ago

Peak Oil is only important when you look at the downstream effect. To me, the real question becomes - who has the oil, who needs the oil and who controls the oil?. The U.S. has made a habit of equating it's political and economic stability with it's ability to continue pulling in oil at stable prices which, in my opinion, is the reason for many of it's recent wars. There's is no shortage of oil world wide, but regardless of quantity the price shifts for consumer countries will continue to impact their economy and continue to cause these wars. It would be nice to see alternative technologies become cheap enough that the US dependency goes away, but then you have another question to ask yourself, what will the countries who currently capitalize on Oil profits do? What will the geopolitical landscape look like then?

dnautics 16y ago
Doesn't peak oil mean that the effects of global warming (as caused by carbon dioxide) are effectively capped?
- arghnoname 16y ago
  No, but it helps. Even with zero oil. power production from other fossil fuels adds greenhouse gases to the atmosphere (assuming no attempt at sequestration).
- whyme 16y ago
  No, It's the maximum point in global production throughput. From which point, supposedly, our oil reserves will continuously decline and demand will continuously and progressively exceed supply. The hype generated from this is along the lines of the world tanking, political instability, and so on.

born-to-think 16y ago

For years, we've been aware that innovations in alternative energy have been bought up by oil companies and quietly, quickly disappeared. Who DID kill the Electric Car and all that? That Peak Oil is even a concern to us now is partly due to the oil companies having invested in keeping us dependant. As a STARTING point, I'm all for getting back off them (by whatever legal means . . . or other are available) all non-oil related technology patents they've bought and hidden away. In the next 10 - 50 years, we may see the oil companies start to go down . . . but damned if they're taking us with them !!

jseliger 16y ago
For years, we've been aware that innovations in alternative energy have been bought up by oil companies and quietly, quickly disappeared. I don't believe this is true. Do you have any citations to support it?
- borsukh 16y ago
  I believe he was talking about this for example: http://fuel-efficient-vehicles.org/energy-news/?p=690 http://fuel-efficient-vehicles.org/energy-news/?p=690

dstein 16y ago

IANAEconomist, but I believe the impacts of Peak Oil will ultimately be overshadowed by "Peak (American) Capitalism" in a similar same manner that the Real Estate bubble was overshadowed by the global financial bubble that created it. By any measure, we are not out of the financial crisis, the Federal Reserve has only bought time by printing money. In general, I think capitalism, as we know it, is coming to an end and there's no easy way to get through it. The conversion from an oil-based economy to a hydrogen/solar economy is going to have to happen during a period of prolonged depression for America, and prolonged economic rise in Asia.

taliesinb 16y ago

I'm surprised no-one here has mentioned the excellent book "The Limits to Growth" (http://en.wikipedia.org/wiki/The_Limits_to_Growth http://en.wikipedia.org/wiki/The_Limits_to_Growth). It's a book I can't recommend highly enough, even though the first edition was written almost 40 years ago (it was last updated in 2008). The basic concept is a system of differential equations called "World3" that allows for the analysis and qualitative understanding of the multitude of interactions between the various bio-geo-chemo-physical systems that couple us to our planet. While it doesn't strive to make actual concrete predictions, it does enumerate a bunch of different possible trajectories that are all consistent with the most current scientific models, and with policy choices we as a species might make over the next 50 years. And the conclusion is pretty much that we are doomed. Sadly. It seems likely (especially with the failure of Copenhagen) that we just are not politically capable of the level of co-ordinated activity needed to prevent a massive 'overshoot' beyond sustainable human population and consumption levels. Carl Sagan talked about the potential for the human race to snuff itself out. He might have been thinking about the Cold War at the time, but it seems the real war is the one we have we are waging on the very systems that support our continued existence on earth.

zoomzoom 16y ago
For an alternate perspective, read "the next 200 years" by Herman Kahn.
bryanlarsen 16y ago
Considering how completely wrong the book has been predicting the last 40 years, I think it's pretty safe to ignore it. The air, water and soil today is significantly cleaner now than it was 40 years ago, population is now predicted to start declining within 50 years, et cetera.

Mz 16y ago

I think that, as with any big change, if people will go ahead and start adapting voluntarily it doesn't necessarily have to be some huge crisis. Some do-able means to adapt: live closer to work, shop closer to home, walk more, car-pool, etc. Some companies are actively trying to encourage more car-pooling, living within walking distance of work, telework, etc. It looks to me like a drop in the bucket compared to what will be needed but I'm still glad to see it. The real challenge is trying to make sure such things don't wind up being "a day late and a dollar short".

keith_erskine 16y ago

Your supposition is incorrect. The planet is awash in oil. The only limitation is cost of extracting it. For example: the Bakken oil reserve in North Dakota is estimated to be in the 100's of billion barrels. Unfortunately, the oil is trapped in shale which limits the amount that can be extracted _today_. That problem gets reduced every year that new extraction technology comes on line. I think you're making the error of equating "energy" with "oil". In an economy that relies on moving people and stuff around, new cheaper ways of supplying the energy will always be found - it's in our nature. Example: New York state has huge natural gas reserves. If you converted all the buses in New York to run on CNG, the state would still be be a net-exporter of natural gas.

david927 16y ago

I was bullish on the price of oil when it was $20. For the world's most traded (and important) commodity, any jump in price is significant. It's now $90/bbl. That's huge. And I'm still bullish. I still think it's underpriced. Why? Because, while we'll never run out of oil, it will get much more expensive to get what's left. The price of extraction after a certain point in a reserve (around half-way) goes dramatically up; the technology we've invented in the last decades has increased our ability to get to pockets of the cheap/easy-to-get-to reserves; and no large reserves of (cheap/easy-to-extract) oil has been found since the 1970's. I'm surprised at the confidence in this thread, but humans have a terrible capacity for forseeing change. Taleb's Black Swan is about this. He has a great example: every day of a turkey's life is a reinforcement that the farmer feeds and cares for it, until the last day. For the turkey, it's a black swan; for the farmer, it's not. Whatever you think of the future of the price of oil, above all don't be too confident. Don't be a turkey.