Following an earlier post on Daniel Yergin’s piece in the Wall Street Journal (promoting his new book), I came across James Hamilton‘s response to Yergin’s basic argument. I use Hamilton as a primary source for teaching the resources piece of my Environmental Economics class, and he is an important player in the public debate.
Next up, we have a Michael Gilberson post that provides an overview of the issues and going through Hamilton’s critique of Yergin. I find his response particularly useful because he gets at why peak oil might be an issue worth worrying about, and also has a section devoted to “supply and demand: boring and relevant.” He prefaces his supply and demand discussion with this:
Hamilton draws attention to the slow rate of the supply response relative to demand growth. He is right, this is where the action is with respect to understanding recent oil market developments … and nothing about what he said depends upon whether the peak in world oil production did happen in 2005 or 2007, or will happen in 2011, or won’t happen until 2100 … and framing remarks as about peak oil distracts attention from the real issues.
Indeed. For those of you who attended the LSB session on petroleum last year certainly know that people with money in the energy industry pay very close attention to supply and demand fundamentals.