Here in America, Congress alternates between calls for "energy independence" and refusals to allow drilling in what it considers environmentally sensitive areas in Alaska and offshore California and Florida. There's more, but you get the idea. There is a lot of oil out there to be found and produced, not even including the vast reserves in Canada's tar sands. We might have reached the age of peak panic about oil supplies, but not of peak oil.
One thing we think we know about the oil business is correct. High oil prices and the greenhouse gasses produced by using oil have important geopolitical consequences. These $100+ prices have led to a massive flow of wealth, and hence power, from consuming to producing countries. If oil were still priced at $20 or even $40 per barrel Russia would not have the wherewithal to revert to its bullying foreign policy, and America's banks would not be going hats-in-hand to Arab capitals in search of new capital. If gasoline prices had not closed in on $4 per gallon in the United States, thousands of SUVs and small trucks would not be sitting, unsold and unloved, on dealers' lots. If oil had not pierced the $100 per barrel level, and was not seen as a pollutant, the current enthusiasm for super-expensive nuclear power would not have reached a fever pitch. And if oil did not produce so-called greenhouse gasses when propelling cars and heating homes, there would be no massive subsidies for ethanol production, acreage would not be diverted from growing food to growing fuel, and the current run-up in food prices would be less steep, and food riots would not be breaking out around the world.
So oil indeed matters. But not in the ways we most often think.
Irwin M. Stelzer is a contributing editor to THE WEEKLY STANDARD, director of economic policy studies at the Hudson Institute, and a columnist for the Sunday Times (London).