■"As Prices Soar, Doomsayers Provoke Debate on Oil's Future: In a 1970s Echo, Dr. Campbell Warns Supply Is Drying Up, But Industry Isn't Worried; Charges of 'Malthusian Bias,'" by Jeffrey Ball, Wall Street Journal, 21 September 2004, p. A1.

A great and very balanced article on the subject. I recommend it word for word.

Campbell says oil production has peaked, and his "scary scenario" is that it will end up costly more and more to produce oil over time. This would mean that the world would be forced to switch off of oil and onto something else. How long would it take. Campbell predicts the world will use oil for the next century or so, but that it will have to switch progressively to more efficient sources of energy or risk lower productivity. He assumes this switching over will go badly, thus the oil age will end with a dramatic thud.

The oil industry says Campbell completely ignores the role of technology in not only finding more oil, but in redefining the very concept of oil, to wit the new discoveries of huge amounts of reserves in oil shale rock and tar sands. Is it harder to extract oil from these substances? Yes. Will technology provide answers? Yes, say most experts, who blow off Campbell as a myopic doomsayer.

Frankly, I buy both arguments and find them completely complimentary and rather banal. We will progressively run out of easily accessed oil. That will raise prices over time, pushing us to new technologies that allow us to extract oil from shale and sands. But as those new sources cost somewhat more, and as the world progressively works to decarbonizes its transportation energy usage (not to mention it's use of coal to generate electricity) due to environmental concerns (like clean air and global warming), technologies also arise in the automotive industry to push us toward hybrids and ultimately to hydrogen-fueled vehicles.

All of this occurs over the next two to three decades, as fast as it makes sense to unfold. Who will decide? Largely the markets, but politics will play a key role, primarily in the form of environmental activism. Will energy companies stand in the way? Judging by their lack of investment in oil infrastructure and processing capacity, no. How about car companies? Do you think they'd like to swap out the entire fleet of automobiles in the world a couple of times over the next two to three decades? Hmmm, let me think about the profit potential there and then answer YES!.

So, in my mind, all this debate about a catastrophically abrupt change from one era to the next is pure BS. I think the most logical tracks will be located in China, where the plussing up of the car population is so rapid, that, along with all the other development there, it's generating a huge uptick in air pollution that the Chinese will soon reach a tipping point on. As they reach and surmount that tipping point, watch for Honda and Toyota, as well as local producers, to push the progressive toward hybrids and hydrogen cars. That push will only sweeten the global sales opportunities for the entire automotive industry, which is already running from the latest bit of California's clean-air mandates in the direction of more plans for hybrids and hydrogen-fueled cars. My guess is that China's explosive growth will be a faster spur, and I say that as someone who was deeply impressedófirst handóby the amount of smog currently choking China's bigger cities.

Can a System Perturbation rock this otherwise fairly gentle pathway? Sure, but it's likely to be environmental in nature, with China in the lead, rather than supply-side in nature, with America totally freaking out and dissolving within a global economic meltdown (not that I wouldn't mind consulting on that thrilling movie script).