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In a funny way, the peak-oilers who disagree with Hirsch's memo have it right. But they have it right because the peak-oil hypothesis is so fundamentally dumb. And its dumbness won't be changed by a recession and temporarily low oil prices.

Quick digression. The peak-oil hypothesis actually has two parts, and only one part is dumb: (1) global oil production has peaked, or is about to peak; and (2) this will cause economic and financial ruin. Part 2 is the dumb part.

Part 2 is dumb because declining production will cause (and in fact already caused) oil prices to rise. $140 oil may have been a fluke, but $100 oil was not. The thing about a high price is that it leads to changes in purchasing behavior. Even before the emerging recession took the air out of oil prices, they'd begun to drop due to conservation by oil consumers. When they return, rising oil prices will soften the blow of the end of the oil era. High prices spur investment in new sources and new technologies, and ultimately the oil era will simply be a curiosity of economic history.

Of course all that's on hiatus while we suffer through this recession. When the global economy recovers and oil demand starts increasing again, the tightness of oil supply will again start pushing prices upward. And then the peak-oilers can quit fighting among themselves and get back to getting it so very wrong.

Andrew,
You are right to distinguish between the phenomenon itself and the societal effects. At some point we will reach maximum production, whether it be for geophysical, economic or political reasons. One could argue that peak oil is irrelevant if our demand stays below the production decline rate.

Now, how do we define economic/financial ruin? In some ways it's a matter of perspective. Do we define it by a year over year drop in national and global GDP? Do we define it by a critical mass of unemployment? Are we focusing on standard of living or quality of life? That's where it gets tricky.

Peaknik visions run the gamut from the pessimistic "long emergency" types to those who see peak oil as a welcome opportunity to transition away from global trade to "resilient communities." I think the point of contention is how is the scope and scale of our challenges, not whether we have any.

I think the challenge with your argument is it's not so much the current price of oil itself that drives consumer and investment behavior, but the expectation of where prices will go. (And the various "official" energy forecasts out there are all over the place.) Investment decisions occur years out. So it's possible that the peak in oil production could occur in a constrained investment environment and the available alternatives will not be enough to make up for the annual production declines. Demand declines have a long ways to go to remove this concern.

The next few years will be very interesting.

Actually, it's not tricky. Will there be costs as society adjusts to a post-oil era? Of course. But while you claim that peak-oilers occupy a broad spectrum of belief regarding the economic and social effects of this transition, what I've seen is fairly narrow and is illustrated succinctly by this excerpt from Ghostbusters (start at the 2:00 mark). Dogs and cats living together! Mass hysteria!

Moreover, if you're right about current behavior depending in part on future price expectations, then that just strengthens my point about this being a matter of adjustment to a new regime rather than catastrophe. The more forward-looking households and businesses are, the less costly will be the adjustment.

(Mind you, the evidence on our forward-looking-ness is mixed, and the proposed auto-industry bailout provides a vivid example of an entire industry that has for years focused on and profited from the here and now of cheap fuel while ignoring reasonable forecasts of the future. Fortunately, households appear to be a bit more forward-looking.)