Peak Oil holds that, due to fundamental limitations of geology, the easy and cheap oil is mostly gone, and "we" must now drill for expensive, hard-to-reach oil.
"Lemon socialism" is a shorthand for "privatizing profits and socializing losses." In the case of oil drilling, it means that the drilling companies will keep the profits from the high price of oil, while shifting the cost of drilling to others.
The damage to the Gulf is a classic (and tragic) example. Drilling in mile-deep waters is necessary (if we are to continue to maintain supply in the face of Peak Oil) and it is expensive. Most of the expense is due to mitigating risk. So BP and friends keep profit for themselves, while ignoring risk-- i.e., shifting it to society. In this case, the costs were paid by all of us, especially shrimp fishermen, folks dependent on Gulf tourism, etc.
In a minute, I'll tell you the bad news.
Let's start at the beginning. We Americans want/have to do a lot of things that use about 20 million barrels of oil per day. And we humans want/have to do a lot of things that use about 85 million barrels of oil per day. We can discuss this in more detail in a bit, but for now let's just take all this as given.
Meeting that demand for 85 mbpd is hard, and getting harder every day. You can't get that oil from just drilling on land-- there just isn't that much oil any more. You have to do all sorts of difficult and expensive things-- boil the tar sands, drill a mile deep in the ocean, run all sorts of complex projects.
When you run a complex project-- doing things that have seldom been done before-- youscrew upa significantportion ofthe time. It happens.
Rest assured that if are attempting something this complex, sooner or later you will screw up. And if that screwup happens a mile under the sea, it will be virtually impossible to fix.
You can minimize the chance of a screwup.
But its going to cost you-- big time.
Much of the cost is likely in the contingency plans. You have to have multiply redundant systems in case something fails. You have to have all sorts of containment procedures, lots of people standing by in case something goes wrong. You have to pay for lots of fancy (and expensive!) tests to learn how things behave a mile under the sea, and ensure that everything is working well at all points.
In a market economy, with no externalities, this is what would happen. BP (or whoever) would pay the cost, and pass the cost on to customers.
In our lemon socialist system, things work differently: BP skips the safety and contingency plans, thus passing the cost on to someone else. In this case, the someone else is whomever is harmed by the oil volcano: basically, everyone who benefits from the services provided by the Gulf of Mexico (fisheman, tourist industry, etc).
It get's worse.
You see, there's long been an ongoing argument about how Peak Oil will affect us. One fairly standard view was recently expressed quite well by Stuart Staniford
the great thing about peak oil, especially compared to climate change, is that when it occurs (and even in the run-up as we saw in 2005-2007) it will call attention to itself in an impossible-to-ignore way. When you have not quite enough oil, the price goes through the roof, and everyone immediately realizes that there is a major not-quite-enough oil problem, and begins thinking in terms of smaller cars, hybrid cars, skipping the family vacation this year, etc. The price feedback is immediate and relentless until enough conservation has been achieved for however much oil is available this particular year. And the same thing will be true all the way down - if at some point we need to transition from gas scooters to electric scooters, there will $40/gallon gas pointing out to us the immediate urgency of that step.
No, no, no. The underwater oil volcano in the gulf forms a rather dramatic counterexample to this. The increased cost of oil due to scarcity is largely being paid by shrimp fishermen.
Consider an NYC-based consultant who flies cross country twice a week. He pays several hundred bucks for this (a very small part of his expenses). But part of the tab is picked up by others-- e.g., a waterfront-hotel operator in Louisiana.
The consultant is virtually insensitive to price-- he's flying on an expense account, and anyway its a small fraction of what he charges his client. The shrimp fisherman and hotel operator are sensitive to price signals, but there's no way they can get the consultant to use less oil.
The oil volcano in the Gulf is, indeed a wakeup call. It indicates that Peak Oil economics are not described by free markets. They are governed by lemon socialism. As oil grows more scarce, those who use it do not pay the full cost, but pass much of the cost on to others.
Now for the bad news.
Some of the best ways to mitigate peak oil are highly carbon-intensive. Examples include Oil Sands, Coal-to-liquid, etc.
If "we" are to keep using oil at the rate "we" are, then "we" will pay the cost-- through the effects of higher carbon emissions.
Of course, as the Gulf volcano demonstrates, the "we" who use the oil can be very different from the "we" who pay the cost. In this case, the "we" who pay the cost are the young and multiple unborn generations.
Peak oil is real. The primary threat is not that "we" will pay high costs of oil. The primary threat is that-- thanks to lemon socialism, people who are insensitive to the real cost of oil will pass its enormous cost on to society as a whole.
You can (and should!) conserve as much as possible. But-- thanks to lemon socialism-- you will still help pay the cost of increasingly scarce oil.