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Underestimating the dangers of peak oil and climate change

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(Read caption) Adelie penguins walk on the ice at Cape Denison in Antarctica, in this December 2009 file photo. The ongoing warming at the poles affects weather patterns that already have and will continue to threaten crop yields around the world, Cobb writes.

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Many people dismiss the risks associated with oil depletion and climate change--even many who accept the two issues as problems. They judge those risks to be small or at least manageable. Since no one can know the future, we cannot be sure whether they are right or wrong. But even if they are right, should we be so sanguine? As we examine this question, keep in mind that we are talking about probabilities and the level of risk, not absolute knowledge which none of us can have about the future.

One reason that so many people discount the risks of oil depletion and climate change is that their experience tells them to do so. We've had high oil prices and tight oil supplies before, and always new supplies and declining prices followed. For many we are just in another market cycle, and there's nothing to be worried about. And, when it comes to climate change, well, we've had hot summers before and even if the climate is warming a bit, we'll adapt. 


Both these observations are subject to what's called the problem of induction. In a nutshell, we believe that because a certain event has reliably repeated itself in the past or because certain conditions have prevailed for a long time, we can always expect more of the same in the future. If that were true, there would come a point in our lives when we would never be surprised. But as it turns out, humans are continually surprised, which shows you that the problem of induction lives on.

The classic illustration is the statement: "All swans are white." The statement may be based on thousands, even millions of observations. But, this would not prove that it is true. This is because we cannot possibly observe all swans for eternity. And, it takes only one swan which is not white to prove the statement false. As it turns out, Europeans only realized that this statement was false when they landed in Australia and saw black swans.

So, just because high oil prices in the past have eventually led to low oil prices does not necessarily mean they will this time. Oil is a finite resource. At some point it will never be plentiful again. Has that point come? Is that even the question we should be asking? I'll elaborate below.

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