Econbrowser discussion on Hirsch report

Following a few posts about peak oil on his weblog, and a chat on econblog, Prof. Hamilton has opened another scintillating discussion on limitations of the Hirsch report on peak oil. I agree with many of the comments that follow the post, and I will try to collect the nuggets that I feel are in line with my poistion even as this discussion continues:

Heading out: World oil demand grew last year much more rapidly than anticipated, despite an increase in price at the end of the year. It appears that it is likely to do so again this year, even as prices continue to rise.

Joseph Somsel: The PURPOSE of the report was not to forecast future demand at some price point but to explore the technological options for convential oil substitution and their physical delivery timing.

Heading out: I think that what it (Hirsh report) was saying in part is that we have a huge inertia against change in the size and needs for fuel of our current transportation fleet, and that this cannot be turned around in less than about 20 years without significant impact, and that 20 years requires that R&D funds be invested now to find a new answer. Short of having that 20-years, we are in trouble.

Odograph: Do economists have any tricks to tell us if $60/barrel oil is signal or noise? Trend or volatility?

RoyYoung: Nymex WTI contract for 2011 is over $58/bbl! There has been a fundamental shift in the futures market in the last 6 months that is different from the (now outdated) heavy backwardation shape some people are referring to.
....I think the bottom line is that marginal cost to increase world oil production capacity is much higher than in years past (infinity if we have truly reach peak oil), so it will be difficult if not impossible to maintain reasonable rate of economic growth while maintaining current rate of energy consumption (Energy Consumed/GDP). So the choice is either lower future econ growth rate, or lower rate of energy consumption per unit of output.

T.R. Elliot: I'm not a peak oil fanatic. Nor anti-economics. But I do think we need a REALITY BASED community focusing attention on this issue.

I must thank JDH for provoking such a good discussion on a very important topic, even though, IMHO, at times JDH himself tries to dismiss concerns of the peak oil community by trying to stereotype their position. I would rather that he try to explain why the difference between futures prices of next month, and next year has all but disappeared, and the futures for 2010 are still selling at $59 a barrel. Historically, the market has always been in backwardation, but as noted by RoyYoung, this has disappeared in the past year. I doubt that JDH is doubting that prices of oil can be expected to increase steadily in the future. The critical issue is whether the adjustment towards increasing oil prices will come through determined efforts to adapt or through an abrupt realization that there really aren't that many promising alternatives to oil in the transportation sector. In spite of a 50% increase in gasoline prices in the last two years, vehicle purchasers and drivers have shown very little signs of budging from the twenty year old trend of buying bigger, heavier, faster and more powerful vehicles, and then driving those vehicles further than ever before. This market is far from being in any sort of an equillibrium, and I am not willing to trust any of the vehicle price or travel elasticity numbers any more.
I don't think that I have the right handle on this issue, but I don't think that anybody has a good understanding of this complex topic. This is precisely why dialogues like this are welcome.