David Friedman gives an economist’s thoughts on Peak Oil:
The economics of depletable resources was worked out by Harold Hotelling more than seventy years ago, although outside of the economics profession almost nobody seems familiar with it. The argument is straightforward. Owners of oil underground can choose when to pump and sell it. If the price of oil is rising fast enough so that oil in the ground pays a higher return than money above ground, it pays to leave the oil in the ground — postpone production in order to get a higher price in the future. That reduces present supply, shifting the present price up, increases future supply, shifting the future price down. In a world of secure property rights and perfect information, the process continues until the projected price of oil, net of pumping costs, is rising at exactly the market interest rate, forever. Any faster than that and people shift production to later dates, any slower and they shift it to earlier dates. Unless the people who control the oil and decide when to pump it are wildly off in their predictions of future prices — the theoretical analysis assumed perfect information — the usual crisis scenarios can’t happen.There is, however, a second critical assumption — secure property rights. Suppose I own underground oil, but I believe there is a substantial chance, say ten percent each year, that someone else will seize control over it. I will only leave the oil in the ground if the expected rise in oil prices is enough to compensate me not only for the interest I could have earned on the money I would get by selling the oil now but also for the risk of losing the oil. So insecure property rights result in producing more oil now, less later, and a price pattern that rises faster than in the Hotelling model.