Quote Originally Posted by Firn View Post
The oil crisis has certainly shown the world how painful an energy supply shock can be for the global economy. In normal times our global markets are doing a mostly great job at solving the market problems. Given how much damage a lack of supply can do the importance of energy security rightly demands answers on how to avoid such big or even bigger shocks in the future.

Personally I think that in the long run the key is both a moderation and shift in consumption as well as far higher share of renewable energy production on home and friendly soil. The importance of fossil fuels in the Western energy mix should decrease considerably while ideally getting supplied by larger numbers of entities. It's energy competitors must get increasingly cheaper and more efficient in production, transport and storage. Thankfully technological progress makes the renewable approach ever more attractive and in some cases it is already the cheaper option.
Oil shocks to date have, for the west at least, been less a matter of lack of supply than of very high prices: the oil has always been there, it's just been expensive. If supply does get really tight, the largest impact will be in oil-importing developing countries, who will find themselves priced out of the consumption picture, likely with serious unrest as a consequence.

To me the key to making a transition away from fossil fuels happen is maintaining a high price for fossil fuels. It sounds self-destructive and it would certainly be unpopular, but as a question of energy policy I think the US should be committed to keeping oil prices in the $100/bbl range. Of course that also means subsidizing a number of unpleasant regimes, but those regimes are less dangerous than the potential consequences of cheap oil.