It's interesting that most of the commenters to the freakonomics post were mostly hostile to Levitt's comments. What bothers me most about his argument is that he seems to take it for granted that if there are market pressures to develop alternatives, they're going to pop up overnight. Yeah, right. I hope as much as anyone else that eventually, we will find some kind of alternative to petroleum, but in the meantime, we're going to go through a rough number of years.
Oh, but we're only talking about "a few percent per year."  Give me a break.  Markets will provide lots of incentives for substitutes and conservation, but this guy clearly knows nothing about the lead time required for changes to energy systems, or the unique properties of oil that make it so challenging to develop viable substitutes.  
on it's face, it really does sound like the discussion HO was having with JDH last week, doesn't it?  
Remember that even the transition from coal to oil was fraught with social upheaval - anyone remember what happened to all those mining towns. And that was a "good transition".
And a lot of those towns never recovered, but now have a bitter remembrance of mining, just as the time approaches when we might need them again.
There was never a "transition from coal to oil". Oil was just added to coal. The world produces and consumes today more coal than ever. But there are lots of depleted coal mines around. Most of the abandoned mines simply run out of coal. The depletion shows as rising costs and decreasing profitability as the coal becomes more and more difficult to mine. That is why it appears that these mines were abandoned for economic reasons, not for lack of coal.

Some of the abandoned coal mines can be reopened but the they cannot never again reach their highest production levels.

The real transition will be a transition to lower energy consumption.

agreed, I was just commenting that all transitions have some pain, even ones that achieve a greater efficiency over the long run. What areas will be the peak oil equivalent of the abandoned mining towns? Probably most of the Southwest and most areas of suburban sprawl...It will not be a smooth transition.