Out of Gas

The economic reasoning of this article is horribly flawed. The author begins by noting that oil is cheap[1], but then he immediately claims that we are quickly running out of oil. These two statements are contradictory.

If we are in danger of running out of oil anytime soon, the price of oil would dramatically rise, just like the price of any commodity rises when supply decreases. Yet that has not happened. The main flaw in his reasoning is that he assumes oil reserves are fixed, and that because of this fact, we can estimate when we will run out of oil. We can't, because this is simply unknown and unknowable. As oil prices rise, oil companies have a greater incentive to search for more reserves. Searching is costly, which is why they don't bother doing so now, and why we cannot know how much oil we have left in unknown reserves.

Doomsday environmentalists have been warning us for over 30 years that any day now, we will run out of oil. And they have all been proven incorrect in every single one of their predictions. Oil will not simply run out over night. Prices will gradually rise as new reserves become more and more difficult to find. As oil prices rise, the incentive for finding oil substitutes (i.e. alternative power generation for automobiles) increases as well.

fn1. In fact, the price of oil now, adjusted for inflation, is cheaper than it was 50 years ago, which implies that we have access to more oil reserves now than we did in 1950.

Share this

Ever more sophisticated

Ever more sophisticated deepcore drilling methods have vastly increased our potential sources. In fact, we are almost to the point where we have just scraped the surface in terms of our oil consumption.

I fail to see the

I fail to see the contradiction as you pose it. If we are quickly running out of oil, then oil at $80 per barrel would be CHEAP. In fact this was the argument that led one worried economist in the 70's to argue that the US should not touch their oil reserves, but should buy up all the cheap oil on the world market instead.

Of course we ARE running out of oil, although the speed at which this is happening is open to debate. It is this debate which may make oil cheap or dear, depending on your own projections vis-a-vis the projections of the market.

John- it will happen MUCH

John- it will happen MUCH faster if the government gets out of it. Of course, that also means getting out of the business of subsidizing oil concerns.

In a sense, we are not

In a sense, we are not running out of oil. In terms of our ability to detect and tap them, our oil reserves have INCREASED since the doomsday warnings of the 70's.

In any event, I remain imminently confident that we have more than enough oil to last until the inevitable shift into newer technologies. It's hard for me to imagine oil being very relevant in another 100 years.

Nick, "...It?s hard for me

Nick,

"...It?s hard for me to imagine oil being very relevant in another 100 years...."

All that would require is the government getting involved in the development and implementation of every alternate energy source. To the extent that happens, oil will be still be relevant for a thousand years.

Regards, Don

What the doomsdayers also

What the doomsdayers also forget is that when oil begin to decline in volume and the price begins to rise, at about $45-$50 a barrel it becomes profitable to refine oil shale. And we've already got another 300 years worth of oil there.

- Josh

Don't forget about thermal

Don't forget about thermal depolymerization, either.

Here: http://lists.envirolink.org/pipermail/ar-news/Week-of-Mon-20030804/004435.html