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Dan wrote:
> In fact, the long-term oil outlook has changed over the last 25 yrs --
> substantially. New fields have been discovered, dramatic extraction
> techniques have been pioneered, while the experience of the 70s demonstrated
> that demand was far more elastic and conservation far more practical than
> mainstream economic opinion had previously believed. Much of the volatility
> is due to politico-economic perturbations that are of course unjustifiable.
> But much of it is not.
>
Tthe extraction techniques might be dramatic (attaching MR scanners to
drill bits that snake around sniffing out the last dregs oil etc) but
they haven't changed the big picture except they probably
ACCELERATE the depletion-rate. As for new oil
fields: where exactly? The Caspian? Don't think so.
Conservation? The fact is that per capita oil consumption in the
US is back where it was, and energy-efficiencies and reduced
energy per unit of product, have not altered the inexorable upward
demand trend.
As for the 'piliticaly unjustifiable political perturbations',
what do you mean exactly?
>> But the big picture has changed. In the last 20 years we've seen intensified exploration throughout the world, particularly in the former soviet bloc. As drilling techniques improve, the amount of oil within reach expands. Hence the paradox: even tho consumption continues to spiral upwards, production accelerates even faster. The result: a continued long-term downward trend in energy prices. Rather than running out of oil, the problem of a global capitalist economy characterized by chronic over-production is one of too much -- too much oil (and therefore weak prices), too many cars, too much CO2, and too much global warming. You no doubt saw the fascinating page one story in the Wall Street Journal a couple of months back about the hi-tech exploration firm drilling in central Mississippi. Here they were nosing around one of the most intensively drilled oil fields in the country, with oil prices hovering around $13 a barrel. If ever an area would seem to have been wrung dry, this was it. Yet they were still making money. Imagine if such hyper-intensive techniques were applied globally. Production would zoom, while prices would crash through the floor.
None of this is to deny that an environmental crisis exists. It does -- it's just a different kind of crisis predicted by the dreaded Paul Erlich and his various epigones. While energy prices are falling, the cost, measured socially and environmentally, continues to rise. The more oil we consume, the more society is impoverished. As for "politico-economic perturbations that are of course unjustifiable," what I was referring to were factors acting on the energy market (narrowly construed) from without. Capitalism was in the throes in the '70s of an inflationary panic. The world, if you recall, was running out of everything -- energy, cocoa, coffee, and a host of other raw materials. What was in fact happening was that there was an oversupply of dollars, negative real interest rates, and consequently a flight to commodities. For OPEC, it was more profitable for a time to keep its oil in the ground than to sell it for devalued American currency. The ideology of shortage, which people like Erlich were so busily promoting, was very much a product of the time. Ultimately, Paul Volcker broke the back of inflation by jacking up interest rates, which is why OPEC wound up on the rocks and people like Julian Simon, the prophet of plenitude, rose to fame.
In short, the world ain't gonna run out of oil for some time to come. Indeed, assuming democracy triumphs and the world responds rationally to global warming and similar problems, we can expect to see the "greening" of the tax system, a general trend away from fossil fuels, and a further reduction in petro prices.
Dan Lazare