Thursday, April 27, 2006

Snake Oil

There is much talk about oil, a lot of demagoguery, and a bit of hysteria. For an excellent, thorough perspective on the state of the world's oil supply, check out this piece by Ron Bailey. An excerpt:

One petroleum engineer— Michael Economides of the University of Houston—calls peak oil predictions “the figments of the imaginations of born-again pessimist geologists.”

Bailey cites many sources that say there is oil to spare for a least one generation, and that rather than a decline, we may see what is known as an "undulating plateau." Doesn't sound so menacing!

He concludes thusly:

Instead of preparing for an energy war, the best policy is to let markets have free rein. Even if, say, the Iranians make the political decision to disrupt the flow of oil to world markets, those markets left to themselves will eventually discipline them. The temporarily higher prices will encourage more exploration and technological advances, which will bring energy prices back down. On the day of his inauguration in 1981, President Ronald Reagan lifted oil price controls. Five years later oil prices fell below $10 a barrel.
One day, the oil age will end. As with all resources, there is ultimately a finite supply of oil. So it is not yet clear how the world will power itself for the bulk of the coming century. But we have at least another three decades to find alternatives to petroleum. “Trusting markets is the only way we can assure energy abundance in the future,” notes the University of Houston’s Economides. “It’s also the only way that we will ever transition to something other than oil and gas.”


Yay markets! Boo manipulation!

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