11.30.2005

hmmm....

Topic for discussion: OIL.

Demand is growing very fast (50% in the last decade according to a BP exec I saw on C-SPAN). Production levels are not growing as fast. If we run out of oil, things won't go, people won't make money, economies will stagnate, unless we find something else to make things go. Oil will get more and more expensive as supply decreases, making it more expensive to make stuff go, making economic growth slow down.

Talk amongst yourselves.

2 comments:

Ben said...

Yes, paying more for gas will suck in the short term, but in the long term I think it will be to our benefit to move away from petroleum products. For more lucid writings on this very subject, please check out this excerpt from an article Wired :
"Yes, a few billion newly motorized citizens of BRIC - that's economist-speak for Brazil, Russia, India, and China - have turned up unexpectedly at the filling station, pushing prices sharply north. And yes, the oil world has lately endured more than its usual share of ugly headlines: insurgency in Iraq, unrest in Venezuela, mayhem in the Gulf of Mexico. And, OK, all those air-conditioned Cadillac Escalades are thirsty beasts. A million extra barrels a day burned here, a million fewer pumped there, a little geopolitical instability, and suddenly the price of the stuff that makes the wheels go around is flirting with historic peaks.

All of which would be seriously alarming but for one happy fact: We've never had more options for keeping those wheels turning. Aramco's fuzzy logic is just one of a multitude of new tools and fuels - some proven, some in the works, and some wildly speculative. The main thing standing between those possibilities and your gas tank is cheap crude oil that costs Aramco barely $3 a barrel to bring to the surface.

So rising oil prices are more than just an irritant or even an ominous nick out of the GDP. They're an invitation to corn and coal and hydrogen. For anyone with a fresh idea, expensive oil is as good as a subsidy - with no political strings attached. Indeed, every extra penny you pay at the pump is an incentive for some aspiring energy mogul to find another fuel.

For the better part of a century, cheap oil has fatally undercut all comers, not to mention smothered high-minded campaigns for conservation, increased efficiency, and energy independence. But growing demand is outrunning the oil industry's carefully computed supply curves, bidding up long-term expectations for the price of energy. The long term may not mean a lot when you're standing at the pump, but the oil industry lives in a world where big projects take a decade to build and the checks that pay for them have eight or nine zeroes. Crude hit $70 a barrel last August, but oil companies have learned the hard way in which quickly prices can crash. They adjust their expectations accordingly - downward."

Cheap oil has stifled innovation, and all innovation needs is a little cash infusion to make it worthwhile. Look at how many oil companies have turned themselves into "energy" companies. This isn't merely to appear friendlier to the environment (though it likely make sense from a pr standpoint), but these companies have a vested interest in continuing to provide energy to the masses.

These companies have diversified their interests, and have positioned themselves in such a way that when oil prices rise so high it no longer makes economic sense to continue supplying it, something more efficient will take it's place. Of course, you will need a supporting infrastructure and all that, but that's where transitional technologies like fuel additives, biodiesel, and the like come in. Read the Wired article, it's quite informative.

Oh, and check out the BP website. Look hard and you may actually find mention of petroleum there, but it's about energy.

Joe said...

I hope you guys are right. But there's a certain amount of faith that the technology will come through for us. I worry about that. I heard a guy from Exxon last year talking about the alternative/renewable energy. He said that it would take a field of solar panels the size of New Jersey to equal the amount of energy in one gas station.

I thought that was pretty scary.