[FoRK] Mises: Will We Run Out of Energy? by Mark Brandly

Russell Turpin deafbox at hotmail.com
Thu May 20 12:06:47 PDT 2004


>Will We Run Out of Energy? by Mark Brandly

I get pretty disgusted with both the Olduvai Gorge
crowd and the Neil Simon-esque pollyanas. Both
extremes make much the same mistakes. Briefly,
here are my talking points. (1) This is NOT a dispute
between geologists and economists. Hubbert's
curve is essentailly an economic model, based on
market allocation, with geological parameters. Some
of its largest failures, such as Russia's double peak,
derive precisely from cases where the market
wasn't allowed to work. (2) This is an economics
issue, not a matter of physics or thermodynamics.
The problem isn't that there isn't enough energy
around, but the technology and cost of diverting it
to our use. (3) Free markets don't guarantee a
solution to every problem. Some ideologues seem
to think that paradise would erupt here on earth if
only markets were freer. They may mouth the
notion that there are gaps between what's possible
and what's ideal, but they don't seem to understand
what that means. (4) With that as background, the
problem is that global oil demand may grow faster
than *cheap* oil supply. Is that a problem? Yes.
Is that an existential problem? No. There are other
energy sources, though now more expensive. There
also is the promise of future technology whose
development will accelerate as economics makes it
more entrepeneurially rewarding. So is there really a
problem, if the market will eventually overcome it?
Yes, there's still a problem. "Eventually" can be a
long time in human terms, and the pain for the
duration can be quite real.

My expectation is that we're in for a long period
of more expensive oil and energy. Of course, since
this is the way I'm investing, y'all may take that as
a sign that the price of oil is about to crash to
$15/bbl, and will stay there for the next decade. ;-)

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