We can never run out of oil

Katrina hit our oil infrastructure hard. Coming at a time of already tight supply, this will mean higher prices and talks of the end of oil. But this too will pass and if we don’t repeat the price control debacles of the 1970s it will pass quickly.

We almost ran on of oil on many occasions. The first time was just after WWI; Many of us remember the last time in the 1970s. Of course we never ran out of oil. We never run out of anything. What we really mean is that we don't have a particular resource at a price we are willing to pay. By the time we reach this price with oil, we will have moved to different energy sources.

The long term is too uncertain to predict, but we have a good handle on the short and medium runs. In the near term prices will rise. In the medium term, we can expect a drop in oil prices. Why? During the low prices of the 1980s and 1990s, we invested less in energy. It takes many years for an investment to begin to produce results. Much of the capacity that will be available very soon was planned and begun back in 2001 or 2002. What is being started now will be ready in 2008 or 2010. This supply will be supplemented by the development of alternatives and conservation provoked by today's high prices.

Bad news for the Bush haters is that cheap gas will be upon us by 2008 and people will be feeling pretty good about Bush.

The prospect of cheap oil is not something I eagerly anticipate. The longer the price stays high, the faster we will develop alternatives. I would like nothing more than to reduce the grip of oil on our country. Each price spike makes us less dependent, but the subsequent drop takes off the edge. A higher tax at the pump is one of the few taxes I approve, especially if it replaces other taxes. As the price comes back down we should offset at least some with a higher gas tax. But we won't have to think about that for a couple of years.

Posted by Jack at September 3, 2005 12:32 AM