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Econbrowser: How to talk to an economist about peak oil

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Econbrowser: How to talk to an economist about peak oil
Topic: Society 12:22 pm EDT, Aug 23, 2005

Anybody who pumps a barrel out of a reservoir today to sell at $60 could make three times as much money if they just left it in the ground another two years before pumping it out. The same is true for anybody with above-ground storage facilities-- they're throwing away money, and lots of it, for every barrel they sell at $60 that they could have instead stored for two years and sold for $200. If oil producers did respond to these very strong incentives by holding back oil from today's market, the effect would be to drive today's price up.

Really good. I don't believe in peak oil: short a cosmic-scale disaster, the supply isn't going to dry up suddenly. Instead, I think the price will steadily increase over time as the remaining reserves become more and more expensive to exploit. At the same time, alternative tech is going to get more investment and become progressively cheaper. At some point, the curves cross and that's that.

Econbrowser: How to talk to an economist about peak oil



 
 
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