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March 18, 2008

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Peter Huber is the kind of writer that Mr. Lessenberry would probably never read about, and whom he probably would never invite to appear on Michigan radio. Too bad; oterwise, Mr. Lessenberry might know better than to suggest that we are rapidly running out of oil. Here is a recent monograph that Mr. Huber co-wrote for the Manhattan Institute on this very subject:

http://www.manhattan-institute.org/html/_wsj-oil_oil.htm

On the other hand, when Mr. Lessenberry says that "when big [technology] breakthroughs occur, they generally happen fast and are totally unexpected," he is right. At least, they are unexpected in terms of long-term government planning. Technological advances usually respond to the limits of technology itself (which don't correspond to social needs) and the demands of the marketplace. And we know that the genius of the marketplace rarely settles for government influence.

The high price of oil today has little if anything to do with dwindling supply. It has everything to do with a spike in demand (yes, that would include China) an artificially restricted supply, and a very high "security tax" in the form of the price speculation in oil futures.

Lower oil prices would be enhanced by better incentives for more exploration and production, across the board. For governments, this means quit deincentivizing production, and improve middle east security and stability, long term.

That article is three years old...

Sorry, here's a newer version of the same theme:

http://online.wsj.com/article/SB120459389654809159.html?mod=opinion_main_commentaries

According to the article...

"Where do reasonable assumptions surrounding peak oil lead us? My view, subjective and imprecise, points to a period between 2045 and 2067 as the most likely outcome."

Even if that is so, the prudent thing would still be to develop alternative fuel sources. Why rush headlong into using up a nonrenewable resource when people depend on oil to do things like make artificial limbs, heart valves, medications, etc.?

I agree with Lessenberry, except for one point: I don't think the breakthrough will be "sooner than we think." I think it could be if our government didn't heavily subsidize the fossil fuel industry. In a country that gives a bigger tax break for buying a Hummer than for a Prius, I think the wait will be artificially long.

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