Wednesday, August 09, 2006

Reason: Is America Over a Barrel?

A thoughtful piece by Ronald Bailey, reflecting on the volatility of present oil prices (presently sitting at upwards of $75 a barrel).

Present high prices have much more to do with fear in commodity markets than any long-term indications of a shortage of oil reserves. Consequently, high prices are temporary and will rescind once investment in new supply catches up to demand. And because oil prices dictate the prices for all forms of energy, the eventual drop in prices in the mid-term has big implications for investment in other forms of energy supply, such as nuclear, low-emission coal plants and "green" options such as windmills.

If, as predicted, oil drops back to a world price of $35 per barrel by 2010, it calls into question the economic viability of any renewed nuclear programs, clearly makes any investment in wind energy totally uneconomic and leaves prudent policy makers with renewed investment in low-emission coal fired generating plants as the best option for sustained electricity production at a manageable cost and low environmental impact.

So the next time you read about high energy prices and the phrase "global warming" is invoked, check to see what future energy options are being promoted. Low emission coal is a proven and viable technology, particularly if high prices and environmental impacts are high priorities. But if the concern for "global warming" is merely a device for an idealogical attack on growth, progress, development, capitalism and/or big oil, the existence of a technological solution for increased energy supply will be dismissed in the exhortation that consumers must reduce demand, conserve and otherwise downsize their lifestyle to fit the approved, reduced and regulated lifestyle prescribed by those who would like the planet to conform to their beliefs.

For those who wish to impose idealogical environmentalism on the rest of us, a future with much lower oil prices will be most inconvienient. For those in the real world, especially those in China and India entering the fray as first-time car owners in the next decade, the drop in oil prices will be most welcomed.