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An oil 'crisis'?, Part II
http://jewishworldreview.com ^ | Thomas Sowell

Posted on 08/24/2005 7:04:48 AM PDT by manny613

Soaring oil prices have revived the old bogeyman that the world is running out of oil. Economics is a great field for nostalgia buffs because the same old fallacies keep coming back, like golden oldies in music.

(Excerpt) Read more at jewishworldreview.com ...


TOPICS: Editorial; News/Current Events
KEYWORDS: doomsdayagain
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1 posted on 08/24/2005 7:04:49 AM PDT by manny613
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To: manny613

I find the lefrt especially humorous in this area. Higher gas prices will make alternative energy sources more viable. Yet, they scream about the high prices.

An absolute lack of economic understanding - the reason they are Marxists.


3 posted on 08/24/2005 7:10:33 AM PDT by JmyBryan
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To: manny613

The only crisis is what the price gouging is doing to our economy.


4 posted on 08/24/2005 7:17:59 AM PDT by EagleUSA
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To: manny613

My biggest concern with oil prices is that the Saudis who were rolling in money will now have so much of it, they'll have to burn some to make room for the new arrivals of chests full of money.
And what do the Saudis do with all that money.... well one thing I know for sure is fund terrorists.

And don't for get that lovable little commie Hugo Chavez is filling his coffers with oil money too.

We really need to focus on alternatives as a matter of national security. But we depend on a government headed by a former oil man to wean us off of oil dependence. That's a pretty grim prospect.


5 posted on 08/24/2005 7:19:32 AM PDT by brownsfan (It's not a war on terror... it's a war with islam.)
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To: manny613
Since GOPUSA isn't on the must-excerpt list, I'll post it from there...

An Oil "Crisis"? - Part II
By Thomas Sowell
August 24, 2005

Soaring oil prices have revived the old bogeyman that the world is running out of oil. Economics is a great field for nostalgia buffs because the same old fallacies keep coming back, like golden oldies in music.

Back in 1960, a best-selling book titled "The Waste Makers" by Vance Packard showed that the known reserves of petroleum in the United States were only enough to last another 13 years at the current rate of usage. Yet, 13 years later, the United States had larger known reserves of petroleum than in 1960.

This has been a worldwide phenomenon. At the end of the 20th century, the known reserves of petroleum in the world were more than ten times what they were in the middle of the 20th century -- despite an ever-growing use of oil.

There is of course some finite amount of oil and of other natural resources. The big leap is in going from saying that there is a finite amount to saying that we are running out.

When John Stuart Mill was a young man, he worried that we were running out of music, since there were only 8 notes and therefore there was only a finite amount of music possible. At that point Brahms and Tchaikovsky had not yet been born nor jazz created.

No matter how many centuries' supply of oil there is on the planet, the high cost of oil exploration ensures that only the most minute fraction of that oil will be known at any given time. Thus there have long been recurring false predictions that we were running out of petroleum, as well as other natural resources.

The high cost of extracting and processing oil ensures that not even half of the oil in a known pool of oil will be brought to the surface and sent off to the refineries.

A generation ago, only about a quarter of the oil in a pool was likely to be brought to the surface. That is because the cost of extracting and processing oil from a given pool tends to increase as you drain from deeper into that pool.

Even at $60 a barrel, most of the oil that is known to exist is too costly to extract. How much will be extracted depends on how much higher the price of oil goes -- and how much new technology can recover more oil at lower costs.

What if the government did nothing about oil prices? Rising prices would lead people to reduce their use of oil and lead producers to drain some of the more costly oil out of the ground.

Many people in politics and in the media seem to be alarmed about the rising cost of gasoline and of the petroleum from which it is made. But they only seem to be. What they are really alarmed about are the prices -- and prices and costs are very different things.

Prices are what pay for costs. The government can impose price controls on gasoline or petroleum tomorrow but that will not have the slightest effect on the cost of oil exploration or the cost of extracting and processing the oil that is found.

When the costs are no longer being fully covered by prices, production is likely to be cut back, whether it is the production of oil or anything else. This is not speculation. This is what has been happening for literally thousands of years, going back to price controls in ancient Rome and Babylon.

Yet price controls have always been popular politically, despite being counterproductive economically. After all, how many votes do economists have and how many voters know economics?

Some people love to believe that prices should be kept down to a "reasonable" level, something that everyone can "afford." Yet the notion of "reasonable" prices is itself unreasonable. The costs of producing oil don't depend on what we can afford or consider "reasonable." Nor does the cost of anything else.

Someone can always invoke the image of an elderly person on a fixed pension being unable to buy enough fuel oil to keep warm in the winter. Taking care of such isolated situations would not make a dent in the massive government budget. But the real goal of such anecdotes is to justify imposing government controls on all of us.

Make no mistake about it, there are many people out there just itching to tell us what to do -- and make us do it. That is why the word "crisis" gets used so much, and not just about oil, in order to soften us up for their taking over our lives. That is a bigger problem than the so-called "oil crisis."

---------

Thomas Sowell is a senior fellow at the Hoover Institution, Stanford University, Stanford, CA 94305. His Web site is www.tsowell.com.

COPYRIGHT 2005 CREATORS SYNDICATE, INC.

--------------------

Note -- The opinions expressed in this column are those of the author and do not necessarily reflect the opinions, views, and/or philosophy of GOPUSA.


6 posted on 08/24/2005 7:22:11 AM PDT by newgeezer (A conservative who conserves -- a REAL capitalist.)
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To: manny613; abner; Abundy; AGreatPer; alisasny; AlwaysFree; AnnaSASsyFR; Angelwood; aristeides; ...

PING!

A good read. Explains our supposed "oil crisis" quite well. Even at these prices, all that oil is still too expensive to extract. However, if prices continue rising or new technology is invented, that could change. Beware of the politician who promises to control prices!


7 posted on 08/24/2005 7:26:40 AM PDT by Tolerance Sucks Rocks (Hey, Cindy Sheehan, grow up!)
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To: newgeezer
Sowell writes:

" -- Make no mistake about it, there are many people out there just itching to tell us what to do -- and make us do it.
That is why the word "crisis" gets used so much, and not just about oil, in order to soften us up for their taking over our lives.

That is a bigger problem than the so-called 'oil crisis'. --- "






Make no mistake, this man knows what he's talking about. The "itch" to tell us what to do -- and to make us do it, - is a political disease endemic in our system on both left & right.
8 posted on 08/24/2005 7:40:51 AM PDT by hypocrite
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To: EagleUSA
The only crisis is what the price gouging is doing to our economy.

"Gouging"? If you have something I want, I expect you'll go right ahead and charge me whatever you think you can get for it. That's called "capitalism" and I'm all for it.

Now, if you think I am in need of some help and you are willing to provide it, feel free to sell it to me at a reduced price. That's called "charity" and I'm all for it, too.

9 posted on 08/24/2005 7:42:52 AM PDT by newgeezer (A conservative who conserves -- a REAL capitalist.)
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To: newgeezer

If you are smart..you own a lot of oil stock and actually like the higher pump prices.


10 posted on 08/24/2005 7:45:54 AM PDT by Oldexpat
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To: manny613
Notice that Sowell isn't arguing against the idea that the era of cheap oil is over. Notice also that if prices go high enough that old person who couldn't afford to keep warm will no longer be an isolated example. What he does say is that price controls can't solve the problem.

Will high prices bring more oil online? You bet. Will that new oil bring prices down? Only somewhat, and only temporarily, because the costs of extraction will remain high. What about alternatives to oil? They certainly exist...but forget about some different-colored liquid that's going to make your old clunker get 50 mpg. The alternatives will either be far more costly or will require a vast restructing of our transportation system.

Do not look for the transition to be cheap or easy.

11 posted on 08/24/2005 7:47:10 AM PDT by liberallarry
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To: EagleUSA
The only crisis is what the price gouging is doing to our economy.

Please explain then why I just paid $.25 less a gallon today at the SAME gas station I filled up at last Wednesday?

12 posted on 08/24/2005 7:55:56 AM PDT by MNJohnnie (If you try to be smarter, I will try to be nicer.)
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To: EagleUSA
The only crisis is what the price gouging is doing to our economy.

Please explain then why I just paid $.25 less a gallon today at the SAME gas station I filled up at last Wednesday?

13 posted on 08/24/2005 7:55:59 AM PDT by MNJohnnie (If you try to be smarter, I will try to be nicer.)
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To: EagleUSA

Blame the economies of China, US and India. China is now importing 1.5 million barrels, India about 1 million, and the US has increased by 700,000 barrels per day (from 4 years ago). Even though new supply is coming on stream, the superheated economies are increasing demand. As soon as the world economy starts slowing down, gasoline, oil and natural gas prices will start to drop rapidly.


14 posted on 08/24/2005 7:57:32 AM PDT by richardtavor (Pray for the peace of Jerusalem in the name of the G-d of Jacob)
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To: newgeezer

That's called "capitalism" and I'm all for it.
----
Me too. And maybe someday soon, I will buy a horse. That is part of capitalism too -- the ability to choose an alternative.

Once the world of science comes up with the next step in battery technology, the oil companies will be settling for less. What goes around, comes around in capitalism, as in all things in life :-)


15 posted on 08/24/2005 7:58:08 AM PDT by EagleUSA
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To: MNJohnnie

A drop of 25 cents in a week? Man, that's quite a drop considering the way pump prices have skyrocketed. Just out of curiosity, how much is it now at that station?


16 posted on 08/24/2005 8:02:15 AM PDT by NCC-1701 (ISLAM IS A CULT!!!!! IT MUST BE ERADICATED FROM THE FACE OF THE EARTH.)
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To: brownsfan
We really need to focus on alternatives as a matter of national security. But we depend on a government headed by a former oil man to wean us off of oil dependence. That's a pretty grim prospect.

No you have it backwards. What we need is the Hysteric Left to drop their ridiculous notion that there is some sort of silver bullet that we can find that will suddenly just slay the Oil monster. The need to accept the reality that it is an Evolutionary process, not Revolutionary. We are going to have to tap our existing oil supplies. ANWAR and the Gulf Coast before we can completely convert to the next energy source. The Hysteric Left's notion that they can get "alternative energy" if they fight tooth and nail against any short term development of exist supplies is just stupid. EVEN if the Hysteric Left could, which they cannot, wave a magic wand and create a magic alternative energy today, it will take DECADES to replace all the existing infrastructure with the infrastructure for the new energy source. Look at History. No on in Washington DC woke up one day and said "Right. Today you all switch over to oil" It was a evolution, under market forces, over time. The same process will have to take place to do away with Oil. Unfortunately the Hysteric Left thinks they can just with the 30-40 between here and a viable replace energy source for Oil by sabotaging any efforts at incremental change. That is why John Kerry ran around last year screaming about "a crash program in alternative fuels" it makes the Hysteric Left feel all warm and fuzzy with out actually DOING anything to solve the problem.

17 posted on 08/24/2005 8:08:00 AM PDT by MNJohnnie (If you try to be smarter, I will try to be nicer.)
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To: brownsfan
We really need to focus on alternatives as a matter of national security. But we depend on a government headed by a former oil man to wean us off of oil dependence. That's a pretty grim prospect.

No you have it backwards. What we need is the Hysteric Left to drop their ridiculous notion that there is some sort of silver bullet that we can find that will suddenly just slay the Oil monster. The need to accept the reality that it is an Evolutionary process, not Revolutionary. We are going to have to tap our existing oil supplies. ANWAR and the Gulf Coast before we can completely convert to the next energy source. The Hysteric Left's notion that they can get "alternative energy" if they fight tooth and nail against any short term development of exist supplies is just stupid. EVEN if the Hysteric Left could, which they cannot, wave a magic wand and create a magic alternative energy today, it will take DECADES to replace all the existing infrastructure with the infrastructure for the new energy source. Look at History. No on in Washington DC woke up one day and said "Right. Today you all switch over to oil" It was a evolution, under market forces, over time. The same process will have to take place to do away with Oil. Unfortunately the Hysteric Left thinks they can just with the 30-40 between here and a viable replace energy source for Oil by sabotaging any efforts at incremental change. That is why John Kerry ran around last year screaming about "a crash program in alternative fuels" it makes the Hysteric Left feel all warm and fuzzy with out actually DOING anything to solve the problem.

18 posted on 08/24/2005 8:08:03 AM PDT by MNJohnnie (If you try to be smarter, I will try to be nicer.)
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To: richardtavor

I heard on a local newscast this morning that the head of BP said that prices should start dropping 15 cents a week starting in January. Pardon me for being a bit skeptical, but seeing is believing. I said to my wife what would the price be in January when this might occur. We crunched some numbers based on the increase at a BP station up the street. There hase been a 40 cent increase since July 22. Extrapolating that foreward, pump prices would be $4.oo a gallon in January. If that drop comes to pass, it couldn't happen fast enough.


19 posted on 08/24/2005 8:08:52 AM PDT by NCC-1701 (ISLAM IS A CULT!!!!! IT MUST BE ERADICATED FROM THE FACE OF THE EARTH.)
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To: NCC-1701

drop of 25 cents in a week? Man, that's quite a drop considering the way pump prices have skyrocketed. Just out of curiosity, how much is it now at that station?


$2.49. Varies between $2.49 and $2.53 at the stations I passed on my way home from work this am. I work nights. Last Wed it was $2.69 at the same place. It was kind of odd because I always notice the price JUMP when it goes up $.05-15 cents a gallon but rarely notice the DROP. The only reason I did was all the hysteric about "Peak Oil production" got me reading and paying attention to the issue.


20 posted on 08/24/2005 8:11:33 AM PDT by MNJohnnie (If you try to be smarter, I will try to be nicer.)
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