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A Propensity For Human Ingenuity

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By jammerh
November 22, 2004

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May I be so bold as to take on the "Dean of Energy Analysts"?

In a recent submission to Barron's (Nov 15-04) 'Other Voices' section, Charles T. Maxwell, a senior analyst at Weeden and Company claims he sees a "difficult future".

Barrons bills Maxwell as a "...senior energy analyst at Weeden and Co, in Greenwich, Connecticut". One has to wonder just how much this guy has of his own or client's money invested in oil stocks and thus a vested interest in having us believe oil is fast disappearing.

"There was always sufficient worldwide geological capacity to produce additional barrels of crude oil to meet the world's needs.

No longer. In the next major energy crisis, that capacity will likely be eroded. So the crisis should have severe impact, be global in scope, and be difficult to solve. Plainly, it will be unprecedented. What may emerge could well be a restructured world, as well as a restructured oil industry.

To which one might ask: who said life was supposed to be easy?

But Maxwell says, "Technology doesn't seem to be moving fast enough to save us."

Save us from what? Higher prices? The Europeans have been living with them for years.

This is the old the-sky-is-falling routine again all dressed up in oil barons' attire, complete with the usual Hubbert references. Hubbert, for anyone unfamiliar with the name, was a geophysicist who predicted in the mid 50's that world oil production would take place in the early 70s.

I'm not going to argue Hubbert's theories here, but 'the dean' Maxwell, does make an interesting point when he points out what higher oil prices might mean,

"...such prices would unleash both destruction and creativity throughout industry and finance", but I don't think he gives quite enough emphasis to the creative qualities of the human entrepreneurial spirit.

We use oil because it is cheap, and it is a highly abundant source when we developed engines, power plants and many other devices that would run on it. But let's imagine for a moment that there had been no such commodity as crude oil. Would that have meant we'd now be sitting in the dark without having progressed much technologically over the past century?

I don't think so. Human ingenuity is more creative than that. We'd have found another energy source. It might not have been quite so cheap. It might not have been so readily available. It might have other environmental costs, but we'd be progressing along another level of development. It might even be a cleaner one in some respects.

As oil supply diminishes, as it no doubt will eventually - although perhaps not quite so quickly as the alarmists might have us believe - alternatives will be found. If all oil imports were cut off tomorrow by war, collusion among producing countries, worldwide rebellions, or hurricanes whatever, we'd survive because we'd have much greater incentive to develop those alternative energy sources.

The reason these alternatives have not already flourished is to a great extent because of the much cheaper availability of oil.

As Maxwell himself points out,

"Living standards might slip a bit and they would recover in different shape: cooler rooms in winter, and warmer rooms in summer, changing clothes instead of thermostats, taking quicker showers, and having fewer hot tubs, using less lighting, indoors and out accepting smaller and lighter cars, walking and bicycling more and using public transportation..."

I think we're seeing some evidence of this already.

I don't think mine is the only family that has taken a closer look at their own family vehicle lately, and cleared out some of the excess weight that we'd been so needlessly carrying around. We're not alone in rediscovering the exercise and enjoyment in walking, biking, and farting a little less pollution into the air. As a result, we're probably not alone in realizing that we don't have to pull up to those ominous fuel pumps so very often.

Gradual depletion of the world's oil reserves is nothing to fear, and it is by no means a transition that will have to take place overnight.

It doesn't have to be viewed as a negative thing, or cause for alarm.

It might even be good for us.

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