Julian Simon, Power of Market Prices, Why We'll Never Run Out of Oil, Why Peak Oil is Peak Idiocy

Mark Perry.

As resource economist Julian Simon taught us years ago, we never have, and never will, run out of scarce resources like oil because as a resource becomes more scarce, its price will rise, which will set in motion a series of actions that will counteract the scarcity.  For example, higher prices for oil will increase the incentives to: a) find more oil, b) conserve on the use of oil, and c) find more substitutes.  And that's exactly what's happened recently in response to higher oil prices - domestic crude oil production reached a 14-year high in March, and the share of rigs drilling for oil (vs. natural gas) set a new record high of 70% last week.  

And now an LA Times article today highlights how companies are making efforts to find substitutes for high-priced oil, here are some examples from the article:

1. Ford has eliminated 5 million pounds of petroleum annually by using soybean-based cushions in all of its North American vehicles. The company also got rid of an additional 300,000 pounds of oil-based resins a year by making door bolsters out of kenaf, a tropical plant in the cotton family.

2. BioSolar of Santa Clarita, Calif., dealt every day with the fact that solar modules are typically made with a glass front, an aluminum frame and a back sheet made out of a petroleum-based plastic or polymer.

"We saw where the price of petroleum was going," BioSolar CEO David Lee said. "We're not economists, but we knew that the price of oil was going to keep going up. The cost of photovoltaic cell manufacturing was going to skyrocket." BioSolar has changed its process to instead use castor beans.

3. Los Angeles businessman Neal Harris once relied on beads made from a petroleum-based polymer to hold fragrances for his company's products. Harris' company, Scent-Events, sells fragrances as a marketing tool to enhance movie premieres, concerts, parties and products. This year, he'll use ceramic beads 95 percent of the time. "It's saving us money, and we no longer have to keep track of oil prices," Harris said.

4. In March, McDonald's began a trial of double-walled paper hot-drink cups in 2,000 restaurants, in place of polystyrene containers, which start out as petroleum. 

5. Coca-Cola and PepsiCo are becoming bioplastics bottlers.

As Daniel Yergin, energy consultant and Pulitzer Prize author of a book on the history of the oil industry, told the LA Times, "Now there are accelerating efforts to squeeze oil out and find ways to substitute for it. That is the power of price."

Related: Duke economist and blogger Mike Munger explains here why "peak oil" is "peak idiocy" and why "Of all the idiotic things that people believe, the whole "peak oil" thing has to be right up there."

Chart of the Day: Peak What?

Mark Perry.

World oil production surpassed 75 million barrels per day for the first time ever in December 2011, at 75.45 million barrels, and went even higher in January of this year at 75.58 million barrels, setting a new monthly production record, according to data recently released by the EIA.  The red line in the graph shows the upward linear trend in world oil production from 1973 onward, with daily production increasing by almost 600,000 barrels per day on average every year since 1973.

Thanks to Walter Olson for the inspiration for the post title. 

The Non-Green Energy and Jobs Boom.

Drill, drill, drill = jobs, jobs, jobs in North Dakota

From today's WSJ staff editorial:

"The ironies here are richer than the shale deposits in North Dakota's Bakken formation. While Washington has tried to force-feed renewable energy with tens of billions in special subsidies, oil and natural gas production has boomed thanks to private investment. And while renewable technology breakthroughs never seem to arrive, horizontal drilling and hydraulic fracturing have revolutionized oil and gas extraction—with no Energy Department loan guarantees needed.

The oil and gas rush has led to a jobs boom. North Dakota has the nation's lowest jobless rate, at 3.5%, and the state now has some 200 rigs pumping 440,000 barrels of oil a day, four times the amount in 2006 (see chart above). The state reports more than 16,000 current job openings, and places like Williston have become meccas for workers seeking jobs that often pay more than $100,000 a year.

Or take production in Pennsylvania's Marcellus shale formation, which the state Department of Labor and Industry says created 18,000 new jobs in the first half of 2011. Some 214,000 jobs are now tied to a natural gas industry that barely existed in the Keystone State a decade ago. Energy firms are also rushing to develop the Utica shale in eastern Ohio, and they are expanding operations in Texas, Louisiana and Oklahoma, among other places. 

Yet earlier this month the Interior Department released a new five-year plan that puts most of the Outer Continental Shelf off-limits for oil drilling. And the Administration has delayed for at least another year the Keystone XL pipeline that is shovel-ready to create 20,000 new direct, pipeline-related jobs.

The Office of Natural Resources Revenue recently noted that federal revenue from offshore bonus bids (from lease sales) in fiscal 2011 was merely $36 million—down from $9.5 billion in fiscal 2008. The Obama Administration has managed the nearly impossible feat of turning energy policy into a money loser, pouring taxpayer dollars into green-energy busts like Solyndra. The Washington Post reported in September that Mr. Obama's $38.6 billion green loan program had created a mere 3,500 jobs over two years. He had predicted it would "save or create" 65,000. 

Mr. Obama nonetheless keeps talking about "green jobs" as if repetition will conjure them. He'd do more for the economy if he dropped the ideological illusions and embraced the job-creating, wealth-producing reality of domestic fossil fuels."

Source: Mark Perry.

Drill baby drill !!! Fernando Hernández Fradejas

Desde hace unos años muchas compañías petroleras y de energía han estado invirtiendo grandes cantidades de recursos en territorios como Colorado, Texas, California y Dakota del Norte así como también en algunas partes de Argentina, Inglaterra y Brasil. Según algunas estimaciones la producción de petróleo de EEUU aumentaría en un veinte por ciento y en diez años podría reducir la importación de esta materia prima en menos de la mitad. En términos estrictamente numéricos la producción podría alcanzar cerca de los dos millones de barriles de crudo al día lo cual no es nada desdeñable, a saber, más de lo que produce la totalidad del golfo de Méjico. De acuerdo con algunos expertos y analistas, existen "arenas petrolíferas" en Canadá, depósitos de "pre-sal" en Brasil y "petróleo apretado" en Estados Unidos. Por consiguiente el señor Aubrey Mclendon, director ejecutivo de Chesapeake Energy ha manifestado de modo reciente lo siguiente: "Hemos transformado completamente la industria del gas natural y no nos sorprendería si transformamos el negocio del crudo también en unos pocos años". Por tanto estos depósitos de petróleo y de gas que eran totalmente inaccesibles y nada rentables, ya empiezan a dejar de serlo gracias a las últimas innovaciones tecnológicas de extracción.

Las consecuencias políticas y económicas internacionales de estos avances pueden ser tremendas y significativas a medio plazo, muy posiblemente con la consiguiente bajada de precios en ambos tipos de energía. La futura demanda de materias primas por la creciente población asiática provocaría grandes tensiones en los productores actuales de estas energías, aquellos situados principalmente en torno al golfo pérsico y Venezuela. Observamos entonces una gran noticia debido a que la posición geoestratégica de Estados Unidos será mucho menos dañina en todo oriente medio. El autoabastecimiento y la independencia energética de algunos países occidentales están cada vez más cerca. Por el bien de todo el mundo espero que sólo nos quede decir una última cosa: Drill baby Drill !!!

Leer completo.

También petróleo en las pizarras. Antón Uriarte

Leo esta mañana que Repsol ha encontrado en Argentina una enorme formación de pizarras con petróleo extraíble gracias a la técnica de la fracturación hidráulica (fracking) y a la perforación horizontal. Creo que el gobierno de la presidenta argentina no pondrá muchas pegas ecologistas (que si los acuíferos patatín, que si los terremotos patatán) para su rápida puesta en explotación. Seguirá el ejemplo de Dakota del Norte, un pequeño estado norteamericano, que vive desde hace tres años el boom del "oil shale". El porcentaje de desempleo ha bajado al 3,5 %, el menor de todos los estados. Allí se espera en pocos años superar la producción de petróleo convencional de Calfornia y de Alaska.

Riding the North Dakota Oil Boom - WSJ.com

BBC Mundo - Últimas Noticias - Repsol YPF realiza el "mayor descubrimiento de petróleo de su historia" en Argentina

El nuevo centro petrolero del mundo. Andrés Oppenheimer

Amy Myers Jaffe, directora del Foro de Energía del Instituto Baker, en la universidad Rice, y autora del artículo, dice que ese cambio se dará por factores tecnológicos y políticos.

Aunque los geólogos saben desde hace mucho tiempo que hay enormes depósitos de energía sin explotar en las Américas, la mayor parte de esas reservas eran difíciles de explotar porque estaban en aguas profundas, rocas o arenas. Pero las nuevas tecnologías están cambiando esa situación.

Hay más de 2 billones de barriles de petróleo provenientes de fuentes no convencionales en Estados Unidos, más otros 2.4 millones de barriles en Canadá y 2 billones en Sudamérica, comparados con 1.2 billones de barriles de reservas petroleras convencionales del Medio Oriente y Africa del Norte, dice el artículo.

Gracias a las nuevas técnicas de perforación horizontal usadas en Estados Unidos, y a otras nuevas tecnologías empleadas para extraer petróleo de las arenas bituminosas en Canadá, o en los depósitos “pre-salt” de las costas de Brasil, esas y otras reservas de las Américas pronto se convertirán en el centro de gravedad de la exportación de petróleo del mundo, afirma.

Leer completo.

How North Dakota Became Saudi Arabia. Stephen Moore

Harold Hamm calculates that if Washington would allow more drilling permits for oil and natural gas on federal lands and federal waters, the government could over time raise $18 trillion in royalties. That's more than the U.S. national debt.

Harold Hamm, the Oklahoma-based founder and CEO of Continental Resources, the 14th-largest oil company in America, is a man who thinks big. He came to Washington last month to spread a needed message of economic optimism: With the right set of national energy policies, the United States could be "completely energy independent by the end of the decade. We can be the Saudi Arabia of oil and natural gas in the 21st century."

"President Obama is riding the wrong horse on energy," he adds. We can't come anywhere near the scale of energy production to achieve energy independence by pouring tax dollars into "green energy" sources like wind and solar, he argues. It has to come from oil and gas.

Today OPEC's market share is falling and no longer dictates the world price. This is huge, Mr. Hamm says. "Finally we have an opportunity to go out and explore for oil and drill without fear of price collapse." When OPEC was at its peak in the 1990s, the U.S. imported about two-thirds of its oil. Now we import less than half of it, and about 40% of what we do import comes from Mexico and Canada. That's why Mr. Hamm thinks North America can achieve oil independence.

A few months ago the Obama Justice Department brought charges against Continental and six other oil companies in North Dakota for causing the death of 28 migratory birds, in violation of the Migratory Bird Act. Continental's crime was killing one bird "the size of a sparrow" in its oil pits. The charges carry criminal penalties of up to six months in jail. "It's not even a rare bird. There're jillions of them," he explains. He says that "people in North Dakota are really outraged by these legal actions," which he views as "completely discriminatory" because the feds have rarely if ever prosecuted the Obama administration's beloved wind industry, which kills hundreds of thousands of birds each year.

Read full.

Source: Matt Ridley.

There Will Be Oil. Daniel Yergin

Since the beginning of the 21st century, a fear has come to pervade the prospects for oil, fueling anxieties about the stability of global energy supplies. It has been stoked by rising prices and growing demand, especially as the people of China and other emerging economies have taken to the road.

This specter goes by the name of "peak oil."

Its advocates argue that the world is fast approaching (or has already reached) a point of maximum oil output. They warn that "an unprecedented crisis is just over the horizon." The result, it is said, will be "chaos," to say nothing of "war, starvation, economic recession, possibly even the extinction of homo sapiens."

The date of the predicted peak has moved over the years. It was once supposed to arrive by Thanksgiving 2005. Then the "unbridgeable supply demand gap" was expected "after 2007." Then it was to arrive in 2011. Now "there is a significant risk of a peak before 2020."

But there is another way to visualize the future availability of oil: as a "plateau."

  

Read full.

Fuente: Francisco Capella.

¿Saben qué país es el mayor productor de petróleo del mundo? Manuel Fernández Ordóñez

Según los datos de la Agencia Internacional de la Energía correspondientes al año 2009, el máximo productor de petróleo es Rusia con un 12,9% del total de la producción mundial. Los países del top-ten y sus porcentajes de producción son los siguientes:

Rusia (12,9%), Arabia Saudí (11,8%), Estados Unidos (8,3%), Irán (5,4%), China (5,0%), Canadá (4,0%), México (3.8%), Venezuela (3,3%), Kuwait (3,2%), Emiratos Árabes (3,1%).

El resto del mundo produce el 39,2% del petróleo.

También es interesante conocer la lista top-ten de los exportadores netos de petróleo, es la siguiente:

Arabia Saudí, Rusia, Irán, Emiratos Árabes, Nigeria, Angola, Noruega, Kuwait, Iraq, Venezuela.

Nótese cómo ha desaparecido Estados Unidos de la lista puesto que consumen la mayor parte del petróleo que producen y, por tanto, exportan muy poco. A destacar también la aparición de Noruega en dicha lista, el claro ejemplo de cómo el petróleo no implica guerras ni luchas de poder cuando se trata de una democracia claramente establecida. ¿Cuál es el problema real, el petróleo o los regímenes que dirigen los países que tienen petróleo?