David Frum: Don't Worry About Running Out of Oil

[Minstrel Boy]

Note: Frum has written this today for Toronto's National Post, but it does not exist complete online for non-paying subscribers. (The partial link is here.)


Don't worry about running out of oil

by David Frum
13 January 2005
The National Post


Many of us think of the world's oil reserves as a finite resource: There's only so much there, and when it's used up, there won't be any more. But as one of the world's great oil economists, M.A. Adelman, has observed, this way of thinking is all wrong. Oil reserves, Adelman writes, "are no gift of nature. They are a growth of knowledge, paid for by heavy investment."

The world's oil supply of oil is not finite. It is more like a supermarket's supply of canned tomatoes. At any given moment, there may be a dozen cases in the store, but that inventory is constantly being replenished with the money the customers pay for the cans they remove, and the more tomatoes that customers buy, the bigger an inventory the store will carry.

...

In this new era of expensive oil, the process of substitution will accelerate. It may reach too into growing markets such as India and China. As it does, oil in the ground may become less valuable. And we will move closer to the day when M.A. Adelman's ultimate prediction comes true: As consumers substitute other energy sources for oil, oil in the ground will gradually become less valuable and producers will gradually lose interest in searching for more.

The world will never run out of oil. It will just stop using it. When that happens, the world will never know and never care how much oil remains in the Earth.

[BlueEyedSon]

1. Who is this knucklehead? Neither geologist nor economist I guess!

[Minstrel Boy]

2. Right. And he counters a geological fact with an economic theory.

A lot of magical thinking going on there.

[BlueEyedSon]

3. Ah, a "Cornucopian"!

:puke:

Anyway the PEAK will be the important event, an thats happening in the next 10 years.

[shaolinmonkey]

4. He wrote a book with Richard Perle...so he's nuts.

I love that analysis, "the oil will replace itself"!

Nevermind that it takes hundreds of millions of years. Do people really believe this stuff?

[Demit]

5. Al From, David Frum, Bob Shrum. MEGO when I see one of those names.

Is it just me? I always know there's something bad about them, but I never remember what.

[musette_sf]

6. I just started reading "Crossing the Rubicon"

and when I saw this headline I knew this guy was nutz.

[Spinzonner]

7. When oil gets too expensive

we'll burn pundits for fuel.

Fool for Fuel !

[BlueEyedSon]

12. That's the funniest thing I've heard all day. Thx. nt

[balta1701]

8. Possible

(Just a note - this post is actually coming from a geology grad student).

Mr. Frum here presents 1 possibility for what could happen in the future with regards to energy production, but it is in fact a highly unlikely one.

He is correct in his economics, first of all. Right now the price of oil is going up, and to a first approximation, I see no reason for it to stop going up until it reaches a level where the additional cost can fund another source of energy.

What Mr. Frum is asserting is that because of this new funding, it will become possible for the world to economically afford to switch to a different source of power. You'll note; he does not say what source of power he thinsk is the most likely, and there's a reason for that.

As oil keeps going up, it is eventually going to reach a point where other technologies, such as wind, solar, nuclear, and oil generated from coal, will be more cost-effective than oil due to the high demand for oil.

The thing Mr. Frum fails to notice, however, is this; each and every single one of the potential replacements for oil has huge inherent problems to it.

If the cost of oil keeps going up, it will eventually become cost effective to take coal, process that into oil, and use that to replace the oil. However, this process has several huge downsides. First, it is much more expensive than just pumping oil out of the ground. Second, it is far more polluting than either burning coal or burning oil. Third, it would burn through the entire world's supply of coal in roughly 50 years. Oil shale has all of these same problems.

Wind and solar are fine, but there is an upper limit to what they can do at this point - if the technology to make these energy forms more efficient and available to everyone doesn't come online until 2050, then they won't help with the oil crunch - they'll be too late.

Nuclear power also has risks - terrorism associated with it, the limited supplies of uranium, and what to do with the waste all come to mind.

Finally, there's the other options - things like fusion. What Mr. Frum ignores in his piece is that there is a huge cost associated with developing any of these technologies - yes, at some point it may be economically feasible to change over to any of these techonologies at some point, here is the major question; how expensive does oil have to get before one of those other technologies comes on line? Also associated with that question is this one; how much damage will that do to the world economies?

At some point, it does become more cost-effective to move from oil to another form of power, but what happens if until 2100, the only things we can do are burn more coal as a stop-gap solution, and then it costs $100+ to produce the equivalent of 1 barrel of oil today?

This would be an absolute economic disaster.

[tkmorris]

9. Good analysis

Welcome to DU! :hi:

[BlueEyedSon]

13. All the Oil guys agree, even the "doomsday/dieoff" ones, that

we will NEVER RUN OUT OF OIL.

The proof is elementary. When it takes more than 1 barrel-of-oil-worth of energy to pump up one barrel of oil from the ground, whatever is left will stay put... hence oil will never be completely exhausted.

(For simplicity I have ignored other economic value issues like oil for plastic, fertilizer, etc., which may make it worthwhile to pull up the oil for negative ERoEI.)

[Barrett808]

14. Good thoughts, thanks

Welcome to DU!

[punpirate]

15. And, lurking behind...

... the economics is another sad reality... increasing output of greenhouse gases (not just CO2, but methane, as well, as those stocks are increasingly used--and leaked--as oil prices accelerate).

I'm not sure any of us have a good idea about how much fuel China will use as its economy grows and the overall standard of living there improves. If China were to eventually (over several decades) reach our current standard of living (and it's possible, given that they've had a number of years with GDP growth of 9-10%), that could mean another billion and a half cars toodling around their part of the planet.

That alone could create considerable pressure on supplies, hastening that $100/bbl scenario. And if we start to substitute coal for oil as a means of bypassing more expensive oil, watch the air- and water-borne mercury levels skyrocket....

[Swamp Rat]

10. Richard Perle lackey and Dumbya speech writer...

[Fusions_Minion]

16. LoL

I love the lizard graphics. Keep up the good work. :thumbsup:

[Coastie for Truth]

11. As an engineer (with a minor in econ) ....

This dude is mixing apples with oranges and trying to get pineapples.

To a point - if you

--pay more to explore for oil in less and less hospitable (politically, geologically, logistically) places, and

--pay more and more to drill (with more advanced recovery methods, and a deeper and deeper depths), and

--pay more and more to refine (all petroleum is not the same - more cyclics, more heavy fractions, more sulfur, etc.)

There probably is more oil then the "Peakers" say --

And, with the economic model of "substitution" -- we can probably go to synfuels from coal, lignite, peat, tar sands, and we can probably play various biotech games to convert more natural products to fuels (lots of successful demonstration projects).

And with creative engineering (hybrids, more effective use of the "automotive data bus" to "optimize" the "drive train" ) we can probably go more miles per gallon.

My "bottom line" -- there are lots of "technological fixes" - but they are not cheap -- and they require American to do something Red Staters consider "Unamerican" --THINK GREEN :)

But that is not what the Bushies are saying -- they are saying we can just go in and take petroleum because we are Americans.

And Frum is speaking from a level of technical and scientific illiteracy that is beyond frightening. And, if he believes his own bull - that is even more frightening.

But, he is one of Perle's buddies, writes for National Review, and is a member of the Federalist Society. :(

[teryang]

17. Economic model of substitution

I agree with your analysis. I don't think we will run out of hydrocarbon fuels. There are lower grades of fuel in large quantities which you mention. The cheapest high grade sources are being skimmed for their utility and profitability, at a time when more expensive alternatives are readily available and probably will be for hundreds of years. Of course, if one can only envision hundreds of millions of Asians driving gasoline powered cars, the future doesn't look too good beyond the short term.

As the cost of alternatives is an impediment until the cost of cheap high utility sources goes much higher, industry doesn't adequately explore the technology of practical alternatives nor invest in the necessary capital infrastructure to exploit their use economically. The technologies are out there but one cannot be sanguine about their prospects because of the shortsightedness of free market forces. The fast buck is always preferable to long term planning and investment. It has always seemed to me that the energy markets are churned to encourage more usage and consequently waste. Income is the sole consideration without regard to a more wholistic assessment of life cycle costs. Alternatives must achieve currency or standardization in the marketplace. This requires a monumental level of investment. No doubt a serious and probably protracted crisis will have to occur to mobilize sufficient leadership, expertise and capital to address the move to substitutes.

Also, changing human behavior is part of the economic equation. At higher cost levels the use of alternative behaviors can bring higher utility from available fuels in combination with more efficient use of fixed assets and reusable materials. Move closer to points of production, trade and work. Up till now dispersion and waste has been the trend because of cheap fuel.

Um, I'm not an expert but what you are talking about makes a lot of sense to me.