Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Friday, September 02, 2005

Another Reason Oil Will Not Reach $100

The Emirates Economist argued earlier that because of vast reserves in the tar sands of Alberta (making Canada the holder of the second largest source of oil reserves), the price of oil will not reach $100 barrel (in 2005 dollars) within the next ten years.

He recently buttressed his argument with evidence from a Rand study that oil shale in the western US can provide between 500 billion and 1.1 trillion barrels of oil eventually. Recovery of oil from shale will be expensive and have environmental problems that will require costly adjustments. But EmEc is optimistic:

People respond to incentives. Technology to extract the oil has been developed in anticipation that the price of oil would rise to make it profitable to do so. I suspect that the response in production to further price increases would be sufficiently large that ten years from now the price of oil will be below $100/barrel.
Let me add that although he might be right about crude oil, we are rapidly discovering that unless there is more refining capability brought on line, finding more oil reserves won't do one heck of lot toward keeping down the price of gasoline and heating oil.
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