The End Of Cheap Oil?

Sep 25 2012 @ 7:02pm

Jeff Rubin worries that oil is increasingly expensive to extract:

It’s not enough for the global energy industry simply to find new caches of oil; the crude must be affordable. Triple-digit prices make it profitable to tap ever-more-expensive sources of oil, but the prices needed to pull this crude out of the ground will throw our economies right back into a recession.

The energy industry’s task is not simply to find oil, but also to find stuff we can afford to burn. And that’s where the industry is failing. Each new barrel we pull out of the ground is costing us more than the last. The resources may be there for the taking, but our economies are already telling us we can’t afford the cost.

A few weeks back, Felix Salmon argued for regulation to prompt automakers to make more efficient cars:

The fact is that fuel-economy standards are a pretty good way of ensuring that carmakers can plan for a more fuel-efficient future, without worrying about competitors undercutting them with gas-guzzlers. If the US government ever comes to its senses and increases the gas tax, or if it — wonder of wonders — actually implements a broader carbon tax, then at that point you would have three different forces conspiring to make America’s fleet more efficient. You’d have the tax, you’d have the fuel-economy standards, and you’d have the general global increase in fuel efficiency.

Without new taxes, we’re down to two; and without new fuel-efficiency standards either, we’d be down to just one. And that’s dangerous, because the US market is big enough that at that point there’s always a risk that we could replay the era of SUVs and Hummers, with manufacturers of small, efficient cars running a risk that they might get crushed if oil prices fall.