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This “Energy Crisis” is Fizzling
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I am old enough to have lived through all the energy crises as an adult, starting with the one in the fall of 1973. They each follow a pattern: panic, alternative ideas, acceptance, and move on. The current one is no different than those of the past.

These happen when OPEC economists forget their mission: keep the price of crude low enough that consumers do not look for alternative forms of energy. That is what happened this time. The hurricanes of 2005 and the Iraqi War stirred things just enough to press prices up, then the OPEC politicians got hooked on higher prices. Consumers panicked and started thinking about other ideas.

Oil exploration companies are motivated in these times, too. In fact, it looks like oil is being discovered all over the place at prices north of USD 110/barrel. Here in the United States, the oil rush is on in North Dakota, where there is believed to be 400 billion barrels of oil in the Bakken Field (an area in North Dakota, Montana, and Saskatchewan). Some enthusiasts say there could be 900 billion barrels there, but no one really knows (As reference: Saudi Arabia has about 260 billion barrels of reserves).

Recent announcements from Brazil indicate new finds that could be 400 billion barrels. Of course, like gold rush fever, these estimates need to be taken with a grain of salt until reputably verified. Additionally, 75% of the Earth’s surface (obviously most of the oceans) have not been surveyed for fossil fuel reserves.

In the meantime, ethanol is starting to get a bad reputation in two areas: food supply disruption and the prodigious amounts of water it takes to produce ethanol (reportedly 3 gallons for every gallon of consumer fuel produced).

The good thing about the oil crises is that each one has taken us a little closer to more efficient and cleaner technologies. This one will, too, but it will be over before it pushes us all the way there.


Members Opinions:
May 14, 2008 at 1:00am
Jim: I read the other day that OPEC (read Saudi Arabia) will control the price of oil as follows: $100, $100, $100, $10 (!), $100 and $100. Etc. This will keep investors from getting up the momentum and cash to tap the sands and shale. But I'm puzzled at your comment re Bakken. What's holding that back? High cost (i.e. infrastructure)?
May 14, 2008 at 1:00am
Bakken is just under development. There have been a record number of drilling permits issued in the Dakotas since January 1 (granted, starting from a small base). Conservative cynics say Bakken will not be developed because liberal greens in the United States will block it against their bigger agenda of getting us off of oil.


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