Jim’s Blog

In his speech Governor Ben S. Bernanke observed that if inflationary expectations rise, and the Fed fails to raise interest rates correspondingly, this is unstable. (more…)

Political correctness is that we should not drill for oil, for more oil will not solve the problem of high and rising fuel prices. Which political correctness the mainstream media firmly endorse. (more…)

Newt tells it how it is: This crisis was caused by politicians. He tells how to reduce fuel costs in the short run, and the long run. “you want energy now” he tells us. And then he tells us how to get it.

How do we solve the energy crisis? Answer. Let businessmen extract oil. Drill here. Drill now. Pay less.

The energy crisis happened because of optimistic projections – that gas to liquid and coal to liquid would not be needed until the technology had been improved and the cost brought down, that the dramatic growth in China and India could be accommodated by rapidly expanding conventional oil production. (more…)

It seems that Arnold Kling has been in Afghan cave during the past six months. He does not seem to think that there has been any bad news on oil supply over the last six months.

The recent run-up in oil prices represents a similar puzzle. I think that it’s difficult to tell a story for the rise in crude prices for the last six months that is based on the rational digestion of news. Either six months ago folks were overly optimistic about long-term supply and demand conditions or now they are overly pessimistic about those conditions. I don’t think that what changed in the last six months was the news about supply and demand.

I have been watching the news, and over the past few months it has been quite horrifying, particular with the Democrats and both major party presidential candidates shooting down Shell’s plan to develop shale oil, which pretty much guarantees extraordinarily high oil prices for at least the next two decades. Indeed, the political majority in most of the developed world seem to intend to block all carbon extraction.

To satisfy world demand, as former third worlders become first worlders, and want cars and air conditioning, the world needs to increase production of oil and oil substitutes about three million barrels per day each year. Equivalently, the world needs to increase production one hundred and fifty million tonnes per year per year. (more…)

Since I think I am smart, going to make prediction. (more…)

The American health care system is socialism without a central plan, and capitalism without markets or prices. (more…)

Econbrowser publishes oil price estimates in more detail

Bottom line:  Demand is going to rise one hell of a lot.  Supply for that demand just is not there.

This paper does not review supply from coal to liquids or gas to liquids.  The only way to meet demand is to generate liquids from coal by underground gasification followed by gas to liquids conversion.  This will require many, many quite gigantic projects, but at present we have only a small number of small exploratory projects, most them scheduled to start producing around 2015 or so.  So the price of oil will have to rise to quite astonishing levels, at least for a couple of decades.   We have only seen the beginning.

I am continually puzzled by the world’s chronic inability to do basic arithmetic, but I see that econbrowser has done the maths on oil.

There are a lot of people in China.  There are no longer large political obstacles to competent and industrious people in China making money.  Therefore, very soon, a lot of Chinese will be making a lot of money.  Therefore China will soon be consuming an enormous amount of oil.  Econbrowser concludes China will soon be consuming a lot more oil than is ever likely to come out of the ground.

Therefore the price of oil will rise without limit until coal to oil and nuclear to hydrogen fills the gap.  And right now, coal to oil projects are insignificant, and nuclear to hydrogen is not even on the drawing board.  Therefore in the next decade or so, oil will rise to astonishing heights, far above present prices.