Sunday, January 13, 2013

Resilience — Not at that price: Why long-term forecasts for cheap oil and natural gas are baseless

Currently, there appears to be no new transformative on-the-shelf technology that will significantly reduce the cost of extracting oil and natural gas. And so, barring a deep economic depression, we can look forward to prices for oil and natural gas that are consistently above the cost of production and therefore far above the bizarrely low forecasts in the air today. In fact, we should expect costs to continue to escalate as we seek out resources that are ever more difficult to extract and refine.
Resilience
Not at that price: Why long-term forecasts for cheap oil and natural gas are baseless
Energy Bulletin

Regardless of how much new petroleum and natural gas is discovered, the price is going to be determined by the cost of recovery, which will establish the floor price for profitable production.

Moreover, as awareness of global warming and its consequences increases, negative externalities are going to be priced in, also raising the price of carbon-based energy. It looks like the Obama administration is preparing to address this in the second term.


2 comments:

John Zelnicker said...

Someone better address this or we are surely screwed. The feedback loop is far more powerful than the scientists expected just five years ago. Change already has reached levels in some areas that was predicted to happen in 2020-2025.

Bob Roddis said...

Oh come now. We can never run out "dollars" so we can always buy all of anything we want all of the time. Scarcity has been abolished by MMT.