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LA Times Demonstrates Ignorance of Economics and Peak Oil

by John Young

The article I am referencing can be found here.

People are so easily misled, mainly because they lack a good background in both economics and the meaning of words.

First, let me explain Peak Oil. Peak Oil is not the end of oil, it is the end of CHEAP oil. The referenced article explains that as oil has become more and more expensive, that higher price has served to justify more risky and expensive methods of extracting what remains. Well, duh. If oil were expensive enough, it would be cost effective to get it by scooping hydrogen and methane from the atmosphere of Saturn, which is theoretically unlimited. Yet, the author, demonstrating complete ignorance of the concept of Peak Oil, claims that this debunks the theory when in fact it supports it.

Second, the article shows a profound misunderstanding of commodity markets in describing a future in which we will be energy independent because of projected oil yields from fracking. Oil is an internationally traded commodity, and no matter where it is pumped, its value is based upon global supply and demand. As Saudi Arabian supplies dwindle, the price will be bid up. Hence, people in America will have to bid against people in China for oil that is pumped here in the U.S. If they out-bid us, the oil goes away in a tanker. The only way what the article describes would be relevant would be if America were an economically nationalist nation, which it most assuredly is not.

At least, it isn’t economically nationalist TODAY. It will have to become so in the future, however, if we do not wish to be economically leveled with the cheapest workers on the planet.

2012-11-13

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