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A world awash in oil

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The world has too many real problems to waste time worrying about imagined ones.

So, rest easy:

We are not running out of oil. We never will run out of oil.

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That means the answer to the question posed on Monday's Grand Forks Herald front page -- "Is the oil era nearing its finish?" -- almost certainly is "No." And if it weren't for the threat of climate change and its possibility of heavy-handed government action, the word "almost" could be removed from that sentence.

Monday's story from McLatchy Newspapers uses dire terms to describe a situation in which demand for oil far outruns supply. As the story puts it, "The looming American oil glut may simply not be enough to sate the United States and the rest of motorized humanity."

But that worry can be confidently dispatched by a single word from Economics 101: Price.

As Earthlings should have noticed by now, our planet never runs out of raw materials. Take gold. It's exceptionally rare: If you were to melt all the gold that has ever been mined, you'd get a cube only about 60 feet on a side.

But gold has been mined for 7,000 years and continues to be mined today. More impressive, world gold production in 2011 was 2,700 tons -- a new record.

How can that be? Why haven't we "run out" of such an obviously limited resource?

Why haven't we mined all the gold?

The answer is simple: Because of price.

When demand for gold rises, so does gold's price. And when the price of gold rises, so do our efforts to increase supply, as engineers and scientists -- the alchemists of the modern world, using ever-more-ingenious technology -- work harder and smarter to recover the metal.

By the way, the world's oceans hold at least five times as much gold as humanity has mined. So, if the price of gold keeps going up, rest assured: Someone will invent a way to economically recover gold from seawater.

Thus will the miracle of price work its magic once again.

And as it is with gold, so, too, is it with oil, as North Dakotans now know better than most.

Alas, the McClatchy story and its accompanying illustrations totally ignored the way oil prices equalize supply and demand. "Production outlook may be too rosy," one graph claimed, noting that "critics say existing oil fields will be down 18 percent by 2035.

But if that decrease happens -- a big "if"; how many predictions made in 1989 actually have come true today? -- then the price of oil will rise, giving producers tremendous incentive to find new sources.

Alternative energies such as wind, solar and nuclear will become more competitive, too.

"Few U.S. drivers want to be energy savers," another graph claims. Sure: That's true at gasoline prices today. But what if gas rises to, say, $5 or $10 a gallon?

Rest assured, plenty of people who are cruising around in Hummers would start driving Volkswagen Beetles. And the "few" energy-saving U.S. drivers quickly would become "many."

Bring it on, China and India: As long as oil prices can rise and fall, demand never will outrun supply. Instead, higher prices will lead to increased supply, more production of alternative energy or both, exactly as is happening today.

So, go ahead and worry about an economic downturn, a Persian Gulf war or other calamities. But a long-term worldwide oil shortage? Relax. It ain't gonna happen.

-- Tom Dennis for the Herald

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