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Energy Crisis on Hold?

Engineers have performed their magic once again. The world is not going to run short of energy as soon as feared. America is not going to bleed its wealth importing fuel. Russia's grip on Europe's gas will weaken. Improvident Britain may avoid paralysing blackouts by mid-decade after all. The World Gas Conference in Buenos Aires last week was one of those events that shatter assumptions. Advances in technology for extracting gas from shale and methane beds have quickened dramatically, altering the global balance of energy faster than almost anybody expected.

Tony Hayward, BP's chief executive, said proven natural gas reserves around the world have risen to 1.2 trillion barrels of oil equivalent, enough for 60 years' supply - and rising fast. "There has been a revolution in the gas fields of North America. Reserve estimates are rising sharply as technology unlocks unconventional resources," he said.

This is almost unknown to the public, despite the efforts of Nick Grealy at "No Hot Air" who has been arguing for some time that Britain's shale reserves could replace declining North Sea output. Rune Bjornson from Norway's StatoilHydro said exploitable reserves are much greater than supposed just three years ago and may meet global gas needs for generations. - Telegraph

Dominant Social Theme: An unexpected development?

Free-Market Analysis: This will not slow down the energy misers one bit. The "conservation" train will chug down the track just the way global warming does in the face of an ever-broadening consensus that such fairy tales are just that. We call these "dominant social themes" - bedtime stories created by a determined monetary elite for purposes of control and profit. There are many dominant social themes floating around in the world today. It is very hard for people to accept that their schooling and the books they read - even the professions for which they work - are products not of a marketplace evolution but at least in part of psycho-social promotions buttressed by vast flows of fiat money.

We have tracked so many of these promotions during the time the Daily Bell has been in existence, actually for long periods of time before that. Fiat money is such a promotion. Global warming is a promotion, in our opinion. So is Peak Oil (we're running out of oil). Mass vaccination programs are a promotion in our opinion, as is the infallibility of Big Pharma and modern medicine generally. Democracy is a promotion. The concept of military "victory" is a promotion. So, for centuries to come anyway, is overpopulation.

Much of what the state taught a thousand years ago was fairly wrongheaded. In a hundred years, much of what is believed today will be proven wrong as well. The foundational force of the universe may be electrical, not gravitational. The urbanization of humankind may be set back another 10,000 or 20,000 years. Our minds and bodies may be amenable to longevity undreamt of today.

One thing that we hope will come to pass is financial literacy. One of the very greatest of humanity's achievements was the discovery of marginal utility, the idea that prices are fungible and only the market itself can discover them. Put a glass of water between a desert and a lake and it is buyers and sellers who will determine the price, and that is the only way it will be accurately determined. Sure, someone can come along and affix a price to the glass of water, but it may not be the price that people are willing to pay. When the state comes along and "fixes" a price, the result is a queue, inefficiency, rationing, or all three and more. Marginal utility constitutes the dividing line between classical and neo-classical economics.

Another basic concept of financial literacy is supply and demand. People talk as if they understand supply and demand, and then a moment later they may be explaining to you that we are running out of oil and that soon food and water will be in short supply. In fact, these are basic necessities. Absent mercantile interference (monetary elite promotions adopted and supported by the state) food, water and fuel will probably remain available to large populations, certainly Western ones.

Oil is one of the most manipulated commodities on earth in our opinion. But because of the West's mercantilist markets, most commodities are manipulated and remain in a constant state of manipulation no matter the price. One can certainly see price manipulation in oil - just look at the way prices move. But beyond this, we keep an eye on discoveries. Hundreds of billions of barrels of oil may exist in the Rockies, in the Gulf, in Canada's tar sands. Every few weeks it seems we read about another discovery - or the potential for large-scale additional energy discoveries.

And then there is natural gas. In America, natural gas is still "flared off" as a nuisance. Back in the 1970s, enough natural gas was discovered in Louisiana at depth to make several geologists temporary billionaires. The "oil crisis" of that day receded and no more was heard about Louisiana's natural gas. But we bet it's still there - unless it's been flared off. Governments are spending billions building wind turbines that kill birds and erecting solar farms that are still, after all these years, fairly inefficient. But there is plenty of coal, plenty of oil, plenty of gas. If energy prices go up, you watch how quickly "new sources of energy" are discovered.

The dirty little secret of the oil industry, in our opinion, is that oil may be abiotic, a naturally regenerating resource created by tremendous pressures in and under the earth's crust. We know the oil industry is sensitive about the idea because it is almost NEVER discussed in polite circles, and Big Oil has gone out of its way to refer to oil as a "fossil fuel" with an almost religious fervor.

Conclusion: We began this conclusion with the observation that energy discoveries will never shake true believers' faith that energy supplies are running out. Someday soon, they are for sure, we will all drive cars the size of toasters and huddle around the solar collector for warmth. We are well aware of this attitude, which holds for the most part that we don't DESERVE the material comforts provided by Western civilization. But, in fact, such amenities are perfectly available to all throughout the world if markets were allowed to operate, if supply and demand were given a chance to operate effectively, and if marginal utility were recognized for the ironclad naturally-occurring economic law that it actually is. Little enough to hope for, but apparently - in the current environment - too much to ask.

© Copyright 2008 - 2009 Appenzeller Business Press AG. All Rights Reserved. The Daily Bell is an informative compendium of independent economic views and analysis, which is published by Appenzeller Business Press AG. The information contained in the Daily Bell is for informational purposes only, is impersonal and not tailored to the investment needs of any particular person and should not be construed as financial or investment advice. Appenzeller Business Press AG does not accept any liability or responsibility for, nor does it verify the accurateness of the information being provided in the Daily Bell. Readers of the Daily Bell or any affiliated or linked sources or sites must accept the responsibility for performing their own due diligence before acting on any of the information provided within the report regardless of the source

 

 

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