Friday, September 02, 2005

Texas Tea, Baby. But Not in Texas.

Rich! We're rich I tell ya!

That is, if the enviro-donkies don't prevent us from tapping the vein.

Here's a little taste of the big story:

The United States has an oil reserve at least three times that of Saudi Arabia locked in oil-shale deposits beneath federal land in Colorado, Utah and Wyoming, according to a study released yesterday.

(HT: Instapundit)

27 comments:

Tlaloc said...

The problem of course is that shale is a lousy source of oil. Russia too has a huge oil shale deposit. It's never been considered economically viable until the recent tripling of oil prices. Hence, and I know it'll rankle that I'm having to give economics lessons again, this deposit is only useful so long as oil stays at this or higher rates. It is in other words a resource of last resort rather than a new find to celebrate.

Tlaloc said...

It cannot and will not lead to oil proces going back down because as soon as they do it's no longer wothwhile to extract it.

Hunter Baker said...

The article says there are two factors:

1. Higher prices.

2. Recent technological advances.

The second might undercut the dynamic you suggest.

James Elliott said...

The Canadians have been trying to make money off of this since the early '90s.

Shale mining has a severe environmental impact, and the extraction process is labor and capital-intensive. Basically, to harvest the oil, we'll have to make gigantic quarries filled with giant yellow Tonka trucks and big rock smashers.

The real question is: Is the oil worth the environmental impact? In the amount of time it takes to get a shale-oil quarry up and running, we could be well on the way to reducing fuel usage and upping the use of alternative fuels and energy sources.

The Classic Liberal Anonymous said...

"It cannot and will not lead to oil proces going back down because as soon as they do it's no longer wothwhile to extract it."

Well said, T.

This is precisely the reason why it bugs me SOOOO much when I hear the yelps of eco-nuts that "we are running out of oil."

James Elliott said...

Well, it is true, in the larger sense. Oil is a finite natural resource. It's not exactly renewable. Once you burn that stuff up, it be gone, man.

The Classic Liberal Anonymous said...

"Well, it is true, in the larger sense. Oil is a finite natural resource. It's not exactly renewable."


This is not necessarily true. While I do not contend to be an expert on oil formation, there has been some debate about oil being a "fossil fuel" and oil being generated via an abiotic process.

The abiotic theory is not new, and there are some who believe it to be hogwash (mostly the anti-war left), but Russian scientists have put many decades of research into it.



"Once you burn that stuff up, it be gone, man."


By virtue of the cost of extraction, it would be impossible to "burn it all up" ... unless the Earth were to be burned up with it.

The Liberal Anonymous said...

...there has been some debate about oil being a "fossil fuel" and oil being generated via an abiotic process.

The abiotic theory is not new, and there are some who believe it to be hogwash (mostly the anti-war left), but Russian scientists have put many decades of research into it.


I'm not sure what you think being anti-war has to do with anything. Regardless, I see no reason why someday we would not be able to fabricate hydrocarbons at will. I'm sure that it's done at a small scale already -- I don't know. But why even bother? Our scientific resources can be better spent looking for sources of clean power, not trying to turn carbon into oil. I'm not suprised that Russian scientists have been working on this for decades. It's a very Communist Russian type of project.

By virtue of the cost of extraction, it would be impossible to "burn it all up" ... unless the Earth were to be burned up with it.

At some point, costwise, it will be effectively all gone. It doesn't matter if there is actually some left when it is no longer economically feasable to extract it.

The Classic Liberal Anonymous said...

"At some point, costwise, it will be effectively all gone. It doesn't matter if there is actually some left when it is no longer economically feasable to extract it."


Right on ... the economically feasible part is the key.

To expand, this means that at some point, the cost of extraction will be so high that capital will flow into the energy sectors that will begin to have a cost advantage over oil.


Ain't economics grand?

The Liberal Anonymous said...

Wow. When we (effectively or actually) run out of oil, people will try to find a replacement.

This "economics" you speak of, it truely has great predictive powers not found in any other field.

James Elliott said...

Wait, wait! I have them too! I think CLA will try to say something snarky and condescending!

I'm an economist!

The Classic Liberal Anonymous said...

Look ... I am simply expanding on your own argument.

If that sounds condescending ... well what can I say.


I'll try to expand my previous post.

If it is not "economically feasible" to extract oil from shale, that means that there has to be an alternative that *IS* "economically feasible".

Right now the economically feasible option is pumping it out of existing oil fields.

When the cost of pumping the KNOWN reserves increases (or as the KNOWN reserves start to deplete and cannot meet demand), more capital flows into exploration, especially in places where it is hard (ie, costly) to look.

And so on ...

The more capital that flows into exploration, the more efficient (ie, cheaper) that exploration becomes; the same is true for the extraction. I believe this is what Hunter's post was about.


Some people are under the impression that as oil gets more expensive, there will be no alternative, and I can sympathize with that viewpoint. I would like to see more alternatives out there. I would like an electric car. I am a technology lover! The trouble is, however, that the alternatives to gasoline are either more expensive or offer less for the same cost.

I would *love* it if we, as a nation, would conserve oil (among other things), but that will not change the economics of getting capital to flow into alternatives.

The Classic Liberal Anonymous said...

BTW ... I am not an economist, I just play one on the internet ... at least thats what I *think* I'm doing.

The Classic Liberal Anonymous said...

"When we (effectively or actually) run out of oil, people will try to find a replacement."


As we "run out of oil", the supply would decrease, thus causing the price to go up accordingly. At some point, the price will get so high that alternatives become more affordable ... relative to the price of oil.

Right now, we are seeing hybrid cars that 20 years ago would not have been feasible. I'd say that they are "almost economically feasible" at this time, because the extra price you pay cannot be made up for in fuel saved.

This means that hybrid cars will need to be made more efficiently (and I trust that economies of scale will help) in order to be a real economic alternative -OR- the price of gasoline will have to rise.


This is all the opinion of a NONeconomist ... take it for what its worth.

James Elliott said...

'd say that they are "almost economically feasible" at this time, because the extra price you pay cannot be made up for in fuel saved.

Depends on the hybrid you buy. A Civic or Prius hybrid costs around $20,000 and will save you approximately $2,000 in gas annually. It will also last you about 10 years of running, if not more, with little maintenance. That saves you, over a decade, $20,000. That's the price of another car.

Hunter Baker said...

We're going to see a repeat of the 80's oil-wise. A big spike in oil prices (see late 70's, see now) will lead to a big consumer movement toward smaller and/or more efficient cars. Plus, more oil will be exploited that was not worth getting earlier. Then, there will be a glut in the supply. And prices will drop substantially.

I do think the electric car and hybrids will become more prevalent. It's fine with me. The states won't like it until they figure out how to replace lost revenue. But the gas vehicle won't go away for good until the cheap oil supply is truly gone. And that may be never, particularly if the Middle East ever gets it sh-- together.

Tlaloc said...

"To expand, this means that at some point, the cost of extraction will be so high that capital will flow into the energy sectors that will begin to have a cost advantage over oil."

The problem CLA is that our entire infrastucture is so critically dependent on oil that we won't have the time to build the massive new infrastructure needed for whatever new energy source they come with (besides which there is no energy source we can use to replace oil that doesn't have just as severe a drawback).

It takes time and money to completely convert the world from one energy source to another. It's not like you can just dump plutonium into the oil refiner if you decide to go nuclear.

Tlaloc said...

"The article says there are two factors:
1. Higher prices.
2. Recent technological advances.
The second might undercut the dynamic you suggest."

It might but the problem is that with oil going up that means all the industries that have to play a part in new innovation are getting squeezed as well. See there are a handful of industries that are so universal that any disruption of them affects everything else: power and communications are the only two I can think of off the top of my head. A single worm can cause billions of dollars of damages and that only affects one aspect of communications.

Oil and coal and Natural gas on the other hand are it as far as any meaningful power generation. Nuclear is so far down the list it might as well not even exist. All three are at or close to decline. That means we can't suddenly depend on coal to save us from our oil shortages. Or NG to save us from our lack of the other two.

As a result this innovation to make extracting shale oil so much cheaper is going to have to come under some pretty adverse conditions. And even if it does come it means only an extension towards when the bill comes due for over reliance on oil.

Hunter Baker said...

I don't think the transition will any more difficult than it was moving from real horsepower and candlepower to the artificial approximations thereof. A statist economy would run all the way up to the wall, hit it, and then be screwed for a good while. A free one will naturally adapt to deal with real market conditions and we won't miss a lick.

Tlaloc said...

"I don't think the transition will any more difficult than it was moving from real horsepower and candlepower to the artificial approximations thereof."

Dude, please. Think about the "massive" candle making infrastructure. Yeah that must have been a real bear to replace.

Oil is hugely intertwined into our economy now for energy and plastics. For God's sake converting a sizable percentage of the US car fleet to anything bu gasoline is a mammoth undertaking.

Furthermore what you aren't taking into account is that while the the transition from candles to lights or from horses to cars took place over decades we simply don't have the time for a gentle transition, nor do we have a reasonable alternative to transition toward.



"A statist economy would run all the way up to the wall, hit it, and then be screwed for a good while. A free one will naturally adapt to deal with real market conditions and we won't miss a lick."

You have that backwards. A free market will continue using oil until the problem becomes critical and it's no longer possible to solve. A statist economy could (if led wisely) start working on the problem decades ahead of time. Indeed Carter tried to implement a movement toward more power efficient vehicles and diversified energy sources which Reagan promptly gutted. Guess which was the statist and which the champion of suicidal free markets?

Hunter Baker said...

Amazing statements from an avowed anarchist. I'm blown away. The idea that a statist economy would handle something like this better than the free market gives me a pretty good understanding of why you are so contemptuous of economics. Having looked at the real world, your assessment is absurd.

In addition, what makes you think this transition has to be faster than the horse and buggy one. I don't see any sign that is the case. It's not like we're running out of oil in five years and we're racing against the clock.

Tlaloc said...

" Amazing statements from an avowed anarchist. I'm blown away."

Why? The "free market" under anarchism would almost certsinly by miles away from what you mean by the term.



"The idea that a statist economy would handle something like this better than the free market gives me a pretty good understanding of why you are so contemptuous of economics."

You're right it does, because you make a prediction that while based on economics has no connection to reality. We have a very free market and yet we have completely screwed up this crisis.



"Having looked at the real world, your assessment is absurd."

So you are claiming Carter didn't try to push alternative energy sources? That Reagan didn't scrap that movement? Or are you claiming Reagan is the statist and Carter the free market wheeler dealer?



"In addition, what makes you think this transition has to be faster than the horse and buggy one. I don't see any sign that is the case. It's not like we're running out of oil in five years and we're racing against the clock."

Come on Hunter this is straight forward supply and demand. Our supply is going into decline so every barrel we pump costs more than the one before it. Our demand is EXPONENTIALLY increasing. China alone is an enormous source of new oil appetite. No we won't run out in five years but in five years oil will cost even more than it does now and it'll keep going up meaning the world economy is going to keep getting worse and worse. And we don't have that much oil left before it becomes so expensive to extract and ship that the system crashes.

The transition from horses to cars took place over many decades. All indications are we do not have that luxury thanks to the shortsightedness of the free market imbeciles you admire so much.

Hunter Baker said...

We just have a completely different view of the facts at hand and what they mean.

Again, it is shocking that you as an anarchist would look to Carter to push for alternative energy. It wasn't because of some presidential push that the internet exploded. It wasn't because of a national policy that we started driving cars. When it happens, it will be the good old profit motive bringing change more rapidly than anyone thought possible.

As I criticize the speed of statist solutions, I remember the great old Soviet story:

A man went to apply for his state-provided Volga (a car). He was told, "Okay, we'll have it ready for you in twelve years."

He responded, "Morning or afternoon?"

The clerk looked at him in surprise and asked, "What does it matter? It's twelve years from now."

The man responded, "The plumber's coming in the morning."

The Liberal Anonymous said...

It wasn't because of some presidential push that the internet exploded.

Where'd the Internet come from, anyway?

Tlaloc said...

"Again, it is shocking that you as an anarchist would look to Carter to push for alternative energy."

Until we can do away with the state I'd rather the state did more good than harm. It's a long shot but I can hope.



"It wasn't because of some presidential push that the internet exploded."

Dude...DARPA. If it wasn't for the state the internet wouldn't have been invented. Private individuals and companies had absolutely no reason to create an enormous free communications network. The government did.



"It wasn't because of a national policy that we started driving cars."

It was absolutely because of state spending that cars became so enmeshed in our lives. Without our enormous highway expenditures and other subsidies that favord cars and planes over rail America would be an entirely different place.

Hunter Baker said...

It was the private choices of consumers that created the need/demand for the highways.

Ditto with the internet. Without private iniative, it would still be this marginally-known underutilized communication infrastructure.

Tlaloc said...

"It was the private choices of consumers that created the need/demand for the highways."

Please. That's like saying it's the private choices of eggs that cause chickens to lay them. Without the highways there was no need for our bloated fleets of automobiles. Automotive companies have along history of manipulating public policy so as to make sure that cars were a necessity and not a choice of consumers. Look at the history of cable cars if you don't believe me. They were systematically wiped out by laws written by auto lobbyists and handed to the politicians in their pay.



"Ditto with the internet. Without private iniative, it would still be this marginally-known underutilized communication infrastructure."

You mean without private interest it might still be an incredibly useful network for scientists to communicate through devoid of spam, malware, and popup ads? Oh god no! Please please let commerce come and sully the internet so I can get fifty emails a day about ritalin and the naught housewives who want me to watch them.

Hallelujah!