Saturday, January 5, 2008

PostHeaderIcon $100+ / BBL

Some musings on the current $100/BBL oil world...

I think that, too often, we tend to be unmindful of history when looking at things that are part of our everyday lives -- things that we take for granted today.

Few people give any thought to how it has come to be that we can easily, safely and relatively cheaply fill our personal cars with gas.

Imagine if you had to engineer a delivery system (from scratch) that could take the process of finding, transporting and processing a natural resource so that it basically is intertwined into all our society's energy and chemical consumption needs.

It's taken more than a century of development -- and change -- to get us to the point where we expect to be able to take a toxic, flameable and volatile substance and put it into the tanks of our personal vehicles... all the while thinking nothing of it (other than to complain about the price).

The complexity of having this global delivery system is only matched by the demand for the commodity in question. That's one of the reasons why $100/bbl is not an anomaly -- $20/BBL (see ten years ago) was.

The complexity of the system -- including the dependencies with the transportation and other energy systems -- is part of the reason why the "free" market cannot quickly move towards alternatives.

That's why a governmental solution is called for -- but bearing in mind the "law of unintended consequences", a governmental solution should not focus on a specific technology but on fostering an environment where Schumpeter's "creative destruction" can take root.

We also need to understand and be ready for the real pain that is coming over this... pain that previous generations masked with ideological conflicts and global wars.


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