I would like to create more oil. Specifically, I’d like to create it up on my field – a gusher of light, sweet crude would be just the thing to fund my farming habit, plus provide some neat little tax benefits. Rural upstate New York has a sad lack of oil fields, and given its recession-prone economy, I think it would be just the place for some oil.
Fortunately, all I have to do, according to Forbes Magazine, is help along the development of new technologies that will extract all the oil that I’d like upstate New York to have. Because, of course as any dimwit knows, we don’t consume resources, we create them.
Please note that I’m not trying to state, as no economist is, that we do not live on a finite Earth. That there isn’t some limit to the number of copper atoms available to us, or that oil or natural gas are out there in truly unlimited quantities.
The argument is, rather, that while there are indeed such hard limits to availability they are so far away from our current situation that they’re irrelevant (for example, the hard limit for tellurium is 120 million tonnes and we use 125 tonnes a year). Thus an entirely different dynamic comes into play, one in which we humans create resources by developing the technologies that make them available to us.
Note that although Tim Worstall mentions peak oil, the resource he actually uses as an example is Tellurium, which, in fact, we aren’t depleting very fast because we don’t use much of it. Just like oil, right?
Worstall conveniently leaves off the numbers of expected production in the Deadwood field in the New York Times article by Cornucopian cheerleader Clifford Krauss he cites, which notes that Deadwood is producing an amazing 9,000 barrels a day – practically a miracle. Indeed the Times in its opening paragraphs continues supporting the myth that new technologies mean energy independence is right around the corner when it says,
...oil production is increasing rapidly in the United States even as gasoline consumption is falling.
High oil prices have indeed made it viable to extract a slightly larger trickle from old oil fields in the Permian Basin and elsewhere. But as anyone with even minimal scientific or mathematical literacy can see, in no way is this a “Turnaround in US Oil Production.” 9000 barrels a day is a bigger trickle – the US uses close to 20 MILLION barrels of oil a day.
Let’s scrap the misleading language of “creating more resources.” When was the last time you made a fish or some oil? Instead, let’s try and get a real sense of what high oil prices are driving us to do – digging around in our couch cushions for loose change.
Let’s say that I have some resources available to me in the form of money. For a long while, I have a good job and my life isn’t very expensive and there’s more than enough cash to go around without worrying about it. Then things change. My benefits cost more, prices go up, raises go down, I have a couple of children and my wife loses her job – all of a sudden, the money supply is awfully tight.
I also suddenly have a compelling reason to extract more monetary resources – and I do. I use technology (internet auctions) to sell off some of my Grandma’s dishes and my collection of Star Wars figurines. I cut my expenses back to the bone. I borrow from my sister-in-law. And when things get really tight, and I’m having trouble paying the bills, I think “Wait a minute, in all those years when I was flush, I never looked in the couch cushions – I bet tons of cash fell out of my pockets and I never even noticed.”
I lift one cushion, and lo and behold, there is $11.58 in loose change back there! And wow, there are three more cushions I’ve never even lifted up – hey, in the language of unproven reserves, I could have 70 or 80 bucks under each one! Wow, what a windfall!
Now is there anyone here that thinks that resorting to the couch change to pay your bills is really good sign for our hero? Or that the couch will yield infinitely ever-greater quantities of money? That our hero’s estimate of the riches of his couch is probably right? That getting a bit more money out of your couch means he’s rich?
Even the New York Times has to admit that those areas of Deadwood *could* have been drilled previously – they are just doing it faster now, and high oil prices make it economically viable. What they don’t do is put more oil in the ground – they don’t make resources, they simply make it worth our effort to do things in desperation we never would have bothered with before.
Our hero’s money woes don’t make him richer – what they do is force him to race around extracting every last bit of money he can from anything he didn’t have to care about when there was plenty. And in the end, the couch can only yield so much – when the last coins have been scraped out, the last salable things listed on Craigslist or Ebay, it is all over – now the inadequate salary is all that’s left. The crash is harder because there’s nothing left to draw on.
The desire to believe that oil is infinite (or nigh-infinite, a la the Tick’s nigh-invulnerability) is so great that it can lead to a great deal of bizarre silliness, including interpreting bad signs as good ones. Drill, baby, drill is proof of something – not America’s infinite resources, but America’s desperation.