Archive for March, 2008

Peak Oil

Monday, March 31st, 2008

“Peak oil” is the theory, first advanced by Shell Oil Company geologist M. King Hubbert in 1956, that predicted, through the use of a derivative of an oil production decline curve, that US oil production would reach a peak between 1965 and 1970 and then decline.  Hubbert’s forecast has so far proved to be correct. One could not completely rule out the potential discovery of a monster field that proves this forecast wrong, but it is generally conceded to be unlikely.

The theory is currently used to argue that world oil production will soon peak and then begin to decline.  An organization dedicated to the study of peak oil exists (APSO International), as do other individuals and organizations that have bought into the theory and have a presumed interest in defending it.

Perhaps it is unfortunate that the curve derived from Hubbert’s analysis looks much like a symmetrical statistical bell curve, thus giving it a credence that it otherwise might not deserve.  After all, it is not based upon oil prices, alternative energy consumption, technology, supply or demand except by coincidence.  While it is true that oil fields reach production peaks and decline over time and that the “easy” oil is extracted first, the experience of individual fields is highly variable.  There are geological, economic, and often even strategic and political reasons for the extraction rate of a particular field. Furthermore, the CIA and other forecasters were way off the mark in their forecasts of supply and demand in the 1970’s (I have copies of some publicly released CIA forecasts that were off the mark that I will be happy to provide for a nominal fee). Oil prices crashed and remained low for decades and it took many years for consumption to climb back to its peak in the 1970’s. 

That being said, fossil fuels are indeed finite resources, world production will eventually decline and some forecasters will accurately predict the timing, through skill perhaps, but probably blind luck. 

Thursday, March 6th, 2008

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Eminent domain

Thursday, March 6th, 2008

This is an interesting article. I would argue that the authors are a bit misguided. More on this later.

“The Taking of Prosperity? Kelo vs. New London and the Economics of Eminent Domain,” by Thomas A. Garrett and Paul Rothstein (http://stlouisfed.org/publications/re/2007/a/pages/prosperity.html)

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Thursday, March 6th, 2008

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