In this special interview with Oxford’s Oliver Inderwildi airing Thursday, Jim and his guest discuss the numerous dynamics of oil and economic growth—what Jim defines as the Petro Business Cycle—and how this relates to riots in Syria, whether non-conventional sources of oil can solve our energy needs, and a number of other factors.
Here, we provide a few excerpts from the interview.
First, on the major difference in costs between extracting easy-to-access oil and the non-conventional sources currently growing in supply:
If we could just drill a couple of holes into the ground and then get the easy light sweet crude out of it, that would actually happen. So, in the face of increasing demand we would just increase supply. The problem is that we are getting very tight with this easy oil and this additional capacity comes from many non-conventional resources—for instance, Canadian tar sands or deep water. Drilling a hole into the ground or converting a piece of Canada into a tar sands facility are two very different things. It costs you a lot of time and money to produce tar sands; moreover, you have environmental regulations that keep you from scaling up [production]. And the same goes for deep water oil. Drilling a hole in the Middle Eastern desert and getting one of those hi-tech platforms into the Gulf of Mexico are two very different things when we’re talking about time from initiation to production and also when we’re talking about capital costs. So, we’ve indeed hit a maximum and will definitely be able to increase the maximum but that will take a lot of time and a lot of money.
On energy alternatives:
For a [Boeing] 747 you will need [oil]. There’s no way around it. [With regards to vehicles], we could indeed move our fleet to more fuel efficient cars. We could go to electric, etc. I think even the electric car is not going to happen in the medium term. It’s going to be the long-term where it’s going to happen due to many many problems… Even if you use electricity as a fuel for transportation you still need electricity, which is often coupled to commodities like gas and coal as well, and these also cause emissions. So, essentially, what you are doing is shifting emissions from the tail pipe to the power plant….there’s a lot of things we can do but I don’t think there’s any silver bullet like electric transportation that will take over in the next ten years.
With regards to how shrinking supplies of oil are affecting certain regions of the globe:
The British newspaper, the Guardian, today has written a very good analysis about Syria; and they are essentially arguing that decreasing oil revenues in Syria—because they are essentially hitting a supply max—are leading to the riots in the country; because up to now, Assad could keep his people quiet with all the money he got in oil revenues, but that’s going down now. Again, in this part of the world—the exporter part of the world—they’re facing essentially the same problems.
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