> From: "Simon Worby" <simon@xxxxxxxxxxxx>
>
> An increasing oil price will lead to global recession which will
> in turn reduce the demand for oil.
>
> At the same time, as oil prices rise, so it becomes economic to extract
> oil from more difficult places, and thus the supply increased.
This is how classical economics views it -- as if it were an infinite
resource that only responds to price. Adam Smith's "invisible hand"
never met a resource that was finite.
In reality (unlike the unreality that economists operate within), a
point is reached where you expend more energy extracting a resource
than the resource supplies. Monetary economics has no model for this.
Serious depletion modelers refer to "EROEI" -- energy returned on
energy invested -- rather than dollars. When you look at it in those
terms, it becomes clear that a breakpoint will be reached, most say
within 30 years. But long before oil becomes energy-infeasible to
extract, there will be supply-demand overshoot, and wild price
gyrations, much as were seen in the recent Enron-induced California
energy crisis.
Try <http://www.DieOff.org> on for size. WARNING: it's not a pretty
sight. But you can continue down that river in Egypt if you prefer --
for a while, at least.
:::: ECONOMIST: a person who, upon encountering an auditorium
containing 40,000 destitute, unemployed people and Bill Gates, says,
“On average, I see a room full of millionaires!”
:::: Jan Steinman <http://www.Bytesmiths.com/Van>
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