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Wednesday, May 19, 2004

Oil Price Stategery

An editorial in WSJ 5/19/2004 posits an argument that higher oil prices have an upside. Curiously the body of the article only advances a single point -- that higher prices will act as a spur to exploring newer currently cost-prohibitive extraction techniques such as oil sands and deep water drilling.

Unfortunately Holman Jenkins makes no mention on profit margins or net energy gains of the alternative approaches. We always need to rmind ourselves that conventional sources of oil have the nickname of Black Gold for a good reason. Hit the mother lode and be set for life. We may need to nickname oil from sand or shale as Black Saffron (lots of volume to sift through to obtain a return) and oil from the deep sea as Black Truffels (hit and miss searching).

The rest of the article bemoans scare tactics from the doomsayers and the absolute resolve that we will muddle through. The alternative scenario and predictable WSJ money quote "we might as well pass out the cyanide capsules now".


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