Last of four.
PEOPLE AND ENERGY – MOVING AWAY FROM FOSSIL FUELS
A naïve economic analysis should suggest that the real price of oil should rise over time as the most easily extractable reserves are used up. As the price of oil increases, then a point will be reached when renewable energy sources become cheaper than oil, and, by the magic of the market, we transition into a shining green future.
However, over the last fifty years, crude oil prices have been affected more by supply shocks than on the supposedly increasing marginal cost of production. It is not clear that the cost of production is rising at all. It may well be, as some commentators suggest, that our technical ability to find and extract oil is growing faster than our reserves are being exhausted. We can profitably extract oil from deeper, smaller, weaker and more difficult oil fields than ever before. Once we have extracted all the feasible crude oil reserves, there are many more sources of fossil fuels: oil shales, tar sands, methane ices beneath the ocean, each source potentially larger than crude oil. Currently they are too expensive, but their production costs have been falling and continue to fall as we learn more about using them.
Renewables too are coming down in cost. The price of wind power has dropped by 90% over the last twenty years and is still decreasing. However, the money being spent on research into making renewables cheaper is still tiny compared with the money being spent on research into making fossil fuels cheaper.
It is entirely possible that energy from renewable sources will always be more expensive to produce than energy from fossil fuels. In a responsible world, excess carbon dioxide emissions from burning fossil fuels would be the limiting factor on fossil-fuel use, rather than the cost of production. We are beginning this, with carbon taxes slowly being developed in many countries around the world including New Zealand. However, despite the rigorous scientific evidence available to justify this change, the change is happening very slowly.
To summarise, we like our oil, and its not going to run out, not for a very long time indeed. So we’re going to keep on burning it until we’re so far beyond screwed that it’ll be bleedin obvious to even the Texans. And then the sky will fall and the sea will rise, our houses will be flooded or washed away. But don’t worry. By that point, our SUV’s will be larger than houses, so we’ll just live in them instead.