Arnold Kling  

Oil Econ

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The Status of Amateur Sociolog... Ethics and IQ...

Anthony de Jasay writes,


Some miracle of an unexpected kind will very likely occur one day to make some renewable energy source economical, but until it does, responsible oil companies will make haste slowly toward biomass, solar or wind power beyond the research stage. They can hardly invest in anticipation of technological miracles, and to invest in existing technology is to waste two units of hydrocarbon energy to produce one unit of renewable—as is the case with hydrogen as a fuel and ethanol vegetable origin.

His main point, expressed later in the article, is that high oil prices, and the prospect of profits, drives oil exploration. The higher the price of oil, the more oil will be discovered.

Lynn Kiesling writes,


If you own a gas station and you have gasoline that you bought before Katrina at, say, $2 a gallon, now when you replace it you are going to have to pay more, probably $2.50 a gallon. So the price you charge now to sell the gas you have in storage is going to reflect your replacement cost, not what it cost you to buy that gallon in the first place.

Overall, in her blogger celebrity death match with John Irons on the topic of how to handle post-Katrina relief, Kiesling seems to have Irons on the defensive, for he writes,

I don't think someone can call themselves a true economist if the idea of spending the entire $200 billion on cash assistance hasn't crossed their mind!

Kiesling explains why this won't happen.

Sadly, such a proposal removes political power from officials of all types and at all levels, even as it removes the possibility of rent-seeking lobbying, so it is unlikely to sail through Congress!


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COMMENTS (2 to date)

I liked the way Lynne demolished his argument about the market manipulation of California electricity.

pat writes:

Get off the simplicity of the elasticity of oil prices in a crises situation. What about reinsurance, derivatives like CAT bonds. How are they engineered, values, prices, traded as options.

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