Wednesday, November 17, 2010

Free market won't deliver alternatives before oil runs out: study

A study by American researchers has concluded that oil will run out long before alternatives are ready:

The world will run out of oil around 100 years before replacement energy sources are available, if oil use and development of new fuels continue at the current pace, a US study warns.

Researchers at the University of California, Davis (UC-Davis) used the current share prices of oil companies and alternative energy companies to predict when replacement fuels will be ready to fill the gap left when oil runs dry.

And the study’s findings weren’t very good for the oil-hungry world.

If the world’s oil reserves were the 1.332 trillion barrels estimated in 2008 and oil consumption stood at 85.22 million barrels a day and growing year-y at 1.3 percent, oil would be depleted by 2041, says the study published online last week by Environmental Science and Technology.

But by plugging current stock market prices into a complex equation, UC-Davis engineering professor Debbie Niemeier and postdoctoral researcher Nataliya Malyshkina calculated that a viable alternative fuel to oil will not be available before the middle of next century.

From the Montreal Gazette. This is unsettling, but when you look at the details it turns out it may not be as bleak as it appears:

On the oil supply side, consumption could well decrease in future as more energy-saving measures are introduced and used by consumers, and new oil reserves could become available as extraction techniques improve.

On the alternative fuel side of the equation, the study did not look at nonprofits, government agencies and universities which are developing new fuels, because they are not quoted on the stock market.

And if governments announced new policy initiatives to promote alternative fuel development, share prices of alternative energy companies would rise, and the gap between the end of oil and the kick-in of alternative fuels would shrink.

So the Gazette's headline is more than a little misleading, but we shouldn't be surprised that they didn't use the title I did; it would be unseemly for a capitalist paper to be too obvious about the shortcomings of capitalism. That said, whether governments and nonprofits will step up to the plate is very much an open question. But there's no reason why it can't be done with sensible government policy.

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