More Drilling in America Issue is Silly

[HappySqurriel]

NJ5 said:

@HappySqurriel: Nice post, but now there's an extra factor to take into account... the effects of the recession in oil demand and price. This could change the picture a lot, for example it could:

- make unconventional oil unprofitable
- stop drilling and development of new fields
- last but not the least, reduce investment in renewable sources of energy. If this happens, we'll get hammered by rising energy prices after the economy recovers from the recession, which may cause yet another recession. Not a pretty picture in any way, especially since there's no Central Bank for energy which can bail us out.

All in all, I have less and less faith in the system to adequately deal with energy issues. Let's hope the third item above doesn't happen...

 

The question is, what is the recession going to look like?

If we're heading into a time where unemployment is at 10% and inflation is at 10% people's wages are (certainly) not going to outpace inflation and people are going to be much more focused on saving money. It is quite possible that this will result in people buying far more inexpensive goods from China where there is (much) less emphasis on energy efficiency and the environment, which means that the reduction in energy use in North America and Europe will (probably) be outpaced by growth in energy use in China; in particular, if you take into consideration the transportation costs and the increased energy usage of the Chineese people.

All in all, this would mean that low energy prices (in American dollars) would be a short term problem because inflation will drive up the price of commodities (in nominal terms) and increased demand from developing nations would increase the price of commodities (in real terms).