Sometimes it gets a bit tiring to think about the financial crisis, which looks a lot like intangible number shuffling to many people (me included sometimes). More important than the financial system are the fundamentals behind our civilization. We rely heavily on oil for transportation, manufacturing, survival (heating and food production) and maintenance of a lot of the infrastructure that our lives depend on. Therefore, for the foreseeable future, a worldwide economic recovery will necessarily result in an increase of oil consumption, even with newer fuel efficient cars (cars have been getting more efficient for a long time, but additional consumers cause higher consumption in the end).

Before the recession started, oil prices were rising astronomically, up to around $150 a barrel... with the recession lowering oil demand, it went back to as low as ~$30 per barrel, but it is now rising again, at ~$65 right now.

I fear that the sagging oil reserves, and increasingly more expensive exploration, drilling and extraction will dampen an economic recovery (whenever it starts). The world is not moving fast enough from oil to other energy sources.

I really hope that governments don't stop whatever they're doing to move away from oil, using low energy prices as an excuse to postpone the solutions. I'm unsure governments were doing enough as it stood before the recession, now they could be doing even less, threatening our future.

What does this have to do with government?

I hope gas gets to $10.00 a gallon. if that happens private industry will do more in 1 year then all the governments in the world could in 20.

There was a lot of talk that the sky high oil prices had more to do with speculation than they did supply and demand. Apparantly there was a stockpile of oil building up at the same time the prices were sky high.

I hope it doesn't, it would obliderate our economy. That being said, the government invests heavily into fuel sources that just don't work, and they stifle private industry coming up with decent solutions because the unefficiant fuel sources are heavily lobbied.

I was listening to the radio today, and they said that gas barrles dropped $2, so whats the problem?

I agree with you somewhat, but government is heavily involved in regulating, administrating, taxing and subsidizing many portions of the energy industry. A government which is sensitive to the way things are changing can smooth out the transition, while a government which is slow to respond can make an enormous challenge even more painful and daunting.

There are two big changes which governments should make that spring immediately to mind. First, this recession is a great time to spend big money to upgrade the power grid to a network sophisticated to enough to handle the micro-generation which is going to be the way of the future. Stimulate the economy while preparing a key part of our energy distribution system to handle the small producers who exploit localized sources of renewable energy which would be subject to interruption by bad weather or seasonal shifts. Aggregation will be essential to smoothing out such fluctuations in the power supply.

The second is to shift the funding, tax breaks and other inducements which go to non-renewables over to renewables (note: this would obviously raise the price of non-renewables). Obama doubled funding for renewables in his latest budget, and inducements for fossil energy producers were still almost ten times as high as those for renewables. And for the love of God, target this funding towards solutions that have actual potential. Don't court rural votes by subsizing biofuels from corn and other food crops. Target things like wind, solar, geothermal, and biofuels from waste.

The problem is that the drop is due to a short-term drop in demand, brought on by the recession. The long-term demand curve is going nowhere but up (especially with emerging economies like China and India industrializing as fast as they can while the needed energy is available), while the long-term supply curve is staying flat or sliding down. The result is that the long-term price of energy is going nowhere but way up, and those unprepared for a future of scarce, expensive energy are going to suffer. Especially if you're an energy importer.

The problem is the government has no control over how people invent solutions. This sounds great and all, but you can't predict the future (at least we never have).

This idea is akin to someone 15-20 years ago saying we should beef up the cellular networks so grocery stores and fast food restaurants can more efficiently accept checks.

Only to have checks surpassed by credit cards, making the whole thing pointless.

If gas got to the point where it was worth more for corporations to find alternatives, there is no doubt in my mind that they will incredibly fast.

What they come up with is anybodies guess (hell, it could be compressed air).

The supply curve would slope upwards in the long term to indicate a diminishing supply of a scarce resource meaning fewer barrels of oil would be supplied at any given price compared to the situation today.

In any case the long term supply curve would have to account for improvements in technology, alternative supplies such as oil from coal, the Canandian tar fields etc. It factors in oil which is currently uneconomical to extract at the current prices but would be economical to extract at higher prices hence total quantity supplied increases in the long term with rising prices.

Time is money. Part of the reason why these sources of energy are more expensive is because they take more time to exploit. More digging, more refining, more shipping. New projects take years of infrastructure development before one drop of oil flows, and in that time the old projects which produce more oil in less time run dry.

As those who talk about peak oil like to say, it's not just the size of the tank that matters, but also the size of the tap.

The marginal sources of fossil fuels and substitutes you describe might drag out the peak and slow the decline, but they aren't going to make the rate of oil production go much faster than it already is. And the price of energy still goes up and up, as demand grows and the energy invested to energy returned ratio gets closer to 1.

Here's part of a really excellent series called "The Crash Course" by Chris Martensen that deals with the idea of peak oil. I highly recommend the rest of the series for an interesting and digestible guide to some of the most serious challenges of the 21st century.

http://www.chrismartenson.com/