Why we will never run out of oil.

A few years ago a friend offered the following theory: We will never run out of oil.

Ill admit that at first I argued the common idea that at the current rate of usage we would run out of oil in the year 2070 or so. It seemed that because there is a limited amount of oil in the world we would of course exhaust it at some point. And there’s where I had it all wrong. The key to understanding this is that dynamic systems do not remain constant and change based on the inputs to the system. In a very basic sense, so long as the price of oil is set in the open market, the magic of supply and demand economics will rule.

Imagine if the price of oil today - through some magical construct - all of a sudden was US$600/Barrel instead of US$60. Obviously gasoline prices would go up ten fold, and the cost of basically all products would greatly increase(because of increases in the cost of transportation, plastics, etc). If the system did not react, the whole system would collapse. But of course, this story has happened before.

The resource then was whale oil and it was used as fuel for lanterns until the mid 1850’s when the price spiked.

But what could prevent this natural supply/demand relationship from providing a viable alternative when it is needed? War for one throws off the supply/demand equation, by hugely increasing demand(which tends to remain persistent). Political instability can effect the supply side of the equation, as in the 1970’s two energy crises(which tend to spike rapidly but go away quickily, though they will cause those long lines).

Most likely, gasoline and oil will follow the natural progression to become useless again as a more efficient alternative becomes viable and cheaper. Its worth noting that in the 1850’s as oil was being refined to make karoscene, most of the by-products were tossed away as useless; gasoline was one of those useless by-products.

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