February 03, 2004

Ignoring Ceiling Prices

You can see some of the most uneducated analysis arising from the simplest mistakes. The geopolitical effects of resource prediction cannot be done properly without analyzing economic ceiling prices. A sad case in point is this analysis over the coming US/China war over oil.

The truth is that the entire article depends on the idea that there are no major new supplies of oil available and that the nations of the world, especially superpower US and the rising economic giant PRC, are on a collision course due to that competition. It is a patently false analysis because it completely ignores huge energy deposits that become available at higher prices, potential competition that constrains ME nations in their capability to raise prices.

The competition between the US and the PRC over influence will exist. It is unlikely to produce war as long as the PRC is content to purchase its energy and not invade nations to steal it away. The idea that it is necessary for the US to use its geopolitical muscle in order for the PRC to behave rationally and invest in a diversified energy stream is both patronizing to the PRC and would be a foolish waste of US resources.

The US, if it needs to make an effort at all, needs to work towards making the price of abundant alternative energy systems fall below the market price of oil and have the oil age end at a relatively low energy price. Which alternatives these will be is unclear but striving mightily so that only we have to kowtow to dysfunctional arab oil principalities is not a positive outcome for the United States.

Posted by TMLutas at February 3, 2004 10:22 AM