Many Historical Economist consider the increase in whale oil cost and the shortages of whale oil as the first true energy crisis. At the time almost all interior lighting in the world was whale oil (sperm whale) based; there were no economical alternatives at the time. This whale oil burned cleanly and brightly and did not have a disagreeable odor.
Once the shortage and high prices of whale oil began, some enterprising company started producing Kerosene from COAL (yes you can produce a liquid fuel from a solid). Kerosene started to replace whale oil for interior lighting.
Other companies produced gas from coal (many of the older cities in the United States had a "Gas Works"conversion factory.
After Kerosene and coal gas started to be used, a major oil find in Pennsylvania in 1859 started the United States petroleum age. It because more economical to produce kerosene from oil then from coal so its use increased.
While I do not disagree with Hubbert and his bell curve of oil production, he does not take into account productivity improvements in extraction of oil; I think if these was put into his bell curve it would skew it to the left:
One of the first techniques that oil companies started using to increase the amount of oil that can be extracted from the ground were hydraulic fracturing and water flooding to drive more oil from the ground. Some other methods include CO2 injection, horizontal drilling, better computer 3 dimensional visualization technology. Maybe in the near future bacteria that will seperate oil from rocks will be injected down oil wells increasing the supplies evern more.
Those who forget history are doomed to repeat it!
In my arrogant opinion, oil may not continue to increase in price until all the oil in the world is used; it worries me greatly when I hear some people say that
"Its different this time".
The longer the price of energy (oil, natural gas, etc) stay high, the more exploration that will take place, increasing the supply.
The longer the price of energy stay high, the more alternative energy supplies will become economically viable.
The longer the price of energy stays high, the more people will begin to use less (the short term prices of energy are inelastic but longer term they become more elastic).
The longer the price of energy stays high, the less economic growth that there will be;
The longer the price of energy stays high, the greater the price of energy will fall; I would not want be an energy investor when this happens.
So before I would put too much money in energy stocks, I would look at the performance of energy stocks in the 1980's after a period of extended high prices during the 1970's.
Can anyone answer this question: How much of the price of oil being driven higher by speculation? Do some research; why is the price of finding a barrel of oil in the ground not rising as fast as the price of oil?
An aside to the energy crisis and new technology; LED lights are about to become a mainstream fixture in American Homes. These lights are already being used in traffic lights throughout the country; for every bulb replaced $75.00 dollars in electricity is saved a year (at 12.5 cents KWH). On four way traffic light has 12 bulbs; by switching this will save $900.00 dollars in electricity a year. 150,000 traffic lights throughout the country already have been replaced. They also save more energy if you add in that they do not need to be serviced and replaced as often (shipping of replacement bulbs, trucks driving to the lights to replace the bulbs, etc.). (You also are seeing this lights more and more in tractor trailers on the highways; the savings in this case are not for the energy but that they last longer reducing the amount of maintenance that needs to be done on these trailers.
I saw one estimate that if every light in the country was replaced by LED lights, an amount of energy equivalent to what the USA imports in oil could be saved. Technology is already working on the problem and coming up with economic solutions.
If energy prices stay high, this will hasten this change. LED lights are as bright as regular lights, use 80 to 90 percent less energy and last up to 100,000 hours (over 11 years). I am sure there are many more energy saving technologies on the way!
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