I agree. People forget the melt down aspect of usage growth outpacing production and reserves.

I doubt we will have the time to react in the case of the next major shock, because we continue to deny the present one. This latest price rise caught the world with their pants firmly planted upon their ankles and the rose tinted glasses in place. The lead times for a lot of this investment is substantial. The investments are gigantic even for the largest multinationals and the projects won't happen overnight. They won't do it until the situation exists long enough that they are certain it isn't going away stranding them with an uber-expensive albatross. I'm not pointing fingers, it is the nature of large corporations to be hesitant to take on this level of risk.

This price rise has been mild. It is not the one I'm concerned about. We still have the pumping capacity to keep up at the moment...just. Contrary to the rosey scenarios, fields are playing out. Plants and refineries shut down when nearby fields reach that point (personal experience.) I don't trust rosy industry projections of reserves.

There is little elasticity to demand: look at Enron's manipulation of western energy pricing for a very clear, very recent example of an energy price shock. (California has historically had an irresponsible "not in my backyard approach" to energy production, so I think this also illustrates the danger of that shortsighted impractical view; but they were 100% right when they pointed their fingers at Ken Lay. And it wasn't just California that got the shaft--neighbors, and every investor in the country got burned, whether they realize it or not.)

People talk about refineries...why? Refineries are not the issue. Refining capacity can be added if needed. We aren't building new ones, we are expanding old ones. There is a lot more at work here than gasoline pricing. Unfortunately, the only thing most people in their SUV's seem to notice is the price at the pump. That's not forward thinking...that is driving forward while concentrating on the view in the rearview mirror.

Coal gasification has some ability to replace oil for many chemical feedstocks. But it takes a major restructuring to replace the current supply chain with coal gas. It is all so interconnected, and coal gas isn't a direct plug in to replace oil. It will give you a new spectrum of material for downstream products, that you then have to convert into what you really want. This means building whole chains of new facilities to use the various products. There is no single magic bullet (even working fusion.)

If anyone wants an indication of how bad things can get when you exhaust a natural resource and completely alter your environment at the same time, study Easter Island. It suffered a man made ecological apocalypse. While I don't see the end of the age of oil as a global apocalypse, I don't feel very comfortable with the position my own country is setting itself up for as the world's largest energy user. We can certainly forget about garnering any sympathy if we end up in the ditch as the result of our own excesses.

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WE denied Germany oil in WW2 and they made their own just as we invented synthetic rubber. Again I have no doubt that the things to relace fossil fuels are already on the boards. Theres just no need for them yet. To much is based on oil to change it now. They could have been getting 80 mpg long ago if they really wanted to. Nessicty is the mother of invention. Or is that Frank Zappas band?

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Look what happened to Germany... they lost the biggest tank battle in WWII because of fuel shortages, > 250k men in Stalingrad trying to get to the oil fields and > 250k men captured in North Africa from lack of oil.

Japan went to war so it could capture the oil fields in south east asia.

Synthetic oil cannot be that good given those efforts.

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Having actually looked at some of this technology I can assure you it is a bigger problem than you think. South Africa probably has the most experience with it at the moment.

Too much is indeed based on oil at present. That IS the problem. You can't just plug in the new tech. The examples you give are ones where governments had to intervene and subsizide heavily as military efforts to patch problems. (Weren't gasoline and tires rationed in the US during the war--and we were far less effected than others." Not preparing for the future is foolhardy, but, hey, investing for the future reduces today's profits. The change to very short time horizons in the corporate world is proving rather destructive over the long haul. It creates a vicious cycle that is hard to break. It wasn't this way when I entered industry, but it has accelerated over the past seven years. I have a hard time finding places to invest my own money. Corporate R&D pipelines are now empty, and the longterm returns look poor.

The basic corporate attitude is much as you have stated, apathetic complacency. Until they have a gun pointed at their head or a 100% sure bet, they will do nothing. Their track record over the past few years has been quite poor with regards to making such predictions. It is easier to stay comfortable in the pack and not invest in the future, it doesn't carry risk of short term failure or reduce short term profits. That is why this sort of thing needs to be driven by government through various incentives and/or research--just like other major national/international initiatives have been. And when incentives are done intelligently, the free market system can produce great results. Doing nothing is the one sure path to failure.

In the U.S. right now, corporate research is dying. Why? Quite a few of us understand what sort of things we will need in the next 10 or 20 years, but there doesn't seem to be much desire to invest time and effort to make them feasible. Instead we face complacency and short term profit taking.

Quoting from the original post: "governments tend to feel limited in their ability to introduce new policies for reducing emissions because they fear business resistance, while companies are unable to take their investments in low-carbon solutions to scale because of lack of long-term policies." That sums up the vicious cycle quite nicely. The do nothings are winning the corporate war, and they are doing it in govt as well. I always found it funny that my own company would inevitably support the lobbying efforts of others in their industry to resist any regulatory changes. Why did I think that? Because we did such a good job at complying that it would have given us an advantage if rules were tightened. It is the sleazeballs/fly by nights/and dying dinosaurs that have the most to gain by keeping things the same. Talk about short sighted...

During a strategy session, I was listening to some of my company's execs wail about proposed regulations and the inevitable phase out of some products for various reasons. I asked them this simple question, "If we can anticipate the change, and use our R&D to develop a product that fits the new requirements, don't we walk away winners?" I saw it as an opportunity to embrace the changes and thereby destroy the competition with new high margin products. They saw it as only the loss of their mature low margin products... No leadership coming from that group.

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I thought we spent a good bit of time talking about new technologies. The technology to being harvesting our vast reserves of shale oil for example. It's not like there are no alternatives to oil out there right now- most diesel engines could currently be powered by vegetable oil with little or no modification, then there's hydrogen, ethanol, ect. Point being, there are alternatives out there- but there is currently little need or demand for such things.

I find myself having a tough time agreeing with any of these 'the sky is falling' predictions about oil supplies. It's not like we'll wake up one morning and be out of oil leaving us to scurry frantically for alternatives. Supply, demand, and market forces will be what ultimately moves people away from oil.

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