Some interesting discussions
A few points I might add:
Total oil reserves are a big question mark. As any two "experts" and you'll get three different answers. I've heard estimates of 40 years, 20 years and even one "theory" that there is an unexhaustable supply of oil that constantly replinishes itself. I would agree with those who say that 20-60 years from now, even with new scientific advances in drilling and extraction, we will begin to see some significant price increases as all of the easy oil is used up. Then, we'll see motivation for a change in fuel sources at least in the transportation sector. Hopefully, as Skuzzy noted, there will be time for a more orderly transition to the next phase.
I have to agree with Funked and Rip's sentiments about government involvement/management/regulation -- but, there are some interesting factors to consider in the current unregulated market.
We currently have a refinery capacity deficiency, which is why we have such a degree of price volitility today. In the summer time our domestic refineries are running at about 98 percent to meet demand, so any disruption at a refinery or pipeline means potential regional shortages which lead to wholesale price adjustments like you would see in any commidities market (the last thing a retailer wants is dry tanks, and the supply chain adjusts price accordingly when fuel is scare or buyers scared
). Price can and will jump 25-cents per gallon because suddenly that is what the retailer finds his/her supply going for that morning.
Now, refining is not big oil. In fact, the majors are anxious to sell of their refining operations to independent operators when they can because it is a more risky and less profitable area of their operations.
We had refining overcapacity more than a decade ago, which was less profitable (but enjoyable to motorists) and the industry adjusted this in some very free-market ways. There is no incentive for the industry to promote overcapacity (they will blame it on environmental/construction issues which is only half the story) since they make less money with overcapacity and make more money with the market as it exists today. Similarly, from the production end, oil companies shut down viable wells each year that cannot be restarted, because the oil is unecomonical on the market at today's prices.
The Bush oil policy has a lot of corporate welfare for oil companies aimed at making refining more profitable and keeping non-viable oil wells in production. Although I hate corporate welfare (see it as far more of an issue than the "traditional" welfare people get riled up about), I'm hard pressed to see an incentive for the oil companies to take care of this problem on their own without this welfare incentive or some form of regulation. Given the role oil plays as a non-optional commodity in our way of life, regulation is probably more justified than it might be normally (and I dislike ham-fisted regulation about as much as I dislike corporate welfare). Perhaps the answer is the threat of regulation with a few incentives to help them look past the shareholders a bit and concentrate more on our needs as drivers.
As for fuel cells, the problem lies with the infrastructure and where you put the hydrogen reactor. In the car you have weight cost and complexity, but you can use the existing gasoline infrastructure pretty well. If you site the reactors at a traditional gas stations or local/regional hubs, my understanding is that you need some combination (depending upon approach) of compressed liquid hydrogen pipelines, high-pressure underground/above ground storage tanks, tanker trucks and fuel tanks in cars which is even a bit more disturbing than driving around with a tank of gasoline in the back. This has been done with LNG, etc. but I don't beleive on anywhere the scale or with complexity of distribution channel required for transportaion use. All these issues can be overcome, but not easily or economically in the near future.
The hybrid vehicles I mentioned earlier are a good approach that is/can be fielded today, but would likely take some regulation to be appealing to both consumers (with our cheap gas) and automakers (with consumers liking to use small trucks to carry a single passenger on a 70-mile daily commute). I think we've already proven a willingness in the USA to pay for gas up to and beyond $2.00 a gallon and I've head it would need to reach $4.00 or so before people really began to change their driving and purchasing patterns in a significant way.
Charon
