Comment 28157

By A Smith (anonymous) | Posted January 12, 2009 at 21:19:25

Ryan, if oil prices are volatile in coming decades, this does not mean we will see a drying up of investment. All that will happen is that people take this into consideration when drawing up their investment plans. For example, we may see technologies that enable cars to use both oil and alternative fuels , thus reducing the need to forecast what fuel will be the most economical.

Furthermore, if spikes in oil become predictable, as you suggest they will be, then this will make it far easier for businesses to plan for these spikes and take corrective action before they reduce profit margins. Over time, businesses will find it no harder to adapt to fluctuating energy sources, then humans do with the coming of the seasons.

The fact that some people were caught off guard by this recent spike in inputs is not surprising. Human behaviour is always reactive, however, over time we do find ways of adapting. All it takes is a few smart people to lead the way in managing to overcome a problem and the rest of the world will take those lessons and apply them to their own situation.

In the meantime, allowing the government to increase the price of oil, in an attempt to conserve it, will only slow down the rate at which new and possibly cheaper fuels hit the market. If the market is allowed to work freely, we will either get new technologies quicker, or enjoy the benefits of cheap oil for a while to come. Either way, the consumer should be the one who gets to make the choice, not politicians.

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