Forget $87 Billion, how about $2.2 Trillion?

In line with our recent discussions on oil, energy, geopolitics.

Well worth the time to read.

http://www.economist.com/opinion/displaystory.cfm?story_id!55405

"In a forthcoming study, the International Energy Agency (IEA), a
quasi-governmental group of oil-consuming nations, estimates that
the oil industry needs to invest as much as $2.2 trillion over the
next 30 years in exploration and production. Much has been made
about the soon-to-soar energy needs of fast-developing giants like
China and India, but only a quarter of that $2.2 trillion is
required to meet growth in oil demand; the rest is needed, the
boffins say, merely to replace production that is already in decline
or soon to decline."

30 years is an appropriate time-frame for orbital development. $2.2
trillion shows that capital is available, even in gargantuan
proportions, if the business case can be made. In this light
consider this paper from the ESA concerning SPS:

"The paper presents a strategic approach to assess the importance of
space solar power for securing the increasing energy demand of
Europe. Past studies have demonstrated the technical feasibility of
Solar Power Satellites (SPS). The significant technical and
conceptual progress made since the 1979 SPS reference concept
lowered the total cost, the cost-to-first-power, as well as the
requried infrastructure. The resulting expected electricity
production costs reach a level comparable to existing terrestrial
power plants."

http://www.idest-paris.org/sps.pdf

For those SPS skeptics, I find the above to be a nice synopsis of
the potential of SPS. The research didn't stop back in the 1970s.
There is a wealth of technical data that exists that validates the
concept. What SPS suffers from is that there is no community of
vested interests that would benefit from its deployment, other than
national space agencies, and we all know how high they rank in
Washington, Tokyo and Brussels.

Back to the "economist" article.

"In Europe and Japan, governments adopted higher energy taxes on the
grounds that the environmental and security "externalities" involved
in using oil were not reflected in the market price. In America,
politicians decided to use regulation rather than price to encourage
efficiency."

Americans, being the largest per capita consumers of oil, have been
spoiled by low prices that don't account for the environmental and
security "externalities." Of course, those costs are still borne by
the society, but in the form of redistributive tax policies, thus
consumers can't make rational decisions on oil use for want of
accurate pricing information.

Low gasoline prices have often been a bragging right in America vis
a vis Europe and Japan. Granted, the higher prices there are really
just a tax-grab that aren't used to mitigate against the
environmental and security "externalities", nevertheless, the higher
price of gas does give consumers the price information they need to
make informed economic decisions.

I tend to think that gas prices are a third rail in American
politics. Leave the rabble with cheap gas for their SUVs and you'll
survive; pull a Walter Mondale and say you'll raise taxes on gas to
account for externalities, and you'll never be elected to institute
your pledge. Rather, we'll see further NECESSARY foreign policy
actions and few will make the connections. Yet, don't take your eye
off of the budget - you're paying for it one way or the other.

Back to the "economist" article.

"As a result, America has started to return to its gas-guzzling ways
of the past. The average fuel efficiency of American vehicles has
been near a 20-year low for the past two years."

And people love those SUVs. They know we're not growing more oil on
trees, yet their decisions are based on the cheap price of gas. You
don't see so many SUVs in Italy. I wonder why?

Back to the "economist" article.

"Alas, the stability of the Saudi regime is far from guaranteed. The
pro-American, ruling family is deeply unpopular with fundamentalists
in the country, and there is no clear successor to the current de
facto ruler, Crown Prince Abdullah. As even the Saudis now
grudgingly concede, home-grown terrorists regularly carry out
attacks in the country. And if a radical like the Saudi-born Osama
bin Laden were ever to topple the royal family, the world could well
be hit by another energy shock."

"The conventional view has held that economic reason and American
military might would quickly put an end to any such trouble. It is
true that any rational rebel, however anti-American, would still
sell oil to the world market in order to feed his people. A wilfully
irrational zealot, however, might very well shut down the Saudi
spigots in an effort to hurt the West."

Let's mull that over for a while. Of course, the irrational zealot
won't care about the economic harm to his own citizens for that will
be blamed on a Zionist plot from the West and will only drive more
angry youth into jihad against the West.

My analysis continues from here in pretty much the same fashion as
my earlier post. The main point I wanted to bring out was the vast
sum of capital that will be invested in searching for, developing,
and transporting oil to market in the coming years.

TangoMan