The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: Wharf Rat who wrote (36269)	7/27/2005 12:46:31 PM
From: GraceZ	Read Replies (4) of 306849

One can expect Hubbert to be heralded as a genius at every short term counter trend rally even while the over-whelming evidence is that the real cost of extracting energy resources has been dropping for as long as there have been energy resources. Known resources are like food in your pantry, you don't fill them up past an appropriate point that makes economic sense. The real cost to find, develop and lift oil dropped so much faster in foreign countries than it did in the US so foreign sources had and still have a strong comparative advantage. US is rich and rich people do not like to look at offshore oil rigs or have a refinery anywhere near them. Capital to invest in energy in the US was more efficiently deployed elsewhere so, of course, known reserves peaked in the US. Not for the material technical reasons Hubbert cites or because of diminishing returns, but for purely economic reasons. No point in searching here for what is so cheaply available elsewhere. Capital has a cost over time. You wouldn't tie up capital in a lifetime supply of food unless you are expecting food to be a great deal more expensive in the future. Most only put as much in their pantry as they would need within a reasonable future period given that the store is down the street. The history of resources can be summed up in the following paragraph written by Julian Simon: More people, and increased income, cause resources to become more scarce in the short run. Heightened scarcity causes prices to rise. The higher prices present opportunity and prompt inventors and entrepreneurs to search for solutions. Many fail in the search, at a cost to themselves. But in a free society, solutions are eventually found. And in the long run the new developments leave us better off than if the problems had not arisen. That is, prices eventually become lower than before the increased scarcity occurred.

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