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It seems to me that people make three big mistakes with oil: (a) they think it will run out soon, (b) they think oil must by necessity be terrible for the environment, and (c) they think that if it runs out that’s bad.

All of these ideas are absolutely true, for a particular state of technology. However, they are all false, for a different state of technology. The problem is people don’t talk about the context of technology which makes these statements true or false, or how to shape policies to encourage new technologies to be produced.

(a) Will Oil Run Out Soon?

For example, let’s consider the thought that oil will run out soon. What country has the most oil? Saudi Arabia. The next most oil? Iraq, right? But that’s only true with the current state of technology.

Did you know there’s more oil in India than in Iraq? It’s just harder (ie, less economical) with current technology to extract…

As the amount of oil available at a current state of technology shrinks, or as demand from third world countries grow, the price of oil goes up, and new technologies become more valuable to develop and deploy. Extracting oil from places it previously wasn’t economical now becomes worth it.

(b) How Bad Is Oil for the Environment?

On the question of the environmental impact of the oil industry, technology is really diminishing the environmental cost of extraction. Oil extraction doesn’t need large open pit mines. As technology advances, more advanced drill bits can be guided by better oil finding technologies at many more angles in the ground, making it possible to have much less surface disturbance for a given amount of underground extraction.

Technology can also have significant effects on improving the safety of transporting oil, particularly when laws exist to punish companies that don’t use more advanced technologies.

Technology is also improving the environmental effects of consumption, with hybrid engines. Clearly the environmental effects of consumption is a large current problem, particularly in light of the shift of the third world (China, India, particularly) to higher levels of oil consumption. An effective global regime of capturing the cost to the environment of such costs, and imposing those costs on the consumers of the oil, is the best method of encouraging the faster development of technologies that would make consumption of oil less a problem, or creates alternatives.

(c) What if the Oil Runs Out?

Which brings me to the last point. If technology creates alternative for oil (like hydrogen fuel cells, safer nuclear processes), then it’s very possible the economy can keep on advancing, when the oil runs dry. And if that’s the case, let’s look forward to when the oil runs dry.

(As with any of my posts, I recognize I could be really wrong. Feel free to tear me apart…)

Want to help people in the developing world who are trying to make something of themselves?

There is an organization called Kiva which has a really interesting idea. They help you lend a small amount of money to a rural African businesses. The borrowers repay the money that was lent to them, plus some interest. Kiva uses the interest to fund Kiva’s barebones operations. You get back the money you loaned in full after a number of months, without interest.

So in effect, you can use Kiva to take your money and loan it to a third world business. It doesn’t require much from you, you are likely to get your money back, and it can really change lives. Check out some of the businesses that have been funded here.