Sunny Days in Heaven
Spiritual/Political/Philosophical Blog on the Nature of Truth and Falsehood and Heaven

Tuesday, June 28, 2005  

Elementary, my dear Watson.

Perhaps the reason that oil is now about $60 a barrel is that even though the Saudis promise to pump more, they can't do it because their fields don't have more to pump out.

This article in WSJ online asks some pertinent questions. It would be good news for Canada and South America with their huge reserves of shale oil.

If the Saudis nor others can produce more oil and lower the price, then the shale oil fields will go profitably into production. With greater production there and economies of scale, the price could come down after we have absorbed the present shock of higher energy costs.

Of course, it would be quite marvelous if the Saudis cannot increase production but keep diminishing as it gets harder to extract.

One has to wonder if Kuwait, Iran, and Iraq have similar problems with reserves, but since Iraq does not seem to have tapped their fields as extensively as the other Arab states have, they may have more time in which to deplete them.

It's funny that the first Islamic jihad was fueled on easy money which came from a tribute tax on the areas they conquored, and which they used to create the fabled cities of Damascas and Baghdad among others. That money sent them to Asia, Spain, and Europe, but eventually Islam destroyed its economy with its religion; and now, the Arabs who have been able to fuel a new jihad with oil money may soon suffer the same fate when the well runs dry.

The Arabs have no other industry but oil. Even at the height of their wealth, they never prepared for a broader economy or skills. And the Saudi "princes" have sucked the kingdom dry of money to invest in its people.

posted by Mark Butterworth | 3:42 PM |