August 29, 2006

Can Iran convert regional influence into higher oil prices?

A reader writes:

Even as much as peak oil fear mongers try to paint a picture of shortages, there are other sources of gasoline and diesel fuel and so the Middle-East has limited control over the price of petroleum. We use so much oil because it is so cheap and we use so much Middle-East petroleum because it is cheaper than fuel from other sources. As the price of petroleum rises more and more of the Canadian tar sands become more profitable, Gas-To-Liquid is already profitable (much of this is in the Middle East but Russia could also start producing GTL) then at a little higher price coal to liquids becomes profitable then at a still higher price bitumen from Latin America, then at a higher price than that shale oil can be used. There is also deep water drilling.

On the other side, for a few hundred bucks cars can be made to get better mileage. Then at some price for fuel people will drive smaller cars. Hybrids are already better, quieter cars but at some point they become economical. The mileage that long hall trucks get has doubled since the 1970’s (from 3.5 mpg to about 7mpg) and the technology exists to double it again to about 14 mpg.

Why do we in the west not have so little confidence that our system will continue to leave countries like Iran in the dust? Why do not believe that they will continue to fall behind as long as they pay people to not work? This is even if the petroleum prices rise? Sharp petroleum price rises can make them some gains but Amedinejad got elected by promising to give more of the petroleum revenue to the people, not to the people who pump the petroleum but to all the people. I would not worry about him.

BTW the Middle-East petroleum exporting countries need the petroleum revenue much more than the west needs the petroleum. Don’t let the politicians convince you that it is otherwise. And I quote:

“The whole aim of practical politics is to keep the populace alarmed – and thus clamorous to be led to safety -- by menacing it with an endless series of hobgoblins, all of them imaginary." -- H.L. Mencken

Leave the Iranians alone and they continue to fall behind. If they ever get a nuclear weapon and use it they will all be dead, and if they don’t, they will change or continue to fall behind.

My published articles are archived at -- Steve Sailer

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