Sunday, March 27, 2005

Don't know much about geology...

Those concerned about energy shortages, especially shortages of oil and gas, tend to focus on geological factors that will ultimately limit what we can extract from the ground. Perhaps just as relevant are infrastructure issues. Years of abysmally low energy prices resulted in low investment in our energy infrastructure. That problem is coming home to roost. Key systems important to energy are being operated on the brink of their maximum including oil tankers, pipelines, and refineries. Houston energy investment banker Matt Simmons warned about the infrastructure problem in late 2000 and mentioned drilling rigs as well. But, of course, nobody listened.

My point is that in the short run the immediate problems we'll likely have with oil and gas shortages will result from infrastructure deficits. This will, however, present a good opportunity to talk about longer term constraints that can't be fixed with infrastructure. Maybe that's a blessing in disguise.

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