154 PETROLEUM TECHNOLOGY, ECONOMICS, AND POLITICS
prices may not increase smoothly because empirical evidence
indicates that producers respond differently to price increases
than they do to price decreases (Kaufmann and Cleveland, 2001).
Significant deviation from basic economic theory undermines the
de facto policy for managing the depletion of conventional oil supplies — a belief that the competitive market will generate a smooth
transition from oil.
5.4.3 Energy and the Political Costs of Oil
The future of oil supplies is normally analyzed in economic terms.
But, the economic terms are likely to be dependent on other costs.
In earlier work, we summarized the energy costs of obtaining US oil
and other energy resources and found, in general, that the energy
returned on energy invested (EROI) tended to decline over time
for all energy resources examined. This includes the energy cost of
obtaining oil by trading energy-requiring goods and services for
energy itself (Cleveland et al, 1984). For example, the EROI of oil in
the US has decreased from a value of at least 100 to 1 for oil discoveries in the 1930s, to about 17 to 1 today for oil and gas extraction.
Similar types of estimates for other parts of the world are unknown,
although heavy oil in Venezuela and tar sand bitumen in Alberta
require a very large part of the energy produced as well as substantial supplies of hydrogen from natural gas to make the oil fluid. The
very low economic cost of finding or producing new oil supplies
in the Arabian Peninsula implies that it has a very high energyreturned-on-energy-invested value, which in turn supports the
probability that productivity will be concentrated there in future
decades. Alternative liquid fuels such as ethanol from corn have a
very low energy-returned-on-energy-invested. n energy-returned -
on-energy-invested value much greater than 1 to 1 is needed to run
a society, because energy is also required to make the machines that
use the energy, feed, house, train, and provide health care for necessary workers.
The means by which the various factors will play out over the
next few decades is extremely important but also difficult to predict. Most of the remaining oil reserves are in Southern Russia, the
Middle East, North Arica, and West Africa where stable governments are not necessarily the order of the day.
There will continue to be high risks of international and national
terrorism, overthrow of existing governments and deliberate supply
prices may not increase smoothly because empirical evidence
indicates that producers respond differently to price increases
than they do to price decreases (Kaufmann and Cleveland, 2001).
Significant deviation from basic economic theory undermines the
de facto policy for managing the depletion of conventional oil supplies — a belief that the competitive market will generate a smooth
transition from oil.
5.4.3 Energy and the Political Costs of Oil
The future of oil supplies is normally analyzed in economic terms.
But, the economic terms are likely to be dependent on other costs.
In earlier work, we summarized the energy costs of obtaining US oil
and other energy resources and found, in general, that the energy
returned on energy invested (EROI) tended to decline over time
for all energy resources examined. This includes the energy cost of
obtaining oil by trading energy-requiring goods and services for
energy itself (Cleveland et al, 1984). For example, the EROI of oil in
the US has decreased from a value of at least 100 to 1 for oil discoveries in the 1930s, to about 17 to 1 today for oil and gas extraction.
Similar types of estimates for other parts of the world are unknown,
although heavy oil in Venezuela and tar sand bitumen in Alberta
require a very large part of the energy produced as well as substantial supplies of hydrogen from natural gas to make the oil fluid. The
very low economic cost of finding or producing new oil supplies
in the Arabian Peninsula implies that it has a very high energyreturned-on-energy-invested value, which in turn supports the
probability that productivity will be concentrated there in future
decades. Alternative liquid fuels such as ethanol from corn have a
very low energy-returned-on-energy-invested. n energy-returned -
on-energy-invested value much greater than 1 to 1 is needed to run
a society, because energy is also required to make the machines that
use the energy, feed, house, train, and provide health care for necessary workers.
The means by which the various factors will play out over the
next few decades is extremely important but also difficult to predict. Most of the remaining oil reserves are in Southern Russia, the
Middle East, North Arica, and West Africa where stable governments are not necessarily the order of the day.
There will continue to be high risks of international and national
terrorism, overthrow of existing governments and deliberate supply