A question from Yahoo! Answers:
Doesnt it make economic sense to start finding alternatives to using crude oil for the worlds energy needs?
If the economic theory is true that we never ever run out of natural resources, we simply find cheaper ways for extracting/producing them or find cheaper alternatives; after all, the prices of all commodities have been falling over the past 100 years(not sure if this applies to crude oil), doesnt it make more economic sense now to start finding alternatives to using oil?
The alternatives have been identified long ago. The reason they remained alternatives and did not become mainstream is very simple: cost. There are several “magical” thresholds in the pyramid of alternatives.
If oil consistently costs above $40 a barrel, tar sands, sugar-cane ethanol, and synthetic gasoline (derived from either natural gas or coal) become viable alternatives. At $50 a barrel, shales become viable. At $60, corn ethanol kicks in. And, finally, at $80, biodiesel becomes profitable.
The key word, however, is CONSISTENTLY. The industry remembers very well what happened to alternative fuels back in the 1980s. A short period of exuberance was followed by a protracted decline when oil prices fell.
There is also heavy oil (whose supplies exceed those of conventional oil), which until very recently was thought to be unrecoverable. Now Chevron is developing a steam injection technology that is thought to be able to recover up to 40% of heavy oil.