• The Ultimate Resource

      Climate blogger Roger Pielke Jr. points to a fascinating graphic from The Economist showing how oil companies have tripled the maximum depth for drilling offshore in the last 15 years:

      Pielke -- a moderate in the global warming debate and fan of alternative energy development -- sees this as a sign of what we can accomplish in alternative energy, if we just put our minds to it:

      If we can make such rapid progress in fossil fuel energy technologies, it is probably safe to conclude that should we choose to direct public resources into fossil alternatives, then we can make rapid progress there as well.

      This is not to suggest anything specific about the relative roles of the public and private sectors ... The remarkable graphic above indicates that technological change happens fast when we focus attention and other resources on challenges that once seemed impossible.

      The graphic is certainly remarkable, but primarily for the reasons that Pielke does not suggest. Oil companies did not invest heavily in new drilling technology because we "[chose] to direct public resources" into oil exploration. This leap in technological capacity did not occur because of any grand presidential initiative to work together towards some common goal. Oil companies invested heavily in this technology because there was the promise of profit if they somehow found away to extract more oil to sell.

      That's it. That's how the profit incentive works. When your profits depend on government subsidies, as wind, solar and nuclear power do, you won't see this kind of innovation.

      This is what the late economist Julian Simon referred to as our ultimate resource: human ingenuity. When a resource becomes scarce, we are driven by the profit-incentive to discover more of that resource, or ways to use less of it -- or to discover an entirely different kind of resource altogether. But for the human mind, oil is just a dirty liquid stuck in the ground.

      When profits depend on subsidies, you'll see innovation of a different sort, as human ingenuity is focused on discovering new ways to secure federal favors and subsidies, rather than technological progress.

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