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Comment by roc | Hacker News Reader

It's pretty well accepted that oil will never physically run out.

Long before even extraction/refining costs make remaining oil infeasibly expensive, supply/demand will send the price spiking to uneconomical levels as soon as oil production so much as slows down relative to growth in world-wide demand.

That's what the US increase in extraction is primarily about: trying to avoid price shocks between now and when the economy is, or can be, substantially run on natural gas and renewables as global demand outstrips supply. And even then, all we'll likely have done is smoothed the increase in price over the next 20 years.

Similarly, the increased CAFE standards are much more about lowering American dependence on oil, fleet-wide, than environmental concerns.

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The problem with oil, is that it is an inelastic commodity. During the oil shocks of the 70's prices had to rise by 400% before demand started to fall.

Also the notion of a country being energy independent when relying upon oil is a silly one. In the global economy, we want everyone to have relatively cheap energy, if not the global standard of living will fall.

It's inelastic in the short term, because there are limits to what people can do to change: they aren't necessarily able to immediately dump their existing car and trade up; they still have to commute to work; cargo still has to be transported to its destination; factories will not replace their inefficient equipment overnight. Costs go up but behavior doesn't change, so an increase in energy costs just replaces spending on other goods, hurting the rest of the economy.

Over the longer run, though, if prices have risen significantly and permanently, and that coincides with a point where a consumer decides they need to replace their car, then oil consumption does start becoming more elastic: the consumer is more likely to choose the more fuel efficient vehicle. We've seen some of this in the rise in sales of small vehicles versus trucks and SUVs lately.

This is where building a long-term steady upward price trend is important, versus short-term price shocks, since the former allows the economy to react appropriately by increasing efficiency.

> "Also the notion of a country being energy independent when relying upon oil is a silly one."

Sure. But there's no path to energy independence that doesn't include either: A.) huge economic shocks or B.) extending use of fossil fuels during the transition.

Increasing efficiency increases consumption , as more activities become economical to more people. ("Sunday drives", commuting to work, etc)

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