Take a look at all the “junk” you have lying around in your garage, basement, attic, closet, etc. Are you doing anything with it? Are you trying to sell it? Have you ever had a yard sale and realized that all that old junk isn’t really worth that much? That maybe for the meager amount of money you earned you would have been better off enjoying your weekend as opposed to organizing and managing the sale? Well, you’re not alone; unless you have enough items of value, selling your old belongings may not be worth your time and effort.
What if all that old stuff you no longer have a need for suddenly becomes very valuable, and you could actually make a great deal of money by selling it? Not only would holding a yard sale be worth your time and effort, but you may even put in extra effort to collect more old things to sell to increase your potential profit. You may even spend some of your own money in getting all this together so that you’ll have more to sell and could make even more money.
That’s a lot like what’s going on in the oil market. In recent years, the price per barrel of oil has skyrocketed and now, we’re looking at extracting and selling oil that once wasn’t worth our time or effort. Arctic drilling, deep-sea drilling, tar sands, shale oil, etc., are all coming online in greater numbers because they are now worth the time, effort and expense to bring them to market. If the price of oil keeps rising, who knows what other oil, or oil-like reserves, may be extracted.
This whole notion may run contrary to what most people believe. On a simple supply and demand curve, usually if the price of a good goes up, demand goes down. However, as the price goes up, supply also goes up, much like in the illustration below. And since we all still need to drive, for the most part, the demand curve for oil is relatively inelastic, meaning prices don’t affect our demand that much (sorry for reverting to all these “Econ 101” terms).
In short, the higher the cost of oil, the more oil there is. After all, if you had a product that kept selling even after you tripled or quadrupled the price, wouldn’t you want to try and sell more of it?
This doesn’t mean that for oil consumers (i.e., the average driver) hope is lost. Just as oil became more valuable, more of it became available for sale, the same could happen for other fuels.
Take, for example, “gas flaring” in oil wells, a particularly acute problem in North Dakota. A common byproduct of oil drilling is that gas, embedded deep in the ground alongside the oil we extract, also rises to the surface. This gas is often flared because harnessing it and bringing it to market may not yield a profit for oil companies since there is less demand and less value for it. Essentially, we’re wasting a non-renewable resource because it’s not profitable.
So what if we were able to give it value? What if we made it so that our cars could have the option to use that wasted gas? One way to do this would be to convert that flared gas into methanol. This would have the many benefits of giving us a choice of what to fuel our cars with (back to our “Econ 101” thinking, choice means more competition which helps drive down prices), not wasting a finite resource, and reducing emissions including significantly reduced drill-site emissions of methane, which is a much more potent greenhouse gas than CO2.
Why should we give so much value to oil when we have the proven technology to use other fuels that we are currently wasting? By giving value to other fuels we would reduce the value of oil, lower prices and even out the playing field in a true open market.