Wednesday, August 7, 2013

We will never run out of oil . . . .

Becker makes an important analysis in a clear and accessible manner - too bad this message falls on deaf ears.

The long run picture is very different, for then opportunities to substitute away from the resources rising most in price are much greater because users have more time to adjust. For example, more permanent higher prices of gasoline induce consumers eventually to shift toward smaller more fuel-efficient cars, and drive less with the cars they have. They carpool more, make greater use of public transportation, or even take jobs nearer their homes. Cars are smaller and more efficient in Europe and Japan than in the US in good part because gasoline prices have been much lower in US.

Longer run adjustments on the supply side are also much larger, and some of them are game-changers.

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