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The Economics of Petroleum Supply: Papers by M. A. Adelman, 1962-1993

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If you know anything of significance about the economics of petroleum, the name M. A. Adelman will already be familiar. If you know nothing and want to learn, this book is the place to start; it will take you a very long way.

Even though some of the papers in this book are approaching their 40th birthdays, all remain fresh and relevant. Adelman virtually invented the serious study of petroleum economics and even his earliest insights are worthwhile.

This book is also essential reading for anyone interested in the economics of resources more broadly. While I don't think that Adelman has spoken quite the last word on the so-called Hotelling theory of the economics of "exhaustible resources", he makes far more sense on the subject than most of his colleagues.

It also has much that is of value to students of non-petroleum commodities. Petroleum is a very special kind of commodity, but there are many lessons from it that apply elsewhere. Anyone still tempted by the notion of the benificent price-stabilizing cartel -- the UNCTAD model -- should read and ponder what Adelman has to say about how OPEC actually has (mal)functioned.

Adelman's style can be a bit quirky and discursive, but never obscure or dry. It's a big book because there's so much in it, not because it's padded out with academic belaborings. There is a little repetition becuase it's a collection, but not too much.

Much may at first seem somewhat strange. That's simply because Adelman's facts and analysis don't support a lot of conventional wisdom about petroleum. Don't be put off by the contradictions. You'll find everything documented and referenced, so you can decide for yourself where Adelman's facts come from. (Moreover, he usually summarizes the positions he's attacking clearly and fairly.) Look at what he has to say and measure it against what you may have assumed or been led to believe. Even if you don't come to agree with him on every point, I think you'll find everything he says to be illuminating and stimulating.

Economic students are taught that banks "create" money every time they make a loan, and that the economy is powered by money instead of energy. The juxtaposition of these two data (the first is true, the second is false) leads even Nobel Prize-winning economists to conclude they have discovered a perpetual-motion machine:
 
"Should we be taking steps to limit the use of these most precious stocks of society's capital so that they will still be available for our grandchildren? . Economists ask, Would future generations benefit more from larger stocks of natural capital such as oil, gas, and coal or from more produced capital such as additional scientists, better laboratories, and libraries linked together by information superhighways? ... in the long run, oil and gas are not essential." [ p. 328, ECONOMICS, Nobel Laureate Paul Samuelson and William Nordhaus; McGraw-Hill, 1998;(...)
 
No person has had a greater influence on the thinking of experts who have become government regulators of the world's oil and gas industries than economist Morris Adelman: "There are plenty of fossil fuels and no limit to potential electrical capacity. It is all a matter of money." [ p. 483, THE ECONOMICS OF PETROLEUM SUPPLY, by M. A. Adelman; MIT, 1993; (...)
 
But of course, economists like Samuelson, Nordhaus, and Adelman are wrong. The First and Second Laws of thermodynamics tells us there is a limit to potential electrical capacity -- it's not all a matter of "money", it's all a matter of "energy".
 
The sudden -- and surprising -- end of the fossil fuel age will stun everyone -- and kill billions. Once the truth is told about gas and oil (it's just a matter of time), your life will change forever
 
Envision a world where freezing, starving people burn everything combustible -- everything from forests (releasing CO2; destroying topsoil and species); to garbage dumps (releasing dioxins, PCBs, and heavy metals); to people (by waging nuclear, biological, chemical, and conventional war); and you have seen the future.
 
Envision a world utterly destroyed by a lethal education.