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China, Oil and the Environment

I don’t know why every time important, intelligent people talk about oil, they speak as if 1) greater demand will always lead to higher prices, as if this is some inexorable law of economics with no other possible outcomes, and 2) higher prices would necessarily be bad.

We face a future where China needs to fuel its economic development and it is likely that can only be achieved by out-bidding the West for the world’s increasingly limited oil supplies. The effect on oil prices will have major consequences not only for the US, but indeed for the entire global economy in the years ahead.

Higher prices for oil will favor the development of other energy sources. They also make investments in energy efficiency yield higher returns.

Yet people speak as if because higher oil prices are coming, we’d better get ahead of the curve and provide other, cheaper forms of energy to avoid these higher prices. Don’t they realize they are short-circuiting the very process that will lead to diminished oil consumption? Would that be a good thing?

Shouldn’t people who favor extensive development of alternative energy be happy that China’s demand for oil is increasing?

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