Scarcity Rent

That’s another thing I learned from the excellent report “Europe facing peak oil” by – Benoît Thévard, commissioned by the Greens in the European Parliament. It discusses the concept on page 29 and 30.

Basically, if one knows that oil will run out and prices will go up, it makes sense to wait with selling it until prices are higher. According to the report this is already a factor with oil since in 2008 the King of Saudi Arabia ordered that all new oil discoveries in the country should remain untapped, left for future generations.

The point here is that is not only good for the climate, and good for the future generations who will be left with more oil, but it is also sound policy if your main motive is profit.

And this is just another reason that the Phaseout Profit Theory is correct. Oil producers should, on pure profit motives alone, try to leave as much as possible of the valuable stuff in the ground as long as possible. It doesn’t make sense for them to have their treasure burned at the present laughably low market prices.

Published by kflenz

Professor at Aoyama Gakuin University, Tokyo. Author of Lenz Blog (since 2003, lenzblog.com).

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