“Resources without man are not resources”, as Robert Bradley correctly writes. Jim Powell explains the global nature of the world’s oil market and why embargoes never worked
Robert Bradley: There Are No “Natural Resources” – Yesterday’s excerpt from Mark Mills and Peter Huber’s book The Bottomless Well showed how people consume energy to discover and create more energy through technological advances. Today’s excerpt from Robert Bradley’s 2009 book Capitalism at Work: Business, Government, and Energy makes a similar point, that there are no such thing as “natural” resources. As he writes, “Resources without man are not resources.”
His name is not found in economics textbooks or histories of economic thought. Where it does appear, his Germanic surname is often misspelled. His contribution is virtually unknown in the world’s vast mineral-resource industries today. Government policies owe little or nothing to him. Yet Erich Zimmermann (1888–1961) developed a new theory to explain why fixity and depletion were the wrong way to view minerals in an economic and business sense.
Zimmermann’s 1933 World Resources and Industries began a line of analysis that would explain a paradox of economic life—the growth of supposedly “depletable” supply, whether measured as current production or known reserves. …. Economists from Jevons forward focused on a conception of known resource quantities that, by definition, depleted as they were mined and consumed. Future production costs would rise as mining progressed from superior to inferior deposits. Resource prices were destined to increase in the face of continuing demand and, certainly, demand growth. The increasing scarcity of mineral resources might be gradual or rapid, but the direction was not in doubt, even allowing for improved exploration and extraction technology. (Cooler Heads)
Why ‘Dependence’ On Foreign Oil Is A Bogus Worry – … Why was that embargo associated with significantly higher oil imports? From a practical standpoint, there’s really no such thing as a U.S. oil market. There’s a global oil market, and oil shipments tend to go where the best prices are offered. Once a tanker leaves a port loaded with oil, the producing country no longer has control over it. In 1973, oil producing countries continued shipping to European countries that weren’t involved with the Yom Kippur War, but much of that oil was re-shipped to the U.S. Some of the OPEC oil shipped to the Caribbean was also re‑shipped to the U.S.
In addition, OPEC has experienced the chronic cheating that generally afflicts cartels: it’s in the interest of each member to have everybody else cut back sales so that prices will be pushed up, while each member sells as much as possible “under the table” at high prices, making it difficult to maintain those prices. Algeria, Gabon, Indonesia, Iraq, Kuwait, Nigeria, Qatar, the United Arab Emirates and Venezuela reportedly have been among the most notorious OPEC cheaters, selling as much as 40 percent more oil than their assigned quotas.
So, the much-feared oil weapon had little if anything to do with U.S. economic problems and specifically nothing to do with the 1970s gas station lines, because America had plenty of oil. Saudi Arabia’s oil minister Sheik Ahmed Zaki Yamani remarked that the embargo “did not imply we could reduce imports to the United States…The world is really just one market. The embargo was more symbolic than anything else.” President Richard Nixon’s Secretary of State Henry Kissinger agreed: “the Arab embargo was a symbolic gesture of limited practical importance…The true impact of the embargo was psychological.” (Forbes)