Most Republicans (and some Democrats) continue to argue strongly for rapid expansion of oil extraction. Many reasons are offered, from aspiring to US energy independence to reducing the flow of dollars to countries we don’t like. [Have to say, though, KO pointed out tonight that according to new polling, Americans hold Venezuela in higher regard than they do the Republican party. Pretty funny….]

I do not recall seeing the following argument for leaving the oil in the ground.

When the supply of oil stops expanding and is finally outstripped by demand (see "Peak Oil") the value of the oil that remains will dramatically increase. For example, a barrel of oil could be sold sometime this year for around $50. That is good money — anything over around $10/barrel is profit. Oil extraction companies and countries with nationalized oil industries are obviously willing to sell a lot of oil at this price, and the bottom-line argument for opening up new exploration and drilling in Alaska, in the Arctic Ocean, and in offshore areas near the continental US coastline, is that someone wants to sell it at the current and near-term range of prices. That is, they expect to make a lot of money.

The problem with this argument is that the future value of the oil, if left in the ground today, is much, much greater. How much greater? That isn’t easy to pin down, but there is every reason to believe that when we are over Hubbert’s peak worldwide, anyone lucky enough to be left with oil to sell is going to get extremely rich. The country that is wise enough to conserve its supply of oil will be in an extraordinarily powerful position.

Shouldn’t we use this argument to defend unborn American oil, and save the environment in the meantime?

You might argue that this is just long-term capitulation to economic interests rather than a fundamentally green position. However, technology for oil exploration and extraction will continue to improve (as it has for decades). The ultimate ecological impact of extracting the oil will decrease in time as a result. Moreover, when the aggregate oil supply growth curve really rolls over, the demand for energy resources will be so great that ecological arguments will likely not hold up. There is little point to denying the potential value of the resources we happen to control.

In a nutshell: the best way to realize the greatest return on a limited natural resource such as oil that is still in the ground is to sell it when the price is highest — and that is far in the future. Economic arguments tell us we should buy the oil we need now from anyone dumb enough to sell it (because it is cheap).

Is this a well-known argument? I don’t recall seeing it anywhere.