Vast Oil Pool Tapped in Gulf of Mexico- What Does it Mean for Alternative Energy?

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The AP reports that a trio of oil companies led by Chevron Corp. has tapped a petroleum pool deep beneath the Gulf of Mexico that could boost the nation’s reserves by more than 50 percent.  Tim Haab, Environmental Economics, finds the reports "both promising and troubling.  As most models of resource depletion would predict, rising oil prices provide incentives for at least three things:  Conservation on the part of consumers, investment in alternative fuel technologies by investors and investment in oil exploration by oil companies." 

Higher prices lead to oil exploration in places where it was previously not profitable to explore.  So what does Tim think this could mean for the future of alternative energy? 

"If this discovery pans out–early projections are it could increase domestic production by 50%–the incentive for investment in alternative fuel technologies is diminished, or at least delayed."

Tim Haab is an Associate Professor in the Department of Agricultural, Environmental and Development Economics at The Ohio State University and writer for Environmental Economics, a blog that is dedicated to the dissemination of economists’ views on current environmental and natural resource issues.

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