Sunday, August 28, 2011

Oil, Apple and innovation

Will Wilkinson wrote a thoughtful post wondering why Steve Jobs is almost universally praised, including by many of our friends on the left, while the Koch brothers are reviled. Ryan Avent responds:
Apple's rich profits are a huge incentive to pursue innovation. Koch Oil's rich profits are a huge incentive to fight harder for access to declining oil stocks. These are not equally valuable pursuits, in so far as society as concerned.
Well, yes, they are not equally valuable pursuits -- Koch's pursuit of oil is of far, far greater service to society. Without my iPhone or MacBook I would have to settle for a somewhat worse phone or laptop. Without oil our society would be much poorer, relying on more expensive sources of energy (and more expensive buses and autos powered by natural gas and/or batteries) that reduce the amount of money we can spend on other goods. As much as I enjoy Apple products, I'd pick a world with no iPhone over one without oil any day of the week (at least until other forms of energy become more competitive).

More stunning, however, is that Avent, The Economist's economics correspondent, is either oblivious to the vast innovation required in the oil sector, or has so little regard for it. What exactly does he think "fight harder" consists of, if not innovation? Perhaps he should start reading the very magazine he works for and take a look at some of the amazing technology involved. Here's a sample:
To gather a consistent picture of the subsurface and to ensure “repeatability” during 3-D and 4-D surveys, the towed streamers need to be kept in a fixed position relative to the source vessels and to each other. So the oil-services companies devised techniques (such as the Q-Fin system from WesternGeco and the Nautilus system from CGGVeritas) to measure and adjust the position of the streamers as they travel through the water. 
But the mechanics of the new acquisition techniques are a doddle compared with the challenge of making sense of the vast amount of data produced. A typical 3-D survey uses about 80km of streamer cable containing a total of around 25,000 hydrophones. Shot points occur every 10-15 seconds, and after each one the hydrophones record a 24-bit signal every two milliseconds. This results in around 500 megabytes of data per shot point. With 50 seismic vessels working around the clock industry-wide, this adds up to a total of around 12 petabytes of new data every year, according to Mr Walker. 
The resulting data must then be processed to produce a picture of the subsurface. The amount of computing power used for such calculations is staggering. BP’s computer centre in the Gulf of Mexico operates at 270 teraflops (270 trillion calculations per second), nearly 3,000 times faster than a decade ago.
The New York Times also has a good article about innovation in the industry that helps to ensure the black stuff keeps flowing.

The fact that oil can be extracted from the depths of the ocean (or countries halfway around the world), refined, transported to your local gas station and then sold for roughly the same price as a gallon of milk is one of the everyday miracles of capitalism. 

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