Afonso de Albuquerque arrived at the Indian Ocean in 1506, commanding a squadron of five war vessels integrated in Tristão da Cunha's Armada. In the summer of 1507, after the conquest of Socotra, the Armada's main objective, Afonso de Albuquerque departed on his own, commanding a fleet of six vessels and 500 marines to take the easternmost island at the entrance of the Persian Gulf, called by local folk Hormuz. Defeating a garrison of 15 000 men with his artillery, Albuquerque took Hormuz and commissioned the construction of a fortress. This island would eventually lend its name to one of the most important choke-points of the Indian Ocean, at the time the principal commercial pathway of commodities from Asia to Europe. Afonso de Albuquerque had brought with him from Lisbon a sealed letter appointing him as Vice-King to the East Indies, replacing Francisco de Almeida, whose strict naval prowess policy didn't impress the territory-hungry King. A period of indecision ensued, with most naval officers in the region initially refusing Albuquerque's rule and Hormuz was lost. In 1515, in his final days as Vice-King, Afonso de Albuquerque stormed Hormuz once again, taking it for good without military resistance. The fortress that stands to this day was finally completed, sealing the command over the commerce in the region. Beyond fortresses, the Portuguese left another lasting mark of their presence in Persia, which is the name of the currency, the rial.

After the Portuguese came the Persians, and then the English. The importance of the fortress waned, but that of the Strait of Hormuz itself, if anything, has only increased. Commodities flow in the opposite way these days, but unlike the luxury and exoticism of the past, today these are vital inputs to the world economy.

This piece resulted from a challenge within the staff to write a collaborative post on emerging energy storage technologies. I left Chemistry back in high school but one technology that has long fascinated me led me to volunteer on a project: the flywheel. It seemed a good justification to study why industry hasn't developed many applications for these ancient mechanisms. The elusive quest for an answer to that question lead to a rather long writing, that justifies a post on its own. Hopefully this shall be the first of a series on energy storage.

Flywheels are very simple mechanisms. If you have a bicycle you can see how it works: lift one of its wheels from the ground and give it an impulse so that it starts spinning. If the wheel hub is in proper condition the wheel keeps on spinning for quite some time. In fact, were your bicycle in space and the wheel could spin for ever, all due to the law of energy conservation - the work employed by your hand on the wheel is stored as kinetic energy as the wheel spins. Here on Earth, the bicycle flywheel slowly grinds to a halt because air friction and hub imperfections slowly dissipate this energy.

This is a repost of an article that ran on The Oil Drum: Europe about two years ago. Today's events warrant another look at Libya's role in world oil production, past and future.

Libya is a relatively new country, having declared independence in 1951. For the last 39 years, the country has been ruled by a single man, Colonel Muammar al-Gaddafi. Over the years, the identity of this leader and his exquisite sense of style have mingled with the identity of the country itself. Libya joined OPEC right after its creation, and played a pivotal role in the 1973 oil crisis. For the next three decades, Libya endured tense (and sometimes belligerent) relations with western countries. In recent years, as international oil prices have been rising, Libya has been able to re-institute itself as a reliable partner to the West, taking full advantage of the wealth promised by its still considerable oil resources.

For decades, economists (Cornucopians or optimists) have been at odds with natural scientists (Malthusians or pessimists) when it comes to the scarcity of natural resources. The economist’s argument, summarized here by Julian Simon, is as follows:

More people, and increased income, cause resources to become more scarce in the short run. Heightened scarcity causes prices to rise. The higher prices present opportunity, and prompt inventors and entrepreneurs to search for solutions. Many fail in the search, at cost to themselves. But in a free society, solutions are eventually found. And in the long run the new developments leave us better off than if the problems had not arisen. That is, prices eventually become lower than before the increased scarcity occurred. (Simon 1996)

The viewpoint of natural scientists seems to be a bit simpler; the more scarce something is the higher the price, leading to increasing prices as resources deplete over time. These opposing views have led to some famous wagers in the past. The most famous occurred in 1980 between economist Julian Simon and natural scientist Paul Ehrlich. The wager was whether the price of five metals would increase in ten years time. Simon won the bet. Another bet was made more recently. In 2005, John Tierney of the New York Times wagered with Matt Simmons over the price of oil. Simmons bet $5,000 that the price of oil would be $200 per barrel in 2010. Tierney won the bet.

As a result, Tierney has publicly applauded himself and the economists’ view in a recent article in the New York Times. He states: “Maybe something unexpected will change these happy trends, but for now I’d say that Julian Simon’s advice remains as good as ever. You can always make news with doomsday predictions, but you can usually make money betting against them.”

But what is the real message (if any) to be gleaned from these bets? Is it that economists are always right and natural scientists always wrong? Is it that prices decline for commodities over time?

I argue that there is very little (if anything) to be learned from these bets, and I explain why below the fold.