According to the CIA's World Factbook Imported oil accounts for about two-thirds of US consumption. For our purpose lets use T. Boone Pickens' numbers and we actually import 70% at a cost of $700 billion. The Pickens plan would like to reduce our IMPORTED oil consumption not our overall consumption. Reducing our "imported" oil is like saying that drinking from one side of the cup makes a difference from drinking from the other side of a cup. Oil however is an international commodity. Think of oil like water in a bathtub. It really doesn't matter where you take the water from. As long as you take from the tub then money goes to those who put the water in the tub to begin with. It doesn't matter if we buy our own oil or someone else's. It all comes from the same bathtub. Therefore, the $700 billion that we send abroad to rogue or hostile nations still get the same amount of money. They'll just get it from someone else. The only way to keep that kind of money from reaching those countries is if we reduce, not simply our IMPORTED oil, but our consumption, period.
The T. Boone Pickens plan should ask our members of congress to pledge to reduce our overall consumption of oil and NOT just our imported oil. We should help move the world off of an oil based energy platform and onto other form of energy, preferably cleaner local energy. Only curtailing our consumption and developing a comprehensive energy plan, can we halt the huge flight of capital continuing to flow to those countries by others!!
Here's a sample letter that I believe should be sent to your Congressional delegation:Our fight against terrorism, our fight for the environment, our fight against our growing balance of payments deficits and our fight for our health care in this country can all be improved by getting our country off of the debilitating effects of our oil addiction/consumption.
We must get this country, and others, off of oil and stop the unprecedented flight of capital to rogue and hostile nations. This plan must include proven American technology and resources; the development of new energy sources; and the expansion and modernization of the national electrical grid to transport renewable energy to homes and businesses.
Delaying is tantamount to negligent homicide by continuing America's, and the world's, addiction to oil.
I urge you to support any and all plans that can legitimately move this country from an oil based energy economy to one that relies on local, clean technology/energy. This should be the call of a new generation. This should be part of the new president's first 100 days of the new administration.
Sincerely,
Jonathan Zucker"
totally agree. but not as catchy as the sheep bleeting "drill, baby, drill."
ReplyDeletejust saw an ad that says we have enough oil & gas in America to last us 60 years but our (big bad) government wont let us get to it...if the current plan is to only plan for the next 60 years - god help us all
ReplyDeleteWe could kill a few birds with one stone....Remove obstacles for drilling in our own country.
ReplyDeleteBy increasing the supply of oil from our own country you do a number of things all at once. The first is that the money you pay for this oil no longer goes to unfriendly regimes. Second, it increases the overall supply of oil in the world market. Given the short-term inelasticity of supply that affects the price of oil a small amount of increased supply has a dramatic effect on the price of oil. While oil is fungible, a reduction in the price of oil is devastating to our enemies abroad especially the Iranians. Third, high energy prices are a friction on the economy. Lower prices will reduce that friction especially at a time when we need to see more from the economy to help us out of the credit-based financial crisis. Fourth, it will help produce jobs in the US. Fifth, we produce oil in a far more environmentally sound way than do any other non-Western country. So it is good for the environment as well.
So this is a win-win-win situation.
Boaz
I wish I could agree with you re: drilling but I don't.
ReplyDeleteFirst, everyone agrees that the amounts of oil in ANWR are ESTIMATES only. They are based on geological computer models and are not known quantities.
Second, the time it would take to get the oil to the market in the best case scenario is now 10 years. That best case, however, does not take into account that there are currently NO oil rigs available. While there are large orders out there for an increase in the amount of oil rigs, they currently are not available. A more likely time frame for getting the oil to the market would take us well into the 2020's at best.
Third, as you know the price of oil is completely fungible. The price of oil is set on a WORLD market and therefore even if we were to reduce our oil imports to ZERO, we would not reduce the amount of money that flows to other oil producers unless we reduce the worldwide demand for oil. Note what happened in 2000 in the UK. Truck drivers went on strike over fuel prices even though the UK is energy independent -they are a net exporter! So unless you are talking about import quotas or export barriers we cannot isolate ourselves from the world price of oil. As for affecting the price of oil through increased production in the US, since we consume over 20% of worldwide production and have at most 3% of worldwide reserves, our increased production would have little to no impact on worldwide oil prices. In fact we would still be at the mercy of foreign oil producers. Just think about the impact on oil prices if there were a disruption in the Middle East. Projections have been sky high regardless of our own production.
Please note also that the cost of production of oil in the US is $15-$20 while the cost in Saudi Arabia is TWO DOLLARS!! Oil companies would be foolish to use US oil as long as they can produce the same oil much cheaper.
In considering our security considerations, we should note that we currently import most of our oil from Canada and Mexico. We haven't imported a drop of oil from Iran in the past 25 years but that hasn't stopped the Iranians from supporting terrorist or trying to acquire nukes.
Your point on employing more workers, while true, will put more workers in the wrong field. It would be much more beneficial if we could create those jobs in a new field of energy technology with a much brighter future that would meet all of our goals. The world, being in the same boat we’re in, understands the situation that and they are also working towards an oil independent future. We should be at the forefront of this emerging technology instead of a laggard.
The simple fact is that oil is the primary source of energy for transportation worldwide (over 96% for the US) with almost no substitute which makes oil unique. It is politically, economically and militarily (and environmentally) imperative that we have a substitute for oil.
The estimates available in ANWR are conservative estimates. The time to get to market is probably closer to 2 to 3 years and the only way it takes 10 years is because of the obstacles and lawsuits that the environmentalists invariably raised. They are not technological limitations.
ReplyDeleteThat there are no rigs available is because other countries are allowed to increase their explorations, but we have put artificial barriers in place to stop us from exploiting our own resources. Instead Brazil and Cuba are running full speed ahead. (Cuba's oil comes from deposits that we could get as well. So we are helping our enemies take our own oil by not competing with them.)
BTW, if the oil companies wanted to pay for new rig construction that is up to them. We don't have to do anything except give them the go ahead.
Third, as you know the price of oil is completely fungible. The price of oil is set on a WORLD market and therefore even if we were to reduce our oil imports to ZERO, we would not reduce the amount of money that flows to other oil producers unless we reduce the worldwide demand for oil.
Oil is fungible, but since it is subject to long-term price-inelasticity small increases in supply can have a dramatic effect in reducing prices during tight-supply circumstances. Plus this ignores the basic benefit of keeping that much money in the US. If we export that oil we still get the money from importers for that oil. It may be going to US Oil producers, but they are in the US. They will also create more jobs to produce, transport and process (at least some of it) this oil.
So unless you are talking about import quotas or export barriers we cannot isolate ourselves from the world price of oil.
We don't have to. The oil we produce becomes money that either stays in the US instead of buying imported oil, or comes to the US from the customers who buy it.
As for affecting the price of oil through increased production in the US, since we consume over 20% of worldwide production and have at most 3% of worldwide reserves,
The 3% number is a very low figure. It uses only known reserves and excludes Shale-oil. What reserves we have off the continental shelves is unknown because we haven't banned ourselves from using any modern technology to look for it. The numbers we have come from the late '70s and a little from the early '80s back when people still thought we would run out of oil by now. New technology has made it possible to increase oil production way past what we thought was possible.
Now Shell has developed an in-situ oil-shale production process that is economical at any oil price over $30 -35/brl. It is estimated that we have somewhere between 1 and 3 trillion barrels of oil in Utah, Colorado and Montana that can be gotten with this method.
We could drown the world in oil if we wanted to.
Please note also that the cost of production of oil in the US is $15-$20 while the cost in Saudi Arabia is TWO DOLLARS!! Oil companies would be foolish to use US oil as long as they can produce the same oil much cheaper.
How much it costs to produce a barrel of oil means nothing so long as you still make a profit on it. As you drive the costs lower you will make some methods economically unproductive, but so what. At those prices we wouldn't be all that upset to buy it from the Saudis as they would be starving from the lower revenues.
In considering our security considerations, we should note that we currently import most of our oil from Canada and Mexico. We haven't imported a drop of oil from Iran in the past 25 years but that hasn't stopped the Iranians from supporting terrorist or trying to acquire nukes.
You were the one who was just saying that oil is a fungible commodity. Anything that causes the price to go higher (or not to drop) still benefits the Mullahs, Putin and Chavez.
Your point on employing more workers, while true, will put more workers in the wrong field. It would be much more beneficial if we could create those jobs in a new field of energy technology with a much brighter future that would meet all of our goals.
When those alternative energy methods become more competitive economically those workers will be able to move there as well. In the meantime the skills necessary by one are not the same as those required by the other. Most alternative energy methods are still so immature that it is scientists, and chemical, biological and/or electrical engineers that are needed. Oil needs more mechanical and civil engineers.
The world, being in the same boat we’re in, understands the situation that and they are also working towards an oil independent future. We should be at the forefront of this emerging technology instead of a laggard.
We aren't laggards. We are quite competitive in these areas. But it is foolish to spend money on some of these endeavors until technology is able to catch up with the requirements. In the meantime we can still use oil.
Keep in mind that the marketplace knows just how big a jackpot there is for someone who finds a source that is economical without the need for government subsidies which is why there is so much private funding available.
The simple fact is that oil is the primary source of energy for transportation worldwide (over 96% for the US) with almost no substitute which makes oil unique. It is politically, economically and militarily (and environmentally) imperative that we have a substitute for oil.
True, but we also have to understand the limitations involved. Oil is a remarkably efficient and cost-effective way to store and refuel energy. There is currently nothing that comes close to it.
Electricity in the US costs about $0.75-1.00 per equivalent gallon of gasoline. But storing it in any means close to how people would want to use it increases the cost of a car by 100-200%. Plus it takes hours to recharge while a tank of gas takes 5 minutes.
There are some wonderful new technologies being developed, but we aren't there yet. I don't worry about funding for these simply because even incremental improvements in battery technology are finding new markets. But there simply is no economical alternative to oil-based energy at this point.
Yet, while we sit and hope for some miracle (we'll get there, but it's still going to take a long time while technology catches up with the problem), we still don't drill as we should if we want to starve our enemies of their money supply and ensure the lower energy costs we need to help keep some sense of strength in the economy.
Boaz