CommieDad (!) makes some very serious and faulty assumptions on the way to advocating government control of energy. I'll note my joy that he finally read the article in the original post which, btw, I wouldn't have linked had I not read it. I doubt it will be little noted by those who frequently accuse me of only presenting on side of an argument. In any event...
If you've been following these matters as long as I have, the 70's, you'll have long ago noted that the world's oil reserves, proven reserves, have annually been increasing. New technology, that allows for recovery of oil previous unrecoverable or too expensive to try, has been partially responsible for this. Whether or not the concept of peak oil has validity or not will not be known for at least twenty years; a veritable eon in the energy search business. Horizontal drilling is probably the most commonly cited form of technology that has caused increases in recovery.
There is a fundamental fallacy, that I have not yet addressed, in the very notion of self-sufficiency. As stated previously, it has made little sense in the past to drill for more American oil when we have had foreign nations so willing to sell to us at such a reasonable rate. You're more familiar with this idea when you purchase tennis shoes. We buy foreign made tennis shoes because they can be made cheaper, including shipping, than they can be in the US. We also do this with products and resources not common in the US. For instance, there are no rubber trees in the US so we must import natural gum rubber. We don't think twice about this as we need the rubber and Indonesia needs to sell it. For those in Texas (g) that's called capitalism and the free market is it's mechanism of opertion. More on that later.
Were there no trade between the US and other countries life in the US would be immeasurably poorer, as it would be world-wide. The populist notion that the US is this big self-sufficient country without need for foreign trade is a pervasive and completely incorrect myth. For instance, the Caterpillar company would probably be about half the size it is if they only sold heavy equipment to companies within the US. Likewise Boeing and most other manufacturers. US agriculture would be substantially smaller werem it not for exports. You say so what? Well. What are all of those employees going to do for work if we don't need so many of them to produce only the goods we consume? Most Americans rightly do not understand the sheer size of our foreign trade. Rightfully because the volume of it boggles the mind be it in tonnage or number of transactions. The entire world is the rest of the way; without trade they would perish of be consigned to an early twentieth century existence.
It is hardly necessary that trading partners even get along or like each other. The market does not ackowledge these factors. At the truest heights of the Cold War, the Soviet Union was buying Caterpillar dozers even though there was a US economic embargo in place against the Soviet Union over the invasion of Afghanistan. Caterpillar is a world-wide corporation and it merely shipped it's dozers from the American midwest to Canada where they became Canadian dozers and, amazingly, were loaded on an American ship in Montreal and shipped to Leningrad. Of course the Soviet's weren't embargoeing us so we brought back birch plywood and Russian tobacco. The market ignores politics, even geopolitics.
This is relevant to oil because we do not have to actually buy Iranian oil for our money to end up in Iranian hands, admittedly via a convoluted process. If the Netherlands is buying Iranian oil there is nothing to stop them from selling it to us as "Dutch" oil later. Oil is fungible. That means that it does not care who buys it or where it goes, it only matters that it is bought. so while we may feel good about embargoing Iranian oil, our "allies" in Europe and elsewhere are quite willing to buy it. Embargoes only work when you can get world compliance. Instead of buying Iranian oil we buy Canadian oil and we pay the same price the Dutch are paying for that Iranian oil. In essense, we are buying Iranian oil because the Dutch are not buying Canadian oil. And, not so amazingly, if we can buy that oil at $5 a barrel cheaper than we can produce it for in the US (even though the US oil is "our" oil) we're not going to buy even our own oil. The market will not allow it. And anyone who says that we should only buy "our" oil will soon be out of business because he is paying $5 per barrel more than what his competitors are paying. And that's also why, when Iran has a production problem, the price of oil goes up in the US even though we do not buy Iranian oil. It has to as the world market sets the price.
That's also why North American reserves are so important as well. With 200 billion barrels in proven reserves, which will surely be revised upwards not downwards, we have more than enough oil for the three economies involved; Canada, the US, and Mexico. We enjoy not only good economic relations with both of those countries but good political ones as well.
I should add that it matters not a wit whether we buy Venezualan oil or whether Mr. Chavez wants to sell it to us or not. All that is important is that Mr. Chavez does sell his oil and, believe me, Mr. Chavez must sell his oil. He has no economic alternative, nor do the countries of the middle east.
So the idea of self sufficiency is really a canard. All that is important is that there is plenty of oil and that markets remain open for it's trade. Which, btw, is why we fought the Persian Gulf war. We fought to keep markets open. Kuwaiti oil in and of itself was immaterial to us as we buy so little of it. but it was important to us and the rest of the world because somebody needed that Kuwaiti oil, and it's absence is felt throughout the world market resulting in substantially higher oil prices and eventually potential shortages. And shortages mean economic decline, for the whole world.
Enough basic economics. Our Texan claims that the middle east is less stable than it was during the oil embargo. I'm not sure what he means by that or what anyone means by middle eastern stability. If the history of the middle east, since the mid-seventies, is what you call stable I say enough of stability. What is different today is that the US is personally involved within the middle east and the likely result of that involvement will be a stability much more to our liking than the past quasi-stability. Already we are on a much better footing with Libya, from whom we are now starting to import massive quantities of natural gas. The entire US-flag LNG shipping industry went belly up in the early eighties over Libyan instability. (read terrorism) that has now been rectified to an extent by Colonel Khaddafi's desire to not assume room temperature like his former pal Hussein. btw, when is Khaddafi ever going to make field grade status, ie...General? (g) In spite of war and terror or maybe because of them, the middle east is going to look much different over the next ten to twenty years, probably much better looking if the will of the West is up to the task. That can only be good for markets.
The Trotskyite Texan appears to think it unworth drilling for US oil. I'd remind him that, had President Clinton not vetoed congressional approval to drill in ANWR, we'd be pumping and refining that oil today. It's time to get on with doing the same offshore of California, Florida, and Michigan. The Gulf coast is littered with oil
rigs pumping offshore oil but the rest of the US ignores that because it's off the coasts of La., Miss., and Texas and we know what kind of people live there, right? It's condescending in the extreme to think that those citizens are any less environmentally conscious as the good residents of those other coastal states. We start drilling today for oil for ten years from now, and for twenty years from now because we really don't know what's down there or how recoverable it may be, until we drill.
Alternative energy, the darling of the Solar Daddy. What's up with that? What's up is that it doesn't work and it's too damn expensive. I'll finesse the doesn't work part of the argument by merly mentioning that wind and solar really only work effectively in a handfull of states, and we've got about 44 other states to supply as well. (And while we're briefly on solar-why doesn't CD use a Fresnel lens to do his bb-q with instead of, guess what, hydrocarbons?) The expense problem is touted as fixable through economies of scale, which is true, but still poppycock. What causes economies of scale? Lots of mass production is what. What causes demand for more mass production? Demand. Why is there not more demand? For the same reason that you'd be foolish to buy an ethanol burning car. Currently, ethanol costs far more to produce than gasoline. The government finesses that point by subsidizing it. Last I heard it was to the tune of 6 cents per gallon just for the regular blend we've had sine the 70's. The new higher ethanol content blend is going to need more of a subsidy to make it cost competetive with gasoline. And you pay for that whether you buy ethanol or not. Then we get to the point that the absolutely best estimates of it's energy efficiency is 85% of gasoline. I've heard anecdotal reports that some vehilces are getting almost half the gas mileage as they do on straight gasoline. So now we need more subsidized ethanol than we would have needed straight gasoline.
How does our experience with ethanol relate to solar and wind energy? Solar and wind energy cost more to produce than does the fossil
fuels they replace and let's not even imagine how much more than nuclear produced energy. so who's going to buy higher priced energy if a cheaper alternative is available? Why would you spend $30,000 on solar panels, assuming they'll work in your geographic location, if you can buy cheaper electricity generated from coal, oil, or nuclear powered stations? Well, you're not going to unless you've just got money to burn. And if you're not buying, the demand will not go up. Lack of increase in demand results in lower production (and higher costs) and so that mass production and economies of scale never take place. And that's why alternative energy remains largely unviable.
How can it be made viable? There are only two ways. And this is the part where I say that CommieDad's thinking is dangerous. The first and most effective way is that oil and other fossil
fuels rise in price to where alternative enrgy becomes a bargain by comparison. That's how things always change in a market based economy. In fact, that's why you drive a car today. Cars and gasoline became cheaper, in terms of miles traversed, than horses. If horses were cheaper we'd all be talking about riding horses to work right now. But you have not heard that because even though horses are a renewable, and therefore a good alternativer energy source, and they are refueled by a renewable resource, they are still more expensive to own and maintain, per mile traversed, than a car. They also don't come with air-conditioning, or heat for that matter.
When fossil
fuel prices rise, the impetous to do more research on alternatives rises due to the profit potential. Every garage inventor, remember Bill Gate's garage, goes to work with the dream that if people will pay 'X' dollars per btu or kilowatt-hour for energy and he can produce it and sell it for just 5% less, the world will beat a path to his door. And he's right. You could ask Bill Gates or, if you're a psychic, Henry Ford. Fossil
fuel prices are not nearly there yet. But it's not like oil will have to hit $200/bbl or $300/bbl for the process of research and development to begin. Entreprenuers are smarter than that. It's also why the enrgy companies and the car companies are investing money in the field now. They don't want to get left behind even if it's twenty or thrity years from now. And so they take some losses, modest losses, in pursuing alternative energy today. The heirs of John D. Rockefeller do not want to miss out on the next "oil". So the market will produce alternative energy if the reward is there. And we won't be out of energy while we're waiting on them-they're already on the case and unless oil drops precipitously in price, they're going to stay on the case along with all those guys in their garages.
The second way that alternative energy can become common or mass produced is by government fiat. The government can mandate that you use solar or mandate something else. Subsidies themselves, and government funded research, will be insufficient to produce a switch to alternative energy alone. The government will run out of money, and the political will to spend it, long before alternative energy makes economic sense. And the average citizen is too smart to buy uneconomical energy even if he's in favor of it as a whole. Example, Al Gore! Which leaves only one other way that alternative energy can reach mass production and, hopefully, economies of scale; government mandate. You will be forced to use it. Now you, patient reader, will see why I called CD, CommieDad. Government mandate, including production quotas and everything else is what the eastern bloc tried doing under communism. It didn't and doesn't work, though they had a great PR campaign that convinced many people who should have know better that it was working. These are the people that produced the Trabant. While just across the border their brothers were building and driving Mercedes-Benz's.
What CD is calling for is socialized energy. And what's really going to disappoint him in when government says, as it inevitably will, that he can't haul horses with his big 'ol one ton Ford pick 'em up across the far stretches of Texas. He'll be using up more than his quota of his energy allotment, becuase rationing always accompanies socialized anything. People is the USSR had such a purported quality of life because only one spouse worked. The part that got left out was that only one spouse worked because the other spouse was spending the whole day standing in various
lines to buy the basic necessities of life, like food.
Now contrary to CD's fevered imaginings, and I didn't mean that CommieDad part other than as a joke, the US doesn't really need a government energy policy. We have one, it's free, and it's much more effective than any one the government can come up with. It's the free market. and government is doing it's level best to screw it up which will virtually ensure that there will be energy shortages. Would oil be at the price it is is we'd started drilling in ANWR ten years ago? Prices might be high but not as high. When oil was cheap it made sense to buy it from other people. Remember those tennis shoes? If tennis shoes from offshore production hit, on average, two hundred dollars the pair you will almost overnight see the revitalization of the American tennis shoe manufacturing industry. Oil is now at a price where we can not only afford to drill but we can afford to drill with extremely stringent environmental requirements. And we will drill. We'll drill because, with our current government policy, we'll have no choice. Nobody is going to invest massive resources into alternative energy because they know that all that oil is just sitting off the coasts of California, Florida, and Michigan. and they can never be certain that, should oil skyrocket, that the government will not suddenly change it's mine and allow drilling instantly wiping out their investment potential. For example, would you build a multi-trillion dollar mass transit system in your town if there was the slightest potential that oil was going to drop precipitously in price and nobody would ride it? If you answer yes to that question you are either a fool or you own stock in the Long Island Railroad, which has never turned a profit since it's inception is around 1914 or so. So just the potential of pumpable oil makes alternative energy a bad investment. Oil is till too cheap and there's too much of it.
What are the current solutions? Oil from coal shows great potential and coal is our most, world-wide, abundant hydrocarbon resource. Conveniently, the US sits on some of the largest coal deposits in the world. Assuming that oil from coal is viable economically we could free up a lot of coal for that use by building nuclear power plants for electricity production. Electricity production we're going to sorely need if battery technology advances making electric cars viable. And CD's concerns about private industry running fusion plants is hilarious. Who does he think designed and run our current nuclear plants? The oil situation alone would be a lot worse than it is if government ran those tankers bringing it in. Imagine the post office in charge of oil transportation!
In conclusion, your government is responsible for not only high oil prices by refusing to allow drilling for oil but will also be responsible for delays in electric car usage due to not enough juice available for recharge. They're also going to be responsible for the pollution of the planet by leaving coal as the only viable electricity production material as coal is the dirtiest burning energy source around-even "clean coal". So your government got you in this mess, shows no sign of being able to get you out of the mess, and my friend CD wants yet more government action. Haven't they really done enough?