Our economy has two big long-run problems, staring us right in the face.
We have become addicted to two devils: cheap credit and cheap energy. It’s not going to be easy to get over either of these addictions, but gradually we’re going to have to do just that.
So it’s been painful to watch the Republican leadership suggest that all we need to do for energy is drill for oil and remove the federal gas tax. These cheap fixes aren’t great ideas, they’re really childish. Because the last thing you want to give an addict is easier or cheaper access to their drug of choice.
I’m no tree hugger here: I don’t particularly care about pristine wildlife in Alaska or the view off the coast of California. In fact, I think oil derricks look kind of cool off the coast of Santa Barbara. My argument isn’t based on scenery. It’s based on cold hard economics. Follow me for a bit.
At some point, we’re going to drill in all these places and suck every drop of that oil out of the ground. No problem. But as a business decision, when do you want to do that?
When you can get the most money for that asset, and when the technology is the most advanced (to keep costs down and safety up). When do you think this occurs, now? Nah. That oil that’s in the ground is going to be worth more in 20 years than it is now. It’ll be worth more in 30 years than in 20. So the economically best time to suck out that oil is probably around 2040 (any further down the pike, and something else will have replaced oil and its value probably goes down).
Think of this strategically: when do we want to run out of domestic oil — by 2020, or 2050? Isn’t our hand stronger if we have the proven reserves, while, say Venezuela and Nigeria are all drilled out?
So, rationally speaking, the best outcome is for us to plan, and to wait.
But industry won’t do that on its own. Unbridled business wants to get to all that oil and pump it out now, to make this quarter’s earnings reports sound better. Business doesn’t care about our national interests. They don’t care about lowering the price we pay at the pump. They just want to get to more oil, because that’s what they know. Even more sinister, the oil business is trying to get us to hose ourselves. Bear with me.
Something like 70% of the world’s oil is now nationalized, controlled directly by governments. Venezuela, Saudi, Russia, Kuwait, Libya, Iran have all told the oil companies to take a hike. So the oil industry looks to Uncle Sam and says, “boy, I sure would like to get my hands on some of your oil.” The oil industry has our government practically working for it, with various politicians begging the public to let the drilling begin as soon as possible.
The biggest irony of the Republican calls for drilling is that it won’t make any difference to today’s price, or even the price 3 years from now. Even if we decided to drill tomorrow, no oil would hit the market for years. And when the oil started flowing, it would immediately hit the world market, where world demand sets the price. That oil wouldn’t come exclusively to our pumps, any more than Alaskan oil did.
WiseUP! You can’t drill your way out of high energy prices, and drilling now is a bad business decision for you, the citizen. The path forward is to in invest in future technologies that allow us to increase energy output without increasing oil consumption. We don’t need to reduce our dependency on foreign oil, we need to reduce our dependence on oil. “The stone age didn’t end because we ran out of stones” — it’s time to get out of the 19th century for our energy techonology. Massive solar arrays. Modernizing the power grid. Natural gas terminals and storage facilities. Redesigned nuclear plants. A new automobile fleet. All of these things mean improving our infrastructure and result in serious job creation.
[WiseUP] Horse-pucky.
I never said there was. The usual right-wing argument tactic, arguing against a position I never took.
[WiseUP] Right, but if we had better technology from messing up all the rest of the world with drilling, we’ll be farther down the experience curve and will be able to drill cheaper and better. What did they teach you at business school? oh yeah, fuqua (sound it out) school. That’s the one that Bill Gates said, “don’t ever hire anyone from that school again.”
[WiseUP] Right again. see, we agree on everything important.
[WiseUP] You’re agreeing with me again. see, you have wised up. keep reading my stuff and you’ll get closer.
[WiseUP] I agree with you. biofuels was a stupid waste of time. Nice bailout for the farmers. I’m embarrassed that the left has such a hard on about it, and that the rest of the world (Canada, eastern eurupe) is following our “lead.” For the record, I was always totally against the current generation of biofuels.
[WiseUP] You’re pointing to the root of the problem, the real problem is there is no good answer here. For the next 20 years we’re going to take big risks (restarting our nuke industry which is still a bunch of loosers) until we come up with something that isn’t 19th century.
We’ve been putting all our best minds to work on wall street, which got us, well, the wages of sin. Rather than putting smart minds on what we really need…which is physicists and engineers doing real energy work. You don’t need physicists for drilling.
[WiseUP] I didn’t say wait to 2040 to start tapping oil, but to have that as the planned date when it comes on line. So we start in 2025 or so. Jumping on the drilling bandwagon is not a plan. You guys deserve a dope-slap.
You missed the economic point of the whole article: our drilling for oil will have almost no impact on the world price for oil, which is what we have to pay. Unless you’re planning to nationalize the oil companies, and tell them they are only allowed to sell the oil here in the US. Sounds communist to me, but you’re the guys having the government buy up the giant insurance companies and banks because of your policies.
[WiseUP] Rest of the world thinks that, and we’ve been proving them wrong. For this, I give Bush huge positive credit (don’t have a heart attack).
That said, we clearly invaded Iraq to have a bigger influence on oil. That, we messed up royally.
[WiseUP] If you want to go there, I think we should realize OBL’s vision in reverse. Have a big ol’ caliphate of democracy. Actually, we’d have to have the Putin’s help…but we could do it. Then we won’t have to worry about the energy crisis because of the war we’d be in with 1.3 B Muslims. (Readers: this is humor. I am poking fun at this entire line of “thought” to show how wrong it would be.)
Slippery slope. Don’t start.
The way to make progress is TO MAKE PROGRESS, not piss people off and threaten invasion.
[WiseUP] Right. In the big picture, the US is actually very responsible and as altruistic as a de facto empire has ever been. I think we’ve done way better than the Romans, and they’re way better than anybody else I can think of in history.
[WiseUP] Right. The whole political dialog has degenerated into name calling and a beauty contest. So the beauty contest is between the Presidential candidate on one side and the Veep on the other, like this:
Who’s easier to look at:
Dunno where it comes out, but the pros aren’t saying good things about your team. We’ll see.
Comment by welshrabbit — 7 October 2008 @ 4:08 pm |