Jeff Jarvis has posted a new entry in his Issues2004 series and this time his issue is energy. I’ve posted my views on this subject before here. If you want to get the straight skinny on the real issues behind the issue, as it were, this is a good place to start.
We import about 20% of our oil from the Middle East. About half of that comes from the Kingdom of Saudi Arabia, the other 10% from other Gulf states. Most of the remainder of our imported comes from this hemisphere, particularly Canada and Venezuela. With the recent discoveries in Mexico, I expect we’ll be importing a lot more from there as well. I don’t have any particular problem with a dependency on Canadian oil. Do you?
Besides we could end our dependency such as it is on Middle Eastern oil in an afternoon. All we’d have to do is slap a stiff import duty on it and it would become uncompetitive in the U. S. market. The action would give us problems in our trade relations worldwide but we could do it.
I don’t believe that such a duty would have a dire effect on the U. S. economy or, in fact, that a disruption in the oil supply in the Gulf would have as catastrophic an impact on our economy as many believe and many have predicted. In the last five years the cost of crude oil has tripled without major impact on our economy. I believe it could triple again without much impact. We’re not the same economy as we were in 1976.
But it wouldn’t change the European, Chinese, or Japanese dependency on Middle Eastern oil one bit. They have no ready alternatives. And since there’s a worldwide market for oil it wouldn’t hurt the Saudis or Kuwaitis one bit, either. So any ideas that anyone may have about cutting off the flow of money to the Middle East in terms of oil revenues are just pipedreams.
And a “Manhattan Project” for energy independence is not a well-founded idea. Check the Den Beste link above for an explanation of why this is. Short answer: it’s not the same kind of problem that developing the atomic bomb was.
So what should the federal government do about energy independence in general and dependence on oil in particular? In my opinion, the federal government should get the hell out of the way. This is a problem that the market is absolutely able to address. Government should stop providing false incentives and let the market operate. Don’t provide incentives for solar cells that take more energy to produce than they’ll produce in their productive lives. Don’t subsidize the production of ethanol that’s more costly in energy terms than the gasoline it displaces.
And, of course, the largest single subsidy that the federal government provides on the consumption of gasoline is called the Interstate Highway System. If the people in Massachusetts, or Wyoming, or Texas, or California want more highways, I believe that they absolutely have the right to build them. But they shouldn’t build them with money from Illinois or New York. And while we’re on the subject why is there an Interestate Highway in Hawaii?
And by the way I have no problem (except for security problems) with the building of more nuclear power plants. But I do have a problem with drilling in the Alaska National Wildlife Refuge. There’s only one of them and we don’t need the oil that badly. Leave it alone.
UPDATE: I should have mentioned it before but there are blogs devoted to the subject of energy policy written by real experts. One of the very best is Lynne Kiesling’s Knowledge Problem
Non-Middle East oil is available and there is the rub, it’s not. Oil producing countries cannot simply “pump more”. The notion that we could simply purchase more from other countries is a common misconception; they do not have the reserve capacity to sell us. Also Saudi Arabian oil is light sweet grade and much of the non-OPEC oil is of a heaver grade that needs more refining.
Also as far as subsidies the oil industry receives more subsidies then any alternative energy source and farmers combined. Cutting those subsidies is the very first step to letting market forces operate. Did you also know that all of the Bills to drill ANWR include massive incentives in terms of subsidies, tax breaks and grants? Otherwise the oil companies would not be able to pump ANWR oil at a profit. I don’t really care about the environmental issues surrounding ANWR, it will be drilled eventually, but telling people that drilling ANWR and various off shore locations will be helpful in the long run is a bold faced lie. All it will do is “Drain America First” leading us to more “resource wars” (that is if you buy that Iraq is a resource war). Nuclear power is also subsidized to a great degree.
Also I have a bit of a problem with Den Best’s rather famous assessment of energy technology, he likes to point out the current state of the art with regards to alternatives then starts talking about advancement in extractions technologies which are every bit as “pie-in-the sky”, but he just assumes that these technologies will be developed where are assumes that logarithmic leaps can be made in extraction technologies or refinement technologies based on no real evidence that I have ever seen.
just some thoughts.
The statement “the production of ethanol that’s more costly in energy terms than the gasoline it displaces”, is not correct.
There is a study from Cornell claiming that is takes 1000 gallons of diesel fuel to grow an acre of corn, which is the basis of much of this horrid bit of algebra (and farm productivity). It does not take 1000 gallons of diesel to grow an acre of corn.
Would it be possible to end the subsidy provided by having the US fleet in the Gulf so that the true cost of getting oil from politically unstable countries is borne by the consumer rather than the taxpayer? Let’s end a bunch of subsidies, not just the ones that effect agriculture, and then see what the cost of gasoline and ethanol really are.
John Powers
I hate this site u guys need to take it down!