The Mixed Blessings of $100 Oil

If we had in place the stronger CAFE mileage standards including trucks (like we should have done 15 years ago), you wouldn't have this seesaw effect. Golly, we're dumb.

of 1:51PM September 09, 2008

Conrad of CA is right, but wait--there's more!

The need to stop drilling and exhaust all of the world's supply of oil is more important than just conserving it.

Future generations will need it to pave their roads, cover their roofs, build their automobiles, computers and thousands of products made from petro chemical derivatives of oil.

They will damn us if we continue burning up the oil they will need for these uses--not for fuel.

The so-called energy crisis is not "energy". It is fuel. Renewable fuels of all kinds to replace the burning of oil, coal & its variations is essential to stretching out the existing reserves of oil for as long as possible into the future.

We cannot exhaust the reserves in our lifetime, but neither could cave men exhaust the dinasaurs in theirs. But they're gone now.

HillbillyBill of TN 9:29AM September 09, 2008

The oil-producing countries have no "tricks" for jacking up the price of oil, other than reducing production. Oil is an internationally-traded commodity. The price is primarily determined by supply and demand. Most oil-producers are very reluctant to reduce production. That is their main income, and it is how they pay their policemen, teachers, soldiers, etc.

All oil-producers want OTHER countries to reduce production, to increase THEIR profits. Norway is the only producer that routinely makes major cuts in oil production when the price gets low. They can do this because they invest all the profits of their oil production (they don't spend it).

We will not win the fight with any colors, flying or otherwise, until we realize that we need to make some sacrifices. The first sacrifice being cheap gas. Politicians are scared to do anything to increase the price of gas, because Americans lack the courage to face higher gas prices, and will vote them out. This contrasts greatly with WWII America, where citizens gave up unused pots and pans and other household items so the war effort would have enough metal to make munitions.

Most Americans are simple-minded, and think that science will wave its magic wand, and our energy crisis will be solved. Some think that we already have "the answer", but Exxon or GM or some other entity is withholding it to make more money from our dependence on oil. Hogwash. Simply put, the laws of physics will not cooperate on this issue. Scientists (at least in the near term) cannot offer a dramatic solution--only incremental improvements. It's up to America to make the most of those improvements.

We have access to cars that get over 40 mpg. Why is the national average around 24 mpg? Because we also have access to vehicles that get 8 mpg.

chem engr of FL 10:49PM September 08, 2008

Oil independence is not the right goal. We need cheap oil, to keep $$$ out of the hands of Russia, Iran, and Venezuela. Expensive oil is the worst foriegn policy we can have, because we'll have to pay 10x as much later (invasions, weapons and support for Russia's neighbors, etc.).

The fastest way to cheap oil is high gas prices, which encourage conservation. We cut 25% of our oil usage in the early 1980's, because gas prices were high. Sadly, the economy would suffer if the price of fuel was too high. How do we resolve this?

Replace the outdated fixed gas tax ($0.18/gal) with a variable oil tax. Collect half the difference between $150/bbl and the current int'l spot price on oil produced or imported into the U.S. (or equivalent for oil products). If the int'l price of oil is $100, the effective price will be $125/bbl. That will put continuous pressure on the American consumer to conserve oil, while having a minimal effect on the economy.

What else will this do? It will encourage alternatives, which will not be taxed. As long as they are viable below $75/bbl, they will be guaranteed to make money. You'd be surprised at how much capital a company is willing to commit if it is guaranteed to make money. Shell recently backed out of a $3 billion investment in oil-from-shale because they didn't think it would make money. You could also give a 10-year exemption to domestic oil-from-shale projects, to jump start them (without spending a dime of taxpayer money). And the gov't won't have to decide between supporting one alternative and the next--the free market (competition) will decide.

The only short-coming of this idea is how to keep maintaining pressure on the consumer if their tolerance for expensive gas goes up. To solve that, you simply tie the fixed part of the equation, $150/bbl, to a standard for improvement. DOE tracks average consumer gas mileage (was 23 a few years ago). Have the fixed number increase by $10/bbl if the average gas mileage does not go up by at least 1 mpg per year.

I'm a fiscal conservative and a republican. Taxes are not normally my idea of how to solve problems. But in this case, it is clearly the right answer, and 35 years late in arriving. You can help pay for Russia's invasions of its neighbors, buy nuclear weapons for Iran, and help build AK-47 plants in Venezuela (America is doing this now). Or you can invest in America's roads, bridges, and dams, which really need maintenance. I would have thought that 9-11 and the Minneapolis interstate bridge collapse would have been sufficient wake-up calls, but the nation is still sleeping. Europe woke up years ago--the price of gas in Germany was $9.19/gal when I visited a few months ago--I think we could get the job done without going above $4.25/gal.

chem engr of FL 8:47PM September 08, 2008