Shandrew (shandrew) wrote,
Shandrew
shandrew

My summary of the 2008 RNC

2008 RNC: http://flickr.com/photos/4blackbeans/2830161158/

I continue to be disturbed by the complete lack of basic understanding that politicians have on energy issues. I wonder if they are actually completely ignorant of reality or if they actually have talked to experts, but instead say greatly (and badly) simplified things to target a dumb electorate.

1. Oil and energy are not equivalent. If we had a few thousand additional giant hydro/gas/nuclear/coal power plants today, we'd still be consuming pretty much the same amount of oil, since little (and a shrinking amount) electricity in the US comes from oil. The great utility of oil comes from its energy density and form. Building more plants that generate electricity won't affect our oil consumption unless we have transportation that uses electricity instead of oil.

2. Energy independence is very misleading. We don't really want energy independence, for the same reasons that we don't want shoe independence or car independence; the benefits from trade are huge, especially for a commodity where the product is identical (when was the last time you saw a "MADE IN [COUNTRY]" label on a tank of gas?) What we really want is energy that is (always) cheap, clean, and available in the location and in the form that we need it.

3. The only way that opening alaska for more for oil exploration will lower our oil prices significantly is if we nationalize the oil fields, in the same way that Russia, Venezuela, and Middle Eastern countries have done, and we choose to subsidize it. I'm not saying that's a good idea, just that oil is a world commodity with low transportation costs, so it'll go to who is willing to pay the most for it. Increasing global production by a fraction of a percent is unlikely to noticably affect prices (plus, if it finds it to be profitable, OPEC can reduce production slightly to keep supply the same). Since the price is unaffected, drilling in alaska does not do anything to change the amount of money flowing to countries that we do not like.

Another way to look at it is to ask, "what are gas prices like in an 'oil independent' region?" Well, gas prices in Alaska are > $4/gallon too. In a world market, the prices are affected by world supply, so for prices, it doesn't matter if new drilling is done in alaska or zimbabwe.

4. So, what does opening park land to oil exploration buy us? It'll bring a lot of money to the oil companies, if the fields prove to have large amounts of economically extractable crude oil, assuming that oil prices are still high ten years from when the ANWR is opened. Alaska government and its residents would receive a lot of money that the oil companies would pay for mineral rights. For the rest of us? Not much impact. At best we might have a very slightly stronger dollar (starting ten years later) as we would be able to reduce oil imports by a couple percent, and that would slightly lower gas prices.

5. You may then ask, how can oil prices be lowered if we can't discover much on the supply side? Well, we can't discover much more, but we can get others to increase supply. The way to do that is to promote work which will decrease prices in the future. For example, if we were to find a method of producing ethanol for the equivalent of $10/bb oil, all oil producers would pump as fast as they could to sell at high prices before people switched to the new cheap ethanol which would eventually force oil down to similar prices. There's an interesting positive feedback loop working there, though it also works in the other direction.

On the demand side, we're already seeing demand drop, SUV sales are ailing and subcompact sales are huge. If the US could equal the transportation fleet gas efficiency of countries like Japan or China, the amount of imported oil needed will drop tremendously. Or even better, a large scale switch to electric vehicles would crush oil demand--as battery and other energy storage technology improves every year, this becomes more and more advantageous.


My prediction for the future: Ten years from now, over half of cars sold here will be electric vehicles or EVs with range extenders (serial hybrids like the chevy volt). EVs will be even more popular in developing countries. Worldwide oil consumption will gradually decrease, pushing prices down below $100/bb. I think this is inevitable, regardless of who controls the US government. The election will affect the trajectory to this point, and how much the US leads and profits from these changes.
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