The ongoing message from the media is that we’re running out of oil, and that it’s dirty, and scary and bad for the environment. Never mind that our air is some 70% cleaner than it was say, 30 years ago. And that with new technologies oil has never been safer to drill and extract and move. Oil platforms in the Gulf buttressed by Katrina were in many cases up and running within a few weeks, without a spill. And the safety of these massive endeavors is unprecedented:
The most recent statistics we’ve seen from the Minerals Management Service, the federal agency that oversees oil and gas production in the offshore continental shelf, say the damage so far has not been nearly as extensive as some people feared. Of the roughly 4,000 production facilities in federal waters, thirty-seven platforms were destroyed. Those produce about one percent of total Gulf production. Four large platforms, accounting for about ten percent of offshore production, suffered extensive damage and could take three to six months to get back on line. So roughly forty-one platforms out of 4,000 is what we’re seeing so far.
The dirty little secret is that there’s lots of oil. We’re just constraining supply. Pete DuPont has it about right:
First, we are not running out of oil. In 1920 it was estimated that the world supply of oil was 60 billion barrels. By 1950 it was up to 600 billion, and by 1990 to two trillion. In 2000 the world supply of oil was estimated to be three trillion barrels.
Technology is not only finding more efficient ways to extract oil, its finding more oil. But it gets worse:
Then the Senate voted in June to mandate a reduction in projected future oil usage of 10 million barrels a day, or 35%, which, since our domestic oil production is declining, means less imports. In other words, Congress wants to block drilling for more American oil while at the same time blocking the importation of oil–not a rational energy policy.
If your goal is a regressive increase in inflation, this is a good place to start. We can only imagine the politicians’ idea is to drive the price of oil up until other technologies like wind and solar become economical or preferable and therefore companies and individuals voluntarily begin to convert. In the meantime, this approach encourages increased, fabricated oil company profits, slower economic growth, which is hugely regressive and a final, higher cost of living, which is also regressive.
But why bother? Natural gas can run in a car right now, with no residual pollution. Nuclear energy and its cost remains a source of confusion given its regulation structure. And who knows what our technological research will uncover in the next twenty years? It always finds something.
Certainly ethanol production is nothing but another political boondoggle. There is a reason the government has to subsidize its production to get the market to use it:
It takes some seven gallons of oil to produce eight gallons of corn-based ethanol–diesel fuel for the tractors to plant and harvest the corn, pesticides to protect it, and fuel for trucks to transport the ethanol around the country. So there is not much energy gain, nor with all the gasoline involved does it help with global warming by reducing carbon dioxide emissions. And ethanol yields one-third less energy per gallon than gasoline, so that mileage per gallon of ethanol-blended auto fuel is less than gasoline mileage.
It’s really more accurate to think of corn as a catalyst, not an energy source, and we subsidize the producer and shelter him with an import tariff. In what alternate reality is ethanol a good idea?
We do disagree with Pete DuPont on one point; we are not convinced the ethanol debacle is a fundamental driver of price increases in corn, although Wall St. speculation of same may be having the same effect. But feed grains in general are rising as world demand sky rockets. The reason: the world is getting richer! Hundreds and hundreds of millions of people around the globe (mainly in China and India) are clawing their way into the middle class. And as they gain disposable income, they’re inclined to upgrade their diet, including meat.
Still, ethanol can not be any kind of answer. In fact given world demand on food stuffs we’d be much better off freeing capacity for food production and weaning our farmers from subsidies altogether.
Our energy policy needs a lot of work. The good news is that the situation is not as dire as reported. It’s largely an artificial one of our own politicians’ making, and could be undone with some sound economic thinking.
