Intro to Oil: Part Two
Posted by seed @ 10:58 AM
Answer quickly now... Who is responsible for the record high gas prices?
(Hint: the answer is not Big Oil.)
Still no answers?
Try this: Our politicians are.
See, unlike much of Europe and Canada, America was mostly frontier fifty years ago. Sure, we had big cities and big populations. For the most part all the spaces in between the metro areas was undeveloped. Unlike other places, it was also develop-able; flat, dry, etc. So, when the automobile came online, and by that I mean everybody could afford one and the fuel to run them was readily available from a domestic source, all those empty space filled up. The result is an urban landscape that relies heavily on the ability to transfer products and people with cars and oil. Take that to the bank.
With that said, the supply of resources to support that landscape has always been available, and pretty cheap. Once our domestic supply dried up in the 70's, partly due to supply and partly due to policy, we began to rely on other sources. America was the biggest buyer on the block. Europe didn't have the need or the space for cars, Russia and China couldn't afford them. So we got to buy whatever we needed without any change in supply. [Aside: the shortages of the 70's were created by federal price fixing. Supply ran low because prices were too cheap.]
While we were able to buy what we needed abroad, our policies began to restrict what we could produce domestically. That's not a problem unless the supply available abroad begins to shrink. Enter India and China. Now there's more buyers on the block. Simple supply and demand - you got it.
At this point, our quick riders will suggest that buy reducing demand the price will go down. You're right. Except for the fact that in order to do that, you would have to tell China, India and other emerging markets that they cannot have things the way we do (because they are bad), and convince Americans to stop moving further away from employment. Why the blank stares?
Fuel prices could also be reduced by shifting demand to another resource. Let China and India buy all the oil the need while we find something smarter. Here's a clue: oil is still the best thing on the market. Run it through a hybrid and make it more efficient if you like. Ethanol is not the answer. For starters, it's not as efficient. Specifically, ethanol has a third less energy than equal parts of gas. So, you need to burn more of it to go the same distance. Producing more of it costs more gas, unless you think the tractors all run on water. Further more, the way ethanol reacts with water, specifically condensation in pipelines, the only way to transport it is with trailers. You guys see where this is going right?
Add to that line of thinking the fact that converting a food to a fuel will only increase the price of food. Taking feed grain off the market to convert to ethanol only reduces the food supply, which raises the cost of things feed grain is fed to, like milk and beef. Converting food fields to feed fields reduces the food supply further. That leads to increased food prices that effect markets abroad and, read this carefully, cause the very things that conservation policy is trying to avoid. To say that more clearly: one of global warming policy's intents is to avoid the ill-effects of climate change, ie: food shortages, starvation, etc. The cure is just as bad as the symptom. Don't believe me, here.
In wicked simple terms, that takes us up to today's situation: Rising prices due to restricted supplies and increased demand. Got it? Great.
Then we can all agree that the answer to this little mess is not: tax the oil companies and restrict domestic production further. [Aside: if Reid's thinking is correct then one would assume that eliminating farm subsidies will reduce food prices. Hilarity ensues.] Thirty years of elective restrictions are the cause. The solution is measured, controlled development of domestic supply for a short-term goal of reducing dependancy on foreign supply and reducing prices; with the long-term goal of developing a replacement technology.
