Sunday, July 06, 2008

A Few Thoughts On The Current Oil Crisis

Every so often, someone comes up with a new crisis to scare us. A lot of the time, it’s some con artist who has figured out that scared folks may be more willing to spend money without making sure they are not getting fleeced. Al Gore’s carbon tax and credits scam comes to mind, for example. Anyway, the most current fright ride is the oil crisis. All sorts of crazy and – frankly – dishonest screams are going on out there, demonstrating how little the general public understand how oil is produced and used, and how we can resolve our energy needs in a functional and realistic manner.

Oil is useless to Nature, first of all. Finding a way to use petroleum does not take it away from animals’ food supply, nor does it necessarily endanger the habitats in which they live. What causes problems are spills, and the pollution caused by burning it, especially in inefficient engines and furnaces. That is, as nations become more advanced, the less likely they are to contribute to pollution, even though most advocates never admit that fact. The Exxon Valdez spill, after all, is notable for the unheralded fact that Exxon has not had a repeat of it in decades, a claim many other companies – notably Chinese companies – cannot make.

Oil is also a popular fuel, because it has generally been cheaper and cleaner than the available choices before it. If you have ever seen one of those quaint coal-burning train engines, you may wonder about the black smoke belching into the sky. Oil-burning engines may be less romantic, but they were worlds better for the environment. Oil also replaced burning wood, because oil burned more cleanly, was less expensive, and because a tank of oil was far easier to acquire than cutting down a grove of trees. This is important, because the transition from oil to something else depends on the usefulness of the substitute. Simply demanding that we stop using oil is stupid; people will use whatever fuel best meets their needs, and that’s simply not going to change.

To the present problem, though, just why is gas $4 a gallon? There’s plenty of blame to go around, largely based on three key facts:

Nations like China and India are using a lot more petroleum than they ever did before, as their economies rapidly industrialize. This means that significant pressure upwards , permanent pressure, is being exerted on the demand curve;

Domestic oil options are not allowed to be used. At least by American companies. Chinese companies are known, for example, to be drilling 75 miles of the US coast, where US companies are prohibited from drilling. There is no acceptable honest answer as to why Congress deliberately works against American interests. And that includes Republicans.

And for more than a generation, there has been massive resistance to building any new petroleum refineries in the United States. Environmentalists lie about the effects of building refineries. Oil companies have seen their needs ignored in lean years, and punished in good times, so that they have no stomach for building expensive and capital intensive refineries that will not bring in profits but will bring tons of headaches. Governments have ignored the need to think in terms of long-time infrastructure, and to put American needs first. No one is willing to tolerate the risk and expense of building the refineries which would immediately and significantly improve supply of gasoline to Americans, let alone encourage it.

Many argue that we are running out of oil. That is both true and untrue. Certainly, the amount of new oil deposits being found each year is less than the oil being used. However, the technology exists to make use of a number of types of oil not considered economically viable before, such as shale oil. Many argue that oil is ecologically bad, but this is generally true in emerging nations, which would use the oil for their needs no matter what other nations said; Oil is essentially a strategic commodity. Developed nations, however, have developed many ways to reduce oil consumption and to operate oil engines more and more cleanly.

What is certain, is that oil will continue to be relatively expensive. I think the price at the pump will go down a bit, but in general the trend will continue to be rising prices. This will force a change in both short-term tactics and long-term strategy. Historically, when such things happen some very good ideas have been provided. But just as good medical ideas come from doctors, and good military ideas come from soldiers, the solution to how to address the changing needs and use of oil will come from the people who work with oil, who find it and make it useful. Looking to Washington is looking the wrong way.

1 comment:

Anonymous said...

It wouldn't hurt to mention Americans obliviousness to fuel economy; the love affairs with SUVs are a relatively recent phenomena. Also, virtually every major oil producing state-especially Nigeria and Mexico-
have notoriously corrupt governments which obviously hampers reaching peak production levels. Iran is at 50 percent of pre-revolutionary productivity...