An Oil Question
16 July 2008 - 14 תמוז 5768 by Huw
Y COWORKER And I were discussing the whole off-shore drilling question. He insisted that McCain’s plan would lower gas prices - which no one in either campaign actually claims. The drilling thing is a psychological ploy of politicians, but let that go for a minute.
What I countered with was the following and, dear readers, please rip it to shreds.
What has allowed us, in the past, to hog all the oil was our strong economy. All roads of production flowed this way. Internationalisation (WTO, NAFTA, etc) has resulted in economic equalisation in one respect: other economies have grown stronger - some stronger than ours. Coupled with the credit crisis, this has created a weak dollar.
The weak dollar is currently allowing the other countries to outbid us for oil. Demand is high not only because there is a lot of new need in other countries, but because there is a lot of new economic power to answer those needs. That power comes from a weak dollar.
The weak dollar is currently destroying our power to outbid (eg) China, for gas.
And finding oil outside NYC harbour, for example, won’t make it any easier for us to buy that oil because the capitalist theory requires that the highest bidder get first dibs. And the internationalist oil companies would have no reason to give us the oil… unless we became more isolationist in our economics and our politics: unless we nationalise - to various degrees - the oil. Any oil lease will need to be restrictive. Otherwise we have no way to guarantee our access to any oil and we will only allow other countries to continue to out-bid us.
What appears to be clear is that demand may be beginning to outstrip production. I say “may be” because a couple of the oil producing countries claim that this is a speculator bubble rather than a true shortage. If demand outstrips production, then the strongest bidder will, indeed, take the first cut of the oil.
However, it is also not in the oil producing countries best interests to really have that happen. It could be a shortcut to military action against them if the prices begin destroying the world economy. This is why a couple of the countries have been trying so hard to talk the prices down. (They assume it is a bubble.)
The USA has a couple of problems in particular. We have not built an oil refinery since close to the middle of the last century. Anti-technology ecologists have made the process of licensing any new means of energy production so prohibitive that they have stopped even legitimately needed expansions. Their battle cry has been to essentially claim that any development of any type will permanently damage the environment, kill us all, and trigger the Apocalypse. They make a fundamentalist dispensationalist preacher sound positively benign. Unfortunately, they have a clout far larger than their numbers.
Recently, drilling for oil in previously protected areas has crossed the 50% approval line in national polls. As more than one commentator has pointed out, we need short-term and long-term plans. There is little doubt that drilling is not a short-term plan. However, to say it is no plan at all is simply more of the typical American short-sightedness. It is a plan for the mid-term, as the first oil wells could start producing before the next President finishes serving two terms in office. And, it may buy us the time we need to continue working on alternative methods of energy production, including nuclear.
BTW, one of the best ways to lower energy usage is to irradiate food so that it can be packaged and stored on shelves rather than on the refrigerator (until opened). This method is successfully used in several Global South countries without evidence of any ill effects to the populace. However, our friendly neighborhood anti-technology ecologists have done their busy little job in scaring people with no scientific evidence to back them up. After all, it is radiation so it must be bad, right?
I am very ecologically minded. My wife and I divide up our trash, keep the thermostat high in summer, etc. It is ecologists that I can’t stand.
I’m with you on the radiation - that’s why I buy tetra-packs whenever possible. And our local Hippie store carries them :-)
What do you think of my capitalist idea? Even if we have oil wells all over, unless we force them to give the oil to us (nationalisation) it won’t work, unless we bully the world back into a strong dollar and a weak everything else.
I don’t mind the irradiated food thing either, actually. I agree that the U.S. will not be able to drop the price of gas solely through acts of navel-gazing, I mean, greater conservation, unless we were also somehow able to get China and India (in particular) to do so. Even though they currently use far less energy per capita than we do, they are understandably irked with some of America’s “do as we say, not as we have done” attitude towards car ownership, A/C everywhere, etc.
Any potential price drop, even with a successful (but unlikely) governmental effort to keep the products of offshore drilling for the domestic market, wouldn’t happen until possibly 2030, according to some reports, by which time I would hope we’re all well on our collective way to some other primary source of energy (and Huw, you and I shall be poring over our retirement savings by then). Meanwhile, we will have the immediate environmental and economic costs of the oil spills, etc. which inevitably accompany drilling.
I think that you are right on the nationalization. It does not mean that nationalization will happen, but that it is a tempting path to take. However, given the high percentage of oil that we import, nationalization would lead to an international backlash that would really hurt us.