Guest Post: Here's How We Get to Energy Independence

Tyler Durden's picture

Submitted by Brad Schaeffer

Here's How We Get to Energy Independence

Respected columnist and author Thomas Friedman has been among the most audible voices in warning the USA about our dependency on foreign oil and our need to end our addiction to this commodity post haste. But his latest call for a $1.00 per gallon gasoline tax to curtail our fuel consumption, the proceeds of which would go towards deficit reduction, misses the mark.

First of all, where Mr. Friedman is absolutely correct is his concern itself which is well founded. Consider: in 1970 the USA imported 30 percent of its crude oil. That figure has effectively doubled in the last thirty years to just shy of 60 percent.

Not since the ill-fated Axis powers of World War II has such a powerful nation so relied on foreign entities to supply its daily energy needs. This is a potential national security nightmare. (Indeed, as much as losses in the field, Germany and Japan were brought to their knees by choking off their energy supplies and causing their military machines to grind to a halt.)

However, Mr. Friedman’s proposal of imposing altered behavior on consumers via a $1.00 gallon gas tax, even one phased in over time, will unduly penalize many lower and middle class workers who have little choice at this time but to commute (this is not like a voluntary consumption tax on soda) and for whom their annual fixed costs would increase anywhere between $500-$1,000 depending on the location and vehicle gas mileage.

Moreover, his idea places inordinate faith in the federal government to properly spend any new tax revenues they do receive with any modicum of discipline needed to pay down the deficit.

Imposing a draconian gas tax at this time, with 15 million already unemployed, with the economy in a precarious position, is not quite the medicine needed at the moment. In fact, it could make matters much worse. I don’t think it takes an economics guru to conclude that $1.00/gallon on top of an already high $3.18 national average could negatively impact consumption in other areas (and we are still very a much a consumption-based economy).

In just one example, an interesting study done by the Center For Business And Economic Research at Ball State University simulated the impact of a $1.00 price increase from a benchmark of $3.00 gallon (not via taxes, just a market rise) on the economy of Indiana. It concluded that the economic activity in that state would be lower by almost -2% and employment by roughly -1.3 percent.

It also offered that tax revenues would decline by -.5 percent. When economic activity falls, tax revenues do as well. Human behavior is unpredictable and it is not a given that $1.00 tax on gasoline will translate into a $1.00 net increase in revenues to Uncle Sam. There is the law of unintended consequences to consider.

I admit that this is just one report in one state, but I suspect similar studies will show the same. Even though numbers can be tortured to say anything to support a policy initiative, common sense dictates that a dollar steered towards higher commuting costs will have a negative impact on the rest of consumption and thus the overall economy all else being equal.

The most far-fetched component of Mr. Freidman’s “one little gasoline tax” proposal is that the extra revenues (should they materialize) will be diverted towards “paying down the deficit.” A noble idea, but if Mr. Friedman honestly believes that Congress will take this windfall and actually use it to for its intended purpose rather than employ clever accounting tricks to steer the cash to their favorite pet projects, well, I have a Social Security “lock box” stuffed with IOUs I’d like to sell him.

Still, if there was no other alternative to Mr. Friedman’s proposal, then I would give it serious consideration. But the fact is, we do have alternatives, both to give us some short-term relief and long-term stability.

As of yesterday we need to immediately open up ANWR and the shallow off-shore regions to exploration and drilling. I love caribou as much as the next person, but this must be done. Even the most conservative estimates tell us that by 2018 if development were green-lighted today, ANWR could be producing as much as 780,000 and then slowing to 710,000 barrels a day by 2030. Also it is estimated that 18 billion barrels of crude oil are contained in areas currently off-limits to drilling for environmental reasons. No nation has denied itself so much abundance of its own domestic natural resources as has the USA.

To be sure, there are environmental risks to an aggressive drilling policy. But environmentalists need to consider the consequences of the USA being cut off from 2/3 of its energy needs...unrealistic given that friendly Canada is our single largest outside supplier, but not impossible. There is no greater killer than the effects of poverty resulting from a collapsed economy.

Rationing the transportation of goods due to lack of petrol means limited delivery of food to our cities, medicines to rural areas, heating oil for homes and businesses in the northeast during the winter, etc. The humanitarian and health consequences would soon be apparent to even the most ardent of green advocates.

Beyond “drill baby drill” our real pathway to true energy independence lies in resurrecting the Synthetic Liquid Fuels Program. This program which began with such fanfare under Jimmy Carter was cancelled under the Reagan administration.

The reasons were ostensibly that it was against free-market principles but the real factor was that oil prices had collapsed and the immediate economic peril had passed. Reagan’s vision was myopic and based on the false premise that arose from the oil glut of the 1980s that oil would be inexpensive well into the next century. But now with turmoil all across the Mideast before us, global demand expanding, and oil trading at $100bbl and climbing, we find ourselves in the position of pouring literally trillions of dollars into the coffers of some potentially hostile regimes with whom we are in an economic and military death embrace.

Although I harbor a conservative’s mistrust of government in my DNA, I do know that government does have its role. Those F-15s that give us top cover while we drive on our interstate highway system demonstrate that. Of course what do these examples have in common? They fall under the auspices of national security. And energy independence must be treated as a national security matter and at least partially funded with tax dollars as we fund our armed forces.

Consider: the USA has more coal than the Middle East has oil. Furthermore, the Defense Advanced Research Projects Agency (DARPA), an agency of the Dept. of Defense (DoD) has estimated the cost of a 100,000 barrel per day 21st Century Coal-to-Liquids (CTL) synthetic fuels plant will be about $6 billion.

Other private sector estimates place the figure higher at $10 billion. Even that higher figure is about the cost of one and a half months of the Iraq war. (A war we are waging primarily because there is oil there remember.) So for the price of the Wall Street bailout—$700 Billion—the DoD could have been on its way to building between 70 and 100 new CTL plants, which would produce up to ten million barrels of synthetic CTL fuel per day.

That is still a high price tag for initial investment. And like many national security initiatives, there is little profit to be made from being the first mover of the technology. (Although in this case the technology goes back almost a century, but it would be a new implementation in this country on a mass scale).

Thus relying solely on the private sector to innovate and invest our way out of this energy dependence problem is problematic for now. That is, unless the government subsidizes the initiative through direct investment. This could even be a profitable venture. Estimates vary as to the profitability break-even cost of CTL, natural gas to liquid (NGL) or biomass refining. Some firms show the profit point to be $45 per barrel. Other estimates vary above and below this level by roughly $10bbl.

Carbon capture technology for cleaner conversion that might be part of any legislation pushes that level even higher.

Still, unlike in the 1980s, clearly we are now above the break-even threshold and thus are the conditions ripe for a hybrid semi-public entity model that could be subsidized by the feds to make up the shortfall should the price of oil dip below that $45bbl level.

Most analysts see this as most unlikely unless the oil producing nations purposefully flood the markets to kill such initiatives to protect their franchise. But they have their own problems in their streets at the moment. If anything, as Mr. Friedman also points out, the price of crude oil will continue to rise.

The current administration is so focused on touting the merits of a ‘new green economy’ that it is missing the potential of an old fashioned synfuels economy already within our grasp. The construction and plant employment opportunities, the increase in economic activity as a new industry emerges from the ashes of our industrial blight, as well as the incredible potential windfall of a ‘mid-east oil independence dividend’ down the road by no longer maintaining a military presence in the regions from which so much of our current energy needs flow is self-evident.

Every month $20 billion of our treasury goes just to maintain our low intensity combat operations in Iraq and Afghanistan, not to mention the staggering financial drain of supporting bases on the periphery.

And there is no end in sight to our involvement in the Mideast without first eradicating our reason for even caring what goes on there…which means an addiction to the commodity we import from the region. Unlike many other ‘shovel ready’ projects that were anything but, synfuels development presents a very real and beneficial investment on many levels.

There is historical precedent that shows the viability of a synfuels program.

But for Allied bombings, Germany was on its way to producing 60 million bbls of synfuels annually into 1946. (A small amount relative to today’s consumption, but scalability is there). Again, when South Africa was the target of punitive sanctions because of Apartheid, they implemented via Sasol a massive synfuels program out of necessity…proving that where there’s a will there’s a way.

And we need not replace all imported oil of course. We currently import a little over 3 million bbls a day from nations in the Mideast and Africa. This amount is quite replaceable by synfuels. I do not mind importing from such stable and friendly nations as Canada for example.

Rather than trust it with a satchel of new gasoline taxes, the federal government could be better utilized through the DoD. In fact, the military is already making strides in synfuels development. The Air Force has already run successful synfuels tests on converted B-52s and have put forth an aggressive goal to have 70 percent of its aviation fuel coming from coal-based sources by the year 2025. They get it. Thomas Friedman does too…even if his solution is off-sides.

Today, there are currently 700 automobiles for every 1,000 Americans; 500 for every 1,000 Europeans. There are only 30 for every 1,000 Chinese. But that figure is expected to balloon to 240 per 1,000 by the year 2035. The world’s thirst for oil is only going to increase, and with it the price. $100 crude is not an anomaly.

It is a harbinger of things to come. Increased exploration of our abundant proven reserves, combined with a sweeping synfuels program to utilize other energy resources within our borders are our surest bets to achieving attainable energy independence.

Certainly more so than a whimsical $1.00/gallon tax (a number the very roundness of which implies to me that it’s the result of whimsical caprice rather than any serious analysis) that would hamper if not kill an already teetering recovery while diverting yet more capital away from the private sector and into the black hole of “deficit relief.”

Like Thomas Friedman, I wonder if history has ever seen such a time where so much of a nation’s own capital was handed over to its enemies for them to use against it—in order to import a product it already has plenty of at home.

Taxes should not be used to change our collective behavior by weaning us off the candy through making it prohibitively expensive; this ignores just how vital oil is to our daily lives. With a more realistic viewpoint that our 19 million bbl per day appetite for oil cannot be just taxed away, I propose we simply take an existing, available and proven century-old technology and ramp it up to make the candy ourselves. More drilling and synfuels may not be sexy or hip solutions.

But they are real and, most important, a part of the here and now. Not the distant future…a future over which we will have little control should the status quo remain unaltered.

Bradley P. Schaeffer is C.E.O./Principal of INFA Energy Brokers, LLC

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trav7777's picture

STFU, idiot.

ANWR, 700kbpd?  Where do the OTHER TWELVE mbpd come from?  Your ass?

Devout Republican's picture

I didn't realize just anyone can post on ZH!  This is awesome!  Where do I contribute my story about how monkey's fly out of my butt?

narapoiddyslexia's picture

Is it possible this is a troll diary meant to distract less-focused readers from the somewhat obvious fact that ANWR will change nothing, and that even discussing it puts off discussing peak oil.

This sounds like an ExxonMobil troll, is this not so?

Oh, and how many got past the name Thomas Friedman? Extra credit for holding your gorge if you did.

Moric's picture

Eh OP has troll written all over him. His number one energy solution is to open up a sensitive issue when the solution is just to use more farts in our daily life. Not only good for keeping loved ones at bay but indispensable when you realize the extent of America's shale gas assets. 

jeff montanye's picture

i think the technology to use the farts (actually sewage to methane) is likely to be cheaper and less polluting than the development of the shale oil, particularly pricing the clean water used therein at a true replacement price.

FeralSerf's picture

There's not enough shit in the sewage to make even a minor dent in the energy supply problem.  Sludge gas barely powers the compressors and whatnot in a modern treatment plant.

South American countries are using a lot of  natgas to power their cars.  High pressure gas mains are common in many American cities.  It's a no-brainer, cheap compared to the alternatives, including especially electric cars.

 

DosZap's picture

South American countries are using a lot of  natgas to power their cars.  High pressure gas mains are common in many American cities.  It's a no-brainer, cheap compared to the alternatives, including especially electric cars.

 

Been screaming that for 20yrs,if your going to raise a tax of a $1.00 a gallon, divert 100% of it to building Nuke Plants.

France gets 90% of their energy from them, why can't we?.

Build 24/7/365 a day, and we have as much or more Nat Gas as ALL of the Middle East combined.

Fracking the shale is going to have to stop, our water supply is more important than what we're getting from Bakken.

Here in Texas they are screwing up the undergroung aquifers the same way.

Ever get a mouthful of gasoline?.

Tastes like shit, and deadly.

Michael's picture

"Reston, VA - North Dakota and Montana have an estimated 3.0 to 4.3 billion barrels of undiscovered, technically recoverable oil in an area known as the Bakken Formation.

A U.S. Geological Survey assessment, released April 10, shows a 25-fold increase in the amount of oil that can be recovered compared to the agency's 1995 estimate of 151 million barrels of oil.

   

 

Technically recoverable oil resources are those producible using currently available technology and industry practices. USGS is the only provider of publicly available estimates of undiscovered technically recoverable oil and gas resources.

New geologic models applied to the Bakken Formation, advances in drilling and production technologies, and recent oil discoveries have resulted in these substantially larger technically recoverable oil volumes. About 105 million barrels of oil were produced from the Bakken Formation by the end of 2007."

http://www.usgs.gov/newsroom/article.asp?ID=1911

History of Bakken Oil Generation Estimates

A landmark paper by Dow and a companion paper by Williams (1974) recognized the Bakken as

a tremendous source for the oil produced in the Williston Basin. These papers suggested that the

Bakken was capable of generating 10 billion barrels of oil (BBbls). Webster (1982, 1984) as part

of a Master’s Thesis at the University of North Dakota further sampled and analyzed the Bakken

and calculated hydrocarbon generation capacities to be about 92 BBbls. This data was updated

by Schmoker and Hester (1983) who estimated that the Bakken was capable of generating 132

BBbls of oil in North Dakota and Montana. Price (unpublished) used a more complete database

and estimated that the Bakken was capable of generating between 271 and 503 BBbls of oil with

an average of 413 BBbls. New estimates of the amount of hydrocarbons generated by the Bakken

were presented by Meissner and Banks (2000) and by Flannery and Kraus (2006). The first of

these papers tested a newly developed computer model with existing Bakken data to estimate

generated oil of 32 BBbls. The second paper used a more sophisticated computer program with

extensive data input supplied by the ND Geological Survey and Oil and Gas Division. Early

numbers generated from this information placed the value at 200 BBbls later revised to 300

BBbls when the paper was presented in 2006.

https://www.dmr.nd.gov/ndgs/bakken/newpostings/07272006_BakkenReserveEstimates.pdf

 

New_Meat's picture

Mikey-u post good stuff.  do u look it all up or do u have a fleet of minions to copy this?

just wonderin'

- Ned

Michael's picture

I'm a one man wrecking crew. I have resources all over the world. Someone should really offer me a job. I don't mess around.

Here's a pretty picture of the  Bakken formation.

Billions of gallons of oil in North Dakota, Montana


Geological Survey calls find largest reserves outside Alaska

http://www.wnd.com/?pageId=61488

 

Flakmeister's picture

 The Bakken is a wonderful field, but it isn't a game changer. It buys a little time, nothing more, nothing less. 

Michael's picture

Here's plenty more.

Great discussion here; Gull Island Oil: The Search for Truth Continues There is no question Gull Island exists and it’s right in the middle of Prudhoe Bay, Alaska. Further investigation only reveals something doesn’t sound right.

http://thecommonconservative.com/?p=65

 

This from Lindsey Williams;

CHAPTER 17

If Gull Island Didn't Blow Your Mind—This Will!

Gull Island just proved what the oil companies have believed for some time. It authenticated the seismographic findings. Seismographic testing has indicated that there is as much crude oil on the North Slope of Alaska as in Saudi Arabia. Since the Gull Island find proved to be seismographically correct, then the other testings are correct also. There are many hundreds of square miles of oil under the North Slope of Alaska.

To clarify what I am about to say, let me first re-emphasize that the government permitted the oil companies to drill and prove many sites (subsequently making them cap the wells and keep secret the proof of the finds), but they do not allow them to produce from the wells. This is why I have referred (below) to a number of wells having been drilled (after I left the North Slope). The only production permitted is from the small area of the North Slope.

Gull Island is located five miles off shore from Prudhoe Bay. It is in the Beaufort Sea.

The chemical structure of the oil at Gull Island is different from that of the oil in the Prudhoe Bay field and the pressure of the field is different, proving that it is a totally different pool of oil from that at Prudhoe Bay.

The Gull Island burn produced 30,000 barrels of oil per day through a 31/2 inch pipe at 900 feet.

Three wells have been drilled, proven, and capped at Gull Island. The East Dock well also hit the Gull Island oil pool (you can tell by the chemical structure). For forty miles to the east of Gull Island, there has not been a single dry hole drilled, although many wells have been drilled. This shows the immensity of the size of the field.

The Gull Island oil find is even larger than the Prudhoe Bay field, which is presently producing more than two million barrels of oil every twenty-four hours.

Where is the energy crisis? It surely is not on the North Slope of Alaska, so it must be only in Washington, D.C.!

Now—just in case Gull Island didn't blow your mind, try this on for size! Only recently, just west of Gull Island, the Kuparuk oil field has been drilled.

Again, this is a totally separate pool of oil from either the Prudhoe Bay field or the Gull Island field. The chemical make up of the field and the pressure of the field is different from the others, proving it to be a totally separate pool of oil.

In an entirely different area of the North Slope than the 100-square-mile area of the Prudhoe Bay field, the Kuparuk field is approximately 60 miles long by 30 miles wide and contains approximately the same amount of oil as the Prudhoe Bay field.

The oil in the Kuparuk field is at a 6,000-foot depth and there is 300 feet of oil sand. The field pressure is 900 lbs. at well head, and test wells have flowed at 900 barrels a day at normal flow pressure.

It is projected that 800 to 1,400 wells will be drilled into the Kuparuk field.

From 1973 through 1980 we were being told continually that America was in the midst of a major energy crisis, yet no oil production was allowed from the Kuparuk field. It wasn't until 1981 that permission was finally granted for production. Why the delay—if there really was a crisis?

The reason Mr. X made the statement that there is as much crude oil on the North Slope of Alaska as in all of Saudi Arabia is because the oil companies have drilled all over the North Slope and have proven that there is as much oil there, but still they are only allowed to produce from the small area.

The North Slope is everything in Alaska North of the Brooks Mountains. Prudhoe Bay is a very small portion of this enormous area (just remember the size of Alaska, as we illustrated earlier in the book).

After the first edition of this book was printed, many people requested additional technical data. This added chapter is a result of those requests.

As I was dictating this additional material, I had the opportunity of being with a gentleman who is a speculator in oil leases. He made the statement to me as he looked over the oath I was making public, that every oil speculator in America who is interested in Alaskan oil leases should get a copy of this, because he had never seen such pertinent information in print before. So what you have just read will excite many oil speculators and cause them to search the maps and watch for the latest leases.

Possibly you, have heard it stated that the Alaskan crude oil has such a high sulphur content that it cannot be refined by most oil refineries in the U.S. We are being told that this is the reason why the Alaskan oil is not helping to solve America's energy crisis. This is also the excuse that is being used for shipping Alaskan crude oil to other countries. It has also been reported that major power companies are even telling this to their customers (in their monthly statement inserts), using it to justify their need for rate increases.

Well, here is a statistic that should silence those false claims and blow the lid off of that phony excuse of too much sulphur in the Alaskan crude. An August 11, 1980, analysis of the Prudhoe Bay crude oil, which is flowing in the Trans-Alaska Oil Pipeline, reads as follows:

Sulphur content - 0.9%
Flash point of the oil - 35 °F
Wax content - 6%
Asphalt content - 2%
Crude oil freeze temperature (better known as pour point) - 15 °F

The sulphur content of the Prudhoe Bay Alaskan oil is low in comparison to oil from other sources in the U.S., as well as many foreign oils.

The Alaskan Prudhoe Bay oil can be refined by any major refinery in America without damage to the ecology.

This means, then, that the widely publicized excuse of too high a sulphur content is simply not true. Therefore, it is just one more link in the long chain of falsehoods that we are asked to believe as Americans.

An energy crisis??????

More Recent Facts—A Comparison

The following is a comparison between the three oil fields on the North Slope of Alaska which have been drilled into with numerous wells, tested, and proven. Prudhoe Bay can produce two (2) million barrels of oil every 24 hours for 20 to 40 years at artesian pressure. Imagine what the production of the Kuparuk and Gull Island fields could be.

Field Pay Zone Oil
(Average depth of oil pool)
 Area of Field
Prudhoe 600 Ft. of pay zone  100 square miles
Kuparuk  300 Ft. of pay zone Twice the size of Prudhoe
Gull Island  1,200 Ft. of pay zone At least four times the size of Prudhoe . . . Estimates are that it is the richest oil field on the face of the earth.
 

Peak Oil Hoax -
The Energy Non-Crisis

 

By Lindsey Williams
Reformation.org
2-14-6http://www.rense.com/general69/noncrisis.htm

They make this place very difficult to search on google maps.

Gull Island in North Slope County, Alaska, USA.

http://www.placenames.com/us/p1403055

http://maps.google.com/?sll=70.36611,-148.365&spn=0.05,0.05

creviceCaress's picture

 

 

i think its confirmed now.

 

micheal, you are a douche.

 

take your bakken drivel and stick it in yer one man wrecking crew ass.  get a job as a politician, thats what you smell like.

 

you have no concept what bakken/anwr is about do you?  i really dont fully understand why you irk me and i dont get into online jousting....but i see you as a tool and a believer in the spectacle....bakken. seriously?

Michael's picture

You will get your comeuppance at $200/barrel.

jeff montanye's picture

$200 a barrel and it is a relatively dirty (polluting), relatively inefficient (great heat loss) technology (internal combustion).  why hold on to this dying (and killing, cf. the middle east, etc. though the post above would have us ignore the zionist entity and its prime mover status) energy paradigm longer than we have to?

Triggernometry's picture

Indeed, online jousting is an exercise in futility, as is any "solution" to a looming energy crisis that does not address the crisis itself: our increasing dependency on a decreasing resource.

snowball777's picture

++++++++++++++++++++++++++++++++++++++++++++

freedmon's picture

Interesting, mike. Can you shed some light on the sort of technical advancements that would have to be made to get and keep the oil flowing all the way through the Alaskan winter? What are the risks of supply interruption due to inclement weather conditions? How much would that extra expenditure raise the extraction cost per barrel of alaskan oil vs. oil from say, Saudi?

Michael's picture

You fill the storage tanks in the summer and you enjoy the fruits in the winter.

Treeplanter's picture

They worked that out nearly forty years ago.

prophet_banker's picture

you seem to be using a straw man tactic in your rebuttal that peak oil isn't real, and use Lindsey William's as source; when he also utilized this said straw man tactic of mislabeling peak oil as meaning running out of oil in the ground.  This is a mis charactization of truth, it is all about RATE OF EXTRACTION, And we peeked 5 years ago already in conventional extraction, and are now on the down side of the bell curve.  It has only been non conventional extraction, tar sands, liquid coal; that is making up the difference.  But make no mistake about it, exponential growth rates of extraction are over, get ready for zero growth

samsara's picture

Flak Tell them the Flow rate of Bakken. 

It's so depressing hearing people talk about how much gazillion there is in 'Reserves" some where.

 

What's the Flow baby?

We're drinking 15 - 20 million a day.  And the bakkens gives us how much per day?  500,000?   Have they sustained 6 digits in their 20 year history of pumping from there? 

Is there ANY projection of them producing multiple millions of barrels per day?  

Didn't think so.

Hey,  Ya got a 100 million dollars in this bank account,  but you can never draw out more than 1000 dollars a month. 

LIVE IT UP.

It's like living in Argentina  only with oil.

(sorry, Just looked it up, Bakkens does about 200,000 per day.  REALLLY GONNNA HELP )

http://www.theoildrum.com/files/Bakken_figure1.png

snowball777's picture

Do the fucking math: 6 MONTHS. That's NOTHING.

Taint Boil's picture

Some good links here about the Bakken Field Myths that seem to going around.

 

Remember folks we use 16,000,000 barrela a day.

 

http://grow-guides.blogspot.com/

Oh regional Indian's picture

Nice indeed. Till you really put your mind to it and realize, conclusively that the age of petroleum is OVER.
Finished. It was a blessing that became a curse and has now, conclusively began to consume us.
Our state of be-holden-ness to it's convenience is quite stunning. It's been many years in the making, but the motor-vehicle is now THE aspirational society poster-child.
And every day and in every way, motor vehicles kill, maim, pollute, from cradle to grave, from hole in the earth through the burn.

It's over people. Seriously. It and this whole explosive industrial paradigm is finished.
We are at the stage when the snake is now eating it's own tail.
The more you can do, every day, to get used to this idea, the better.

ORI

http://aadivaahan.wordpress.com/2010/12/24/where-do-we-fit/

samsara's picture

It's easier to spot them by which tactic number they use.

http://warofillusions.wordpress.com/2009/01/20/25-rules-of-disinformation/

Numerous #'s 4,5 & 6's

We had # 13 with the Hydrogen Decay thingy

#19 numerous times  and #20 more times than you can count inconjunction with #22.

 

hambone's picture

This author and article really are the height of idiocy.  Drill more.  Great.  Won't change the price of oil in any significant way...unless you are advocating the US should nationalize this or all oil within our borders (all energy...anything else?) and subsidize the costs to Americans?  Or do you feel that the price of oil based on an 83million barrel day global usage (and growing) will be seriously driven down by gradually bringing on less than a million barrels a day (while new demand far outstips that offered)? 

I don't care if you open up to more drilling or not, (if fact, hell, please do so we can then move on to serious efforts to resolve our energy shortcomings and insecurity).  Just be secure that this idea we'll just drill more will not solve the issue, not even on the margin.  The oil will go to the highest global bidder at the highest price. 

Also, this kind of supply side thinking that the world has infinite resources and no need to address the demand side is really fucking annoying and stupid.  I expect more on ZH.

Capitalist10's picture

We've been hearing the same lame argument that "opening up ANWR won't influence oil supplies for 5 years" for something like 30 years now.  If we had put a stop to this tree hugger obstructionism at any point in the past, we would be producing oil from ANWR now.

The argument that ANWR won't supply all our energy needs is a red herring too.  No single source will, but every barrel produced in ANWR is a barrell we don't need to buy from some Middle Eastern dictatorship.

hambone's picture

Great - go for it.  But understand the money goes to corporate interests and likely foreign to boot (BP, Shell, Total, whatever).  Guessing the corporate taxes on this will be "not so much".  So, if it's approximately the same price and the money probably leaves the country either way...what the fuck is the difference? 

Now could be an interesting discussion around nationalizing these resources essential to our national economy and security and running them ala utilities.  If this was "our" resource for "our" use, then this is a different conversation.  Until that happens, we're just lining somebody elses pocket on Wall Street or Riyadh and it's all the same to me cause both are engaged in destroying our society.

Capitalist10's picture

Thanks for informing us all that oil is produced by *gasp* oil companies.  Is it produced by unicorns in the Middle East?

The difference is that our overreliance on Middle East oil leaves us vulnerable to embargoes, supply interruptions, cartels, price shocks and political extortion.  Sure, the oil companies make money, regardless of where they produce the oil, but some of the money is also retained by the producing country.  In the Middle East that money supports dictatorships that are hostile to our interests and it also supports terrorist organizations such as Al Qaeda.

hambone's picture

I don't buy it - we buy very little of our oil directly from the Middle East - mostly Africa and Western Hemisphere.  But oil is a global commodity and the price is unaffected by who buys it.  All that matters is that it's a global market for energy and the highest bid wins (some caveats when moved by fixed pipelines).  Middle East will get their money regardless if we buy direct or eat up capacity elsewhere that forces that region to buy more Middle East oil. 

I see the greater threat to the US is the internal threat - theft, graft...greater than any external threat from Al Qaeda or whoever.  Look at the damage being done to the US from the economic collapse driven by Wall Street / DC / and apathetic citizens.  Al Qaeda can only dream of such devastation.

There is no power that could destroy us but ourselves and we're doing a fine job giving away everything of value for nothing in return.

BigJim's picture

When a company produces something in a competitive market, it is not the only entity profiting from the deal - so is the buyer.

The more people producing a commodity, the better it is for the consumer.

As for wishing to nationalise production - have a look at what happens when governments directly get hold of the enormous revenues generated thereby: untold cronyism and corruption.

If you think the US is bad in this regard, take a look at Nigeria, Saudi Arabia, Libya, etc, etc. I know they're not directly comparable, given their different histories and cultures, but frankly I'd prefer to keep as much money away from governments as possible - it only encourages them.

hambone's picture

Big Jim,

Think of oil corporations producting oil in N. America have everything against them vs. Saudi Arabia, eg...higher labor, higher regulatory, higher exploration, higher extraction, etc...to sell this oil back into the global market @ $50 barrel these companies make much lower margins in N. America than Saudi's at $5 barrel. 

My point is these corporations are really in a competitive disadvantage vs. Saudi and the like...so we pretty much give 'em the oil for free and lay little liability for anything going wrong on their feet.  We thought this is good cause they employ us, pay taxes, build infrastructure.  But trouble is corporations are more and more not paying taxes, outsourcing functions, employees, and HQ's overseas.

These corporations and ourselves no longer have the same interests in mind.  They will move with the wind to the most fertile soil and leave us w/ the great dust bowl. 

If we want energy independence and security, it's going to take a quasi state / market approach.  That's why I throw out the utility model as an option.

Zero Govt's picture

Hambone

I don't know what planet you've been living on for the past 5 years but your "quasi State / market" approach has already been tried on US property, US education and US banking. Where has your model got you???

Yes 3 of the biggest bankrupt disasters in global economic history. 

What are you pickling your brain in, Valium!!

Only a free open competitive market works. It never fails. The only models that fail are State and "quasi State / market"  models. Go and suck hard and long on some housing, education and banking for a few years and when you've swallowed the miserable bitter bankrupt taste of your incompetent modelling then we can talk again

jeff montanye's picture

first off, where is the widespread, excellent private education (k to phd) of which you speak?  the u.s. had a great public education system until about when the property tax referendum in california blew up what was an excellent state university system and similar priorities began sapping the rest of the nation.  if your ideology keeps you from seeing this, what else does it blind you from seeing?  

second, the "property" (real estate?) and banking markets' failures were themselves, in the main, failures of free, open, competitive (and vastly fraudulent) markets.  greenspan himself said he couldn't believe the executives of companies would so casually sacrifice the firms' long run well being for the executives' short run advantage.  again if ideology makes you think less regulation (i.e. fraud law enforcement) would have fixed things, what else does it make you think?  good markets require good regulation.  consumers have little information and are at enormous disadvantage against corporations or even sellers in a rug bazaar.  

it is the shameful, criminal, economically disastrous world control fraud and its coverup/bailout by the governments of the world that have destroyed belief in the usefulness of corporations or governments.  it may be their nature or it may be the particular stewards we endure.  i can't tell.  but it has been better during other times.  it may be so again. 

Zero Govt's picture

Jeff

Regards the previous "great" public education can you define its greatness? I can assure you nothing the State has ever done is great, it is always without exception 2nd-3rd rate in every quality measure and 3 to 10 times more expensive to deliver.

One reason the State dominates a market is to avoid any and all comparisons with private competition because it is so crap and quality goals and achieving them with any commercial discipline such as return on capital employed, input costs, effective use of technology etc

It's also hard to tell where the private education system is because the State has so many dumb rules and Regs and qualifications and standards which stick a spanner in the works of both State and private schools and of course the free market developing its own course. You mention the Californian property tax yourself doing precisely that to the previous "great" public education.

The US property and real estate markets were not examples of a free market, but examples of State misdirected mal-investment which is what happens in every market where Govt subsidises. We can add the same carnage in trains and transport, corn ethanol subsidies, green energy and other previous free markets now running into the ground due to State misdirection such as energy (no new US oil refineries in 30 years).

Regards Greenspans comments about short-termism amoung greedy executives the problem seems to be Govt bailing them out.  Because the free market would resolve such issues with bankruptcy forced by a free competitive market that is ruthless with wasters who do not run efficient operations. 

Good markets do not require "good regulation". I refer you to the black market, wholly unregulated, un-policed with zero consumer protection legislation. It delivers $Billions of top quality product to its end-users day in day out, year after year for decades. It's a totally free market free from any and all Govt and works on the pure competition and pricing mechanisms. It is self-regulating because of these mechanisms.

I've no idea where you think a free market "disadvantages" the consumer and would lead to a "rug bizaar". Maybe in the past 2,000 years of markets you can give 1 solitary example?

Your disenchantment with govt and corporations i can assure you are entirely Govt made. Nowhere the free market operates is there anything like you mention. Simply because when there is the competition mechanism gives consumer the choice (power) to walk away from a crap corporation and choose another.

All the problems come when Big Govt and Big Corps shut down the free market and shuts down smaller rising competitors to deny consumers choice (power) and try to monopolise markets. Have you seen a new entrant in the oil market or garage chain to deliver your petrol in the past 50 years? How about energy? How about water? How about pensions? How about mortgages?

All these markets have been systematically rigged, systematically hoarded into the national central committees of large corporations rather than allowed small competitiors to emerge as any healthy free market would welcome. The constant emergence and 'churn' of new young entrants to put the big old diseased dinosaurs to a deserving grave.

Ahmeexnal's picture

Riiiight. Just like the free open competitive stock markets.

The State is now only a puppet of the "free markets" in most countries.

Zero Govt's picture

Ahmeexnal

The Stock Markets are not 'free markets', they are monopolised by a few boards such as the NYSE and Nasdaq who are competitors in name only. There is all sorts of rigging going on to favour the big players in the casino against the small retail investors such as their advance order info computer systems.

Of course if a free market existed many of the Big diseased WS dinosaurs who the Indexes are rigged for would no longer be here still rigging the Indexes because the free market would have allowed them to go bankrupt. Blame your normal culprits for all disease, Big Govt bailing out Big Corps.

Same as my post to Jeff above I refer you to the black market to see how smoothly free markets work and in the interests of both consumer and producer day in day out, year after year for centuries (no Govt, law, lawyers, consumer protection or regulation required). Or visit a farmers market, car boot sale or a bazaar when you're next abroad. 

AnAnonymous's picture

As for wishing to nationalise production - have a look at what happens when governments directly get hold of the enormous revenues generated thereby: untold cronyism and corruption.

If you think the US is bad in this regard, take a look at Nigeria,

 

Just like Uganda, Nigeria national oil company is small. Most of the oil extraction is operated by private corporations. Contrary indeed to Libya, Saudi Arabia etc

Seer's picture

The "solution" is to more rapidly exhaust limited resources?  Strength through exhaustion?

The ONLY solution this is is to the wealthy for something to pad their pockets (at the expense of everyone else).  One has to love corporate socialism!  Reagan was a genious for really launching this kind of crap to new heights! (and the idiots still swallow that swill!)

I wonder how folks are going to scapegoat Mother Nature when she no longer puts out...

BTW - You failed to mention "Communists."

God bless the US and its high regard for life and liberty esp when trying to eradicate hobgoblins (Operation Northwoods, 9/11), and for Edward Bernays!

kayl's picture

How about this solution--We take the oil leases away from the MFers who held on to leases but failed to develop the oil since the 70s. We put these fields online with nationalized producers and have the oil refined in nationalized US refineries. Open up jobs in the oil sector like it used to be.

Parallel to this operation, open up development of nuclear power facilities and alternative energy. Cut through the red tape and adopt plans that don't take 30 years to implement.

Why is there no common sense left in this radical environmentalism-tree hugger, PC culture!

Flakmeister's picture

Buddy, you are just blowing smoke re: leases and oil... The US is the most pin-cushioned country in the world, they are for all intents and purposes getting blood from a stone. Given the proven and probable resource base, the US is massively overproducing relative to the rest of the world.

Zero Govt's picture

Yes we need to ask the US Govt why US oil production has declined so radically over 30 years?

Could it be the stinkingly corrupt US Govt has been strangling its own supply? Could it be the stinkingly corrupt US Govt run a protection racket for monopoly oil companies to prevent oil exploitation by smaller, faster, more efficient oil companies???

Take a Chinese Oil Co's offer for one of the small US companies. The US Govt stopped the sale for 'security' reasons. Exxon picked up the same company with shareholders having to take $300m less than the Chinese offer. Big Govt, Big Corp, Big Stink

This is the patent history of the stinkingly corrupt US Govt who are 100% responsible for both the 30 year decline (strangulation) in US oil and the fact no oil refineries have been built in the US for nearly 3 decades (you want jobs, as the fuking US Govt where they're sending US jobs go).

Flakmeister's picture

  Could it be that your head is so firmly up your ass that you fail to realize that the great US oil fields were found in the 1930's and they have been pumped dry?

hardcleareye's picture

These post are very funny....  in a sick sort of way... 

How do we address our problems? "Why get rid of government and regulations, it's the source of all evil!!!!!!"  "Do away with government and those tree hugging environmentalist and all the oil problems go away.... it's a big conspiracy to screw you over..."

Gee, what about protecting "the commons"?  

I know this might come as a novel idea but you could be wrong (the conspiracy thing)!!  Maybe your grandkids might really need that oil.... 

The hubris is just over the top....

Zero Govt's picture

Hardcleareye

Nobody needs a "conspiracy" about the US Govt, it's patently in your face reality what is going on to anyone who lives in the real world. Just take the Chinese offer for a US oil company blocked by the Govt fleecing its shareholders of $300m when (surprise surprise) Exxon then came in and bought it up.

As for your love of Govt planning and Regulation take a look at US banking. Take a look at the shambles of US healthcare or the complete wasteland they made of US property. 

As for "novel ideas" the US might try one called the "free market". It's the ONLY mechanism that has worked throughout history at providing both producer and consumer with satisfaction guaranteed. A stark contrast to the carnage, shambles and complete bankruptcy the US State and its totally incompetent regulators 'manage'.

You're clearly a fuking idiot