Yes, the price of oil keeps going up, gas is at about $3 a gallon and the politicians are afraid. They're in a tizzy because they think they'll be next as the bloodthirsty cries of the unwashed masses echo to the sky ever louder in a rising chorus of outrage and despair: "Bring us the head of ExxonMobil!!!!!!!"
But it may surprise you that the big oil companies are not laughing all the way to the bank.... ok, well maybe they're chuckling a little, but there are dark clouds on the horizon for Big Oil. I came across this article on BusinessWeek's website which explains it pretty well.
These problems are well known in the industry, and those of us who work in it are bemused when politicians and refuseniks blame fuzzy concepts like "greed" and "price gouging" for the price of oil. Yes, both of these reprehensible things exist, but it all depends on the thresholds that we're willing as a society to tolerate. Nobody was calling for oil executives' heads when gas was $.89 a gallon in 1991, were they?
Trust me, as an unashamed enviromental conservationist liberal, I am no fan of Big Oil or our country's addiction to it (even though I work in the industry :-) How's that for 'perspective'). The BusinessWeek article's boo-hoo tone is fairly sympathetic to the industry -- no surprise there, though from my perspective they are crocodile tears. It's par for the course -- the article's in a business magazine after all. And as a business major I like to read about issues such as this one from a business perspective, expecially since the issue of oil dependence is so divisive right now. I just can't feel sorry for ExxonMobil, whatever troubles they may have in the future. Among oil companies they in particular have been instrumental in blocking progress re: CO2 emissions and regulations to protect the environment, as well as stumping hard for opening ANWR to exploitation. Cry us a river, ExxonMobil.
But people who blame the oil companies miss the point -- the problem is built-in, systemic greed in petroleum markets, the world's escalating demand, diminishing supplies, flat refining capacity, and certain cartels and unsavory countries which have found our Achilles heel and are using it to their advantage. I could go on to say that the root of the problem is a blind adherence to a free-market, capitalist ideology that is inappropriate and destructive for an irreplacable and finite resource such as petroleum/fossil fuels, but I think you get my point.
I admit I do take a certain bitter pleasure in watching the Republicans try to squirm out of this, because there is nothing they can do about it. NOTHING. And they're the ones who are supposed to understand the underlying principles of free markets so well. The "solutions" they've proposed would be ineffectual at best and more likely will only exacerbate the problem in one way or another.
$100 one-time tax rebates? *guffaw* That was pretty funny. Hooboy... who says Republicans don't have a sense of humor?
Suspend the national gas tax? Nice try. They (or the Democrats) may even try it for short-term political gain, but it doesn't matter -- any price reduction will be temporary if it happens at all. Suspending the gas tax would also cut off a vital source of funding that governments use to maintain their highways and infrastructure, and that would cause its own problems.
Drill in the Arctic National Wildlife Refuge? That won't work either except to temporarily alleviate some of Big Oil's worries (elucidated in the article) about replenishing their proven reserves. Drilling in ANWR won't reduce the price of gas, no matter how much the Republicans talk of "secure oil supplies."
Even the Democrats' idea of a "windfall tax" on oil companies, while slightly more rational from a macroeconomic viewpoint, will indeed decrease investment in oil exploration and production (known as 'E&P' in the industry) -- just as the oil companies say. And E&P is about the only segment of the industry enjoying fat profit margins these days. As the petroleum supply moves "downstream" the margin gets as thin as a razor, especially at the wholesale level -- my company TransMontaigne's segment.
So go ahead Republicrats -- try all of the above! Knock us all out. Keep the half-baked schemes coming! None of them will work and some of these options will cause shortages in supply, which will make the pain even worse. Face it people, we are in for prolonged economic pain and it is directly due to the lack of attention that has been paid to reducing our oil dependence for the past 30 -40 years.
There is no easy solution to this one and the problem goes deep -- far beyond one focus-grouped, sound-bitten, negative-ad, god-fearing election cycle. Our elected leaders' inability to speak the truth about our country's long-term problems represents a profound failure in our democracy.
Anybody have an opinion on this that is not totally clouded by rigid free-market ideology? Let me know.
7 comments:
I don't have a profound opinion, but I do agree with the implication in your comments that "more of the same" will not solve the problems we face now and in the future. I think there has to be a fundamental shift in society and the energy biz. The sooner people start talking about that kind of change instead of about how we can "take the sting out of rising prices at the pump," the better.
I would definitely agree with you that there is a problem. I also really liked the point you made about one of the main problems is that the leaders of our country haven't been able to directly approach this problem(along with others). I wouldn't necessarily blame it all on them, because the people republican and democrat a lot of times don't want to hear about our problems and if they did propose a solution we would politically crucify them for the it. Or at least argue about it until everyone has lost sight of what the real point was. Having said that, I have no solution.
My scooter gets about 60 mpg, so there. :-P
Well said, Matt.
I think the solution is in transforming to a hydrogen-based economy. The technology is there, but the infrastructure isn't. It will take an incredible investment and determination from the American public and politicians, but the longterm environmental, geopolitical, and economic ramifications would be tremendous.
If you think about it, 100 yrs ago there was NO energy infrastructure . . . so I've got to believe we could make the change in rapid fashion once it we decided.
But who are "we?" The American public is such a fractious conglomeration of interests and indendepents, that it's difficult to come to a consensus on anything except after a crisis like 9/11.
We need some leaders with vision, courage, and charisma.
M@tt for President! :)
Well, speaking as a right wing zealot and one who is in the energy business, I will chime in here.
Matt brings up very good points but is a bit overstating the hopelessness of the situation.
I do think that there is no one single answer to the energy problem we face and it will take political will that is not there on either side of the aisle to accomplish it.
The oil dependency we have allowed ourselves to get into is a real issue. When you think about the consumption in our country alone it is appalling. Add to that a booming expansion of the use of energy in China and India and we have ourselves a major problem. If China alone consumes on per capita basis even half of what we do in this country, availability of oil will dwindle even more and prices will skyrocket further. It will happen...it is just a matter of time for the 3rd world countries to catch up.
Here is my brilliant outline of a solution and this is not a Republican/Democratic issue...it is more a simple and logical way to get out of this mess we are getting ourselves into.
1. Expand supply by "E&P" in places that we have not been allowed to go in the past. It is insane that we as a world population are not expanding and developing all available potential sources of natural gas and oil and coal. There is plenty of oil (albeit not infinite) if we can just get to it) This is insanity, my friends.
2) In parallel with nubmer one we need to develop on a "Manhatten Project" kind of schedule new technologies such as oil shale, hydrogen engines, clean coal, nuclear energy, windpower, solar power etc. We need a dual edged sword of developing existing reserves of fossil fuels but just as much emphasis on on the renewable technologies.
3) Reduce our dependence on the use of fossil fuels so we can no longer be held hostage by foreign sources of oil. It would be nice to tell all foreign countries to take their oil and go pound sand. This won't be easy due to the enviornmentalist movement but we as a people need to look to the future and the betterment of mankind and quit pandering to these zealots who would have us living in the stone age. We can develop technologies that are both compatible with nature and at the same time not reduce our standard of living. I refuse to believe the scenario that we need to reduce our standard of living to to over consumption of energy. We need to responsibly develop what we have and then new technologies as fast as we can.
4) Nuclear energy should be at the forefront of electrical power generation. It is safe and virtually infinite in supply. It can be as safe and much cleaner than any technology. The hysteria of this being a "dangerous" technology is preventing a partial solution to our energy problems. When you think about it, almost everything we use in our society can be electrically driven. Let's generate more electricity and do it in a clean and responsible way.
I have other platforms on my policy but it is basically a duel effort of developing what we have and shifting to new technologies on an "emergency" basis. It does not include reducing our standard of living compared to the world but to bring the world up to our standard to improve their lives.
That is my two cents for now.
Dad
Dad, dad... daaaad!
It was nice of you to limit yourself to 656 words this time. I would've expected at least 5,000 from you on this. Thanks for posting such a succinct comment (for you)!!!
Now, to dig into the soft meat -- at least you are acknowledging the problem. But what you refuse to acknowledge is the relationship between oil demand and supply. It doesn't matter how much supply is added. World demand is growing even faster, even if the massive investment in E&P you describe happens.
And you can bet it is beginning to happen anyway. E&P, as I described earlier, is the only segment of the biz to have such fat margins, and is about the only place where oil comapnies can invest their dough right now.
Furthermore, you are excluding the secondary effects of this ramping up of investment. Deposits that become economically extractable in the future will be ever more difficult to get at, and require more environmentally stressful methods.
Nuclear power is a net loss to society when we add the costs of the uranium enrichment process and disposal of radioactive waste -- most of which will be dangerous for tens of thousands of years.
You have to put it somewhere, if not in a desert mountain then in more populated areas like central Missouri. I remember you could see the plumes from the nuclear plant in Fulton, MO from the playground at my elementary school. There is no national repository yet, and increasing the amount of waste we have to store is foolish.
Nuclear fusion holds promise, but the technical challenges are enormous and no one can predict when it will be feasable. It's decades away at best.
Moreover, if a peak in oil/fossil production has not already come, it will come at some point in the future. The longer we wait to deal with the problem by reducing consumption, the more painful the shock will be, whether in 5 years or 50.
Finally, you took a cheap shot and took a shot at the environmentalist movement. I have noticed there is a pathological tendency of Republicans to blame the left for problems they create themselves. This manifested in their party line on Iraq -- they underplanned and undermanned the war but claim we are losing because of the people who didn't want the war in the first place.
Now it is evidenced in your silly comment that we are prevented from being oil-independent because of the environmentalist movement. The exploitation by greedy markets of natural resources in decades past has brought our society to this point. Dad, the environmentalist movement is the one trying to make us energy independent -- not ExxonMobil. Hello?
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