Oil: Do The Right Thing
Oil: Do The Right Thing
BY ROBERT SAMUELSON
New York Sun, October 18, 2006
Original here
"Americans can always be counted on to do the right thing … after they have exhausted all other possibilities."
— Winston Churchill
On energy, we're proving Churchill wrong. Our main energy problem is our huge dependence on imported oil. For years, some remedies have been obvious: tax oil heavily to spur Americans to buy more fuel-efficient vehicles and to drive a bit less; raise the government's fuel economy standards so those vehicles are available; and allow more oil and gas drilling. In recent years, we've done none of these things. It's doubtful we will anytime soon. "Other possibilities" seem inexhaustible.
Under present policies, American oil demand will expand 34% by 2030, projects the Energy Department.There will be more people, cars, planes, and travel. Imports would satisfy all the increase. We should try to prevent or minimize that. With China's and India's oil demand increasing, American restraint would relax pressure on prices and reduce oil's usefulness as a political weapon. Consuming 25% of world oil, we're hardly powerless.But instead of doing what we might, we're awash in delusions.
As gasoline prices have receded from $3 a gallon, many Americans attribute the decline to politics. In one Gallup poll, 42% of respondents said the Bush administration had manipulated prices to improve Republican prospects in congressional elections. Gee, if the White House could fix prices so easily, why let them rise in the first place? And we're still enthralled by energy "independence" even though — as a new report from the Council on Foreign Relations makes clear — it's impossible for "at least several decades." In 1973, President Nixon announced Project Independence to eliminate oil imports by 1980.In 1973,America had net oil imports of 6 million barrels a day (mbd), 35% of our consumption. In 2006, net imports average 12.4 mbd, or 60% of use. President Nixon's advisers warned him that his goal was unattainable. Within the foreseeable future, it still is.
No plausible combination of alternative fuels or "conservation" can soon substitute for all that imported oil. Even if that weren't true, many other countries —most of the world economy to which we are tightly tied — would remain dependent on oil imports. So we'd be hostage indirectly.
The problem is not that the world will soon run out of oil. Global oil use now totals 31 billion barrels annually. Proven oil reserves are about 1.3 trillion barrels, reports Oil & Gas Journal. That's 42 years of supply at present consumption rates. Yes, consumption is rising — but more oil will be found. Even when it's all gone, other hydrocarbon deposits can be, at higher prices, converted into oil. John Hofmeister, president of Shell Oil, claims that the oil shale in Colorado amounts to another 1 trillion barrels of oil and that Canada's oil sands total 1.3 trillion barrels. Indeed, the oil sands are already producing.
The problem is not even imports. It is that most imports come from areas or countries that are potentially insecure, unstable, or hostile — the Persian Gulf, Venezuela, the former Soviet Union, Libya.
Unfortunately, the steps we should take involve immediate political costs — they'd be unpopular — while the benefits would emerge slowly and seem modest. Suppose, for example, we opened coastal areas and parts of Alaska, including the Arctic National Wildlife Refuge, to drilling. American oil and natural gas production would rise. But the increases would occur only after five or 10 years, and they might merely offset declines in existing American fields.To a casual observer, the benefit would be barely visible.
Or imagine we raised the government's fuel economy standards for new vehicles — say, from 27.5 miles per gallon for cars to 40 mpg. Because factories can't be converted instantly, the shift would be spread over 10 to 20 years. Replacing today's more than 225 million cars and light trucks would also be gradual and hardly perceptible. Moreover, we'd also need a tax on fuel of at least $1 to $2 a gallon. Without mandating higher fuel prices, many Americans wouldn't buy more efficient vehicles. They'd recondition bigger SUVs and sedans to keep them running. Or more driving would offset potential fuel savings.
So we probably won't do much about our oil habit. Any realistic proposal would ignite a firestorm of protest. Environmentalists would denounce more drilling. Auto companies would protest new fuel economy standards. Most important, the public would denounce a steep energy tax, even if introduced gradually with most proceeds rebated by lowering other taxes (as is desirable). And these steps would merely reduce our dependence from what it would otherwise be. It's a hard case to make.
Americans want the impossible — painless salvation — and find endless excuses not to do the "right thing."
BY ROBERT SAMUELSON
New York Sun, October 18, 2006
Original here
"Americans can always be counted on to do the right thing … after they have exhausted all other possibilities."
— Winston Churchill
On energy, we're proving Churchill wrong. Our main energy problem is our huge dependence on imported oil. For years, some remedies have been obvious: tax oil heavily to spur Americans to buy more fuel-efficient vehicles and to drive a bit less; raise the government's fuel economy standards so those vehicles are available; and allow more oil and gas drilling. In recent years, we've done none of these things. It's doubtful we will anytime soon. "Other possibilities" seem inexhaustible.
Under present policies, American oil demand will expand 34% by 2030, projects the Energy Department.There will be more people, cars, planes, and travel. Imports would satisfy all the increase. We should try to prevent or minimize that. With China's and India's oil demand increasing, American restraint would relax pressure on prices and reduce oil's usefulness as a political weapon. Consuming 25% of world oil, we're hardly powerless.But instead of doing what we might, we're awash in delusions.
As gasoline prices have receded from $3 a gallon, many Americans attribute the decline to politics. In one Gallup poll, 42% of respondents said the Bush administration had manipulated prices to improve Republican prospects in congressional elections. Gee, if the White House could fix prices so easily, why let them rise in the first place? And we're still enthralled by energy "independence" even though — as a new report from the Council on Foreign Relations makes clear — it's impossible for "at least several decades." In 1973, President Nixon announced Project Independence to eliminate oil imports by 1980.In 1973,America had net oil imports of 6 million barrels a day (mbd), 35% of our consumption. In 2006, net imports average 12.4 mbd, or 60% of use. President Nixon's advisers warned him that his goal was unattainable. Within the foreseeable future, it still is.
No plausible combination of alternative fuels or "conservation" can soon substitute for all that imported oil. Even if that weren't true, many other countries —most of the world economy to which we are tightly tied — would remain dependent on oil imports. So we'd be hostage indirectly.
The problem is not that the world will soon run out of oil. Global oil use now totals 31 billion barrels annually. Proven oil reserves are about 1.3 trillion barrels, reports Oil & Gas Journal. That's 42 years of supply at present consumption rates. Yes, consumption is rising — but more oil will be found. Even when it's all gone, other hydrocarbon deposits can be, at higher prices, converted into oil. John Hofmeister, president of Shell Oil, claims that the oil shale in Colorado amounts to another 1 trillion barrels of oil and that Canada's oil sands total 1.3 trillion barrels. Indeed, the oil sands are already producing.
The problem is not even imports. It is that most imports come from areas or countries that are potentially insecure, unstable, or hostile — the Persian Gulf, Venezuela, the former Soviet Union, Libya.
Unfortunately, the steps we should take involve immediate political costs — they'd be unpopular — while the benefits would emerge slowly and seem modest. Suppose, for example, we opened coastal areas and parts of Alaska, including the Arctic National Wildlife Refuge, to drilling. American oil and natural gas production would rise. But the increases would occur only after five or 10 years, and they might merely offset declines in existing American fields.To a casual observer, the benefit would be barely visible.
Or imagine we raised the government's fuel economy standards for new vehicles — say, from 27.5 miles per gallon for cars to 40 mpg. Because factories can't be converted instantly, the shift would be spread over 10 to 20 years. Replacing today's more than 225 million cars and light trucks would also be gradual and hardly perceptible. Moreover, we'd also need a tax on fuel of at least $1 to $2 a gallon. Without mandating higher fuel prices, many Americans wouldn't buy more efficient vehicles. They'd recondition bigger SUVs and sedans to keep them running. Or more driving would offset potential fuel savings.
So we probably won't do much about our oil habit. Any realistic proposal would ignite a firestorm of protest. Environmentalists would denounce more drilling. Auto companies would protest new fuel economy standards. Most important, the public would denounce a steep energy tax, even if introduced gradually with most proceeds rebated by lowering other taxes (as is desirable). And these steps would merely reduce our dependence from what it would otherwise be. It's a hard case to make.
Americans want the impossible — painless salvation — and find endless excuses not to do the "right thing."
posted by JDS at 7:42 PM
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