Limits to oil
The recent "high" oil prices have interesting results. The first interesting result is that many people are not yet suffering from financial hardship, and so demand continues to increase despite the prices. This suggests that prices are still "too low".
Secondly there's the bigger issue of a finite nonrenewable resource. ANYTHING we do to increase production or decrease consumption which can bring down prices will as likely as not merely promote NEW increased consumption.
The oil optimists say as prices increase, supply will increase to meet the new demand, at least for the next 20-30 years. Right at this very moment, $65/bbl oil is making EVERYONE scramble to see how they can take advantage of this new price. Sure, there's short term speculators going for a hopeful quick profit, but there's others looking at the bigger picture of energy needs in the coming years and decades. Those people are the ones who theoretically will create the "production" that can keep our demand rising for another 20-30 years. AND the predictable profits from higher prices equally is making a scramble to see what alternatives can be found to replace our dependence upon oil. The optimists are sure we'll relatively smoothly transition to renewable energy that can scale to our projected ever higher needs in the indefinite future.
I'm not such an optimist. I see a declining nonrenewable resource that is ultimately irreplaceable in the scales of consumption compared to all alternatives. I expect higher prices to continue to the point that limits must be placed on consumption. I mean both individual decision and government decision.
Individuals will response to higher prices and learn to live without some of the "standard of living" expectaions that have grown too far. Governments will respond to foreign energy resources as undependable and seek methods to reduce overall consumption.
Conservation, as I've said, offers little in the bigger picture to cut into production, but it does offer us a little more breathing room.
Individual transporation accounts for 40% of our oil consumption, and there's surely a 50% drop possible under the most extreme conditions. The U.S. consumes about 21mbbl/day (25% of the world), and so that's about 8mbbl/day for personal travel, and so the U.S. could cut our consumption there by 4mbbl/day with some pain.
It is interesting to project such numbers. Of course an average 50% decline might seem "fair" if everyone did it. On the other hand, perhaps 50% of the people will find themselves unable to decrease consumption at all, or so they'll claim. That means the other 50% would have to cut 100% of their consumption to offset the stubborn half. That's clearly nonsense, so probably my 50% drop is wildly optimistic. More fair to say that 50% of people could cut consumption by an average of 50%, for a total drop of 25%, or 2mbbl/day. (and overall U.S. 10% drop)
Overall people who can cut consumption are rewarded by cutting their costs, but this is still "unfair" in the sense that conservation merely reduces prices which discourages others from conservating as well.
That's why I think fuel taxes are an ideal tool. Say the U.S. decides to reduce our consumption from 21mbbl/day to 15mbbl/day by 2008. On a free market, the more we conserve, the better chance prices will drop and reverse the conservation. However a floating tax could be created which rises and falls based on consumption. If world prices fall, the tax naturally increases to compensate. If consumption doesn't decline as desired, higher prices will force reduced consumption.
The other approach is consumption vouchers. Imagine every american adult (by SSN) was given a monthly gasoline voucher. The voucher could be spent on fuel. It could be sold to others if unneeded. Then market prices are free to respond to the lower demand by lowering prices.
The voucher system is better in that prices are kept lower, and conservation is rewarded to individuals, but would also take much more bureaucracy and also opens new forgery.
Of course even if the reduced consumption worked, all we've accomplished is made more oil available for other countries to use. PLUS since we compete against them, our higher prices will hurt our economic viability.
So obviously a world system would be better. But that opens a myriad of issues, especially considering the voucher system. Why does the U.S get 25% share now? Would we suddenly have to PAY China for their unsued vouchers to keep our economy going? It is a reasonable result in the sense of the bigger picture, but not something a country would accept willingly.
It is interesting that OPEC cartel is illegal because it attempts to fix prices. The obvious answer is that we shouldn't given them the monopoly power in the first place by diversifying our fuels that can be produced internally. The idea that I can't be told I can't limit my production to keep prices higher is silly. I can see the argument that resources that keep our economy running are better kept out of "private" control. I don't "own" oil because I'm producing it. I am given the right to produce it in the name of the government.
Of course that opens a wider perspective in ownership. Does "humanity" own the world oil, or just the governments who happen to control the territory of it.
I guess the U.S. was considering invading middle eastern countries in the 1970's oil embargo against us. An amazing assertion of power. Similar perhaps to Japan attacking pearl Harbor in response to U.S. blocking access to oil.
Even liberal John Kerry is urging Bush to demand the Saudi's increase production to reduce prices. There's a great sense of entitlement here.
I really HOPE that oil producers, like Venesuela, do try asserting their soverty by boycotting U.S. oil sales. The sooner the U.S. share of the oil pie is reduced, the better I see the odds that we'll get through the coming oil crises.
Sad scary business all around. OPEC is only scared of damaging U.S. economy which leads their market.
Ideally also, every oil exporting nation should keep a 10% "space capacity" and criteria for accessing it. I see the criterion is perhaps $200/bbl oil. As long as prices are cheaper, I'd promote OPEC to cut into production.
How can conservation be "illegal"? There's no reason for oil exporters to WANT to meet all demands of importers. The sooner this reality becomes clear to all, the sooner we'll be in a place to deal with our dependency honestly.
Secondly there's the bigger issue of a finite nonrenewable resource. ANYTHING we do to increase production or decrease consumption which can bring down prices will as likely as not merely promote NEW increased consumption.
The oil optimists say as prices increase, supply will increase to meet the new demand, at least for the next 20-30 years. Right at this very moment, $65/bbl oil is making EVERYONE scramble to see how they can take advantage of this new price. Sure, there's short term speculators going for a hopeful quick profit, but there's others looking at the bigger picture of energy needs in the coming years and decades. Those people are the ones who theoretically will create the "production" that can keep our demand rising for another 20-30 years. AND the predictable profits from higher prices equally is making a scramble to see what alternatives can be found to replace our dependence upon oil. The optimists are sure we'll relatively smoothly transition to renewable energy that can scale to our projected ever higher needs in the indefinite future.
I'm not such an optimist. I see a declining nonrenewable resource that is ultimately irreplaceable in the scales of consumption compared to all alternatives. I expect higher prices to continue to the point that limits must be placed on consumption. I mean both individual decision and government decision.
Individuals will response to higher prices and learn to live without some of the "standard of living" expectaions that have grown too far. Governments will respond to foreign energy resources as undependable and seek methods to reduce overall consumption.
Conservation, as I've said, offers little in the bigger picture to cut into production, but it does offer us a little more breathing room.
Individual transporation accounts for 40% of our oil consumption, and there's surely a 50% drop possible under the most extreme conditions. The U.S. consumes about 21mbbl/day (25% of the world), and so that's about 8mbbl/day for personal travel, and so the U.S. could cut our consumption there by 4mbbl/day with some pain.
It is interesting to project such numbers. Of course an average 50% decline might seem "fair" if everyone did it. On the other hand, perhaps 50% of the people will find themselves unable to decrease consumption at all, or so they'll claim. That means the other 50% would have to cut 100% of their consumption to offset the stubborn half. That's clearly nonsense, so probably my 50% drop is wildly optimistic. More fair to say that 50% of people could cut consumption by an average of 50%, for a total drop of 25%, or 2mbbl/day. (and overall U.S. 10% drop)
Overall people who can cut consumption are rewarded by cutting their costs, but this is still "unfair" in the sense that conservation merely reduces prices which discourages others from conservating as well.
That's why I think fuel taxes are an ideal tool. Say the U.S. decides to reduce our consumption from 21mbbl/day to 15mbbl/day by 2008. On a free market, the more we conserve, the better chance prices will drop and reverse the conservation. However a floating tax could be created which rises and falls based on consumption. If world prices fall, the tax naturally increases to compensate. If consumption doesn't decline as desired, higher prices will force reduced consumption.
The other approach is consumption vouchers. Imagine every american adult (by SSN) was given a monthly gasoline voucher. The voucher could be spent on fuel. It could be sold to others if unneeded. Then market prices are free to respond to the lower demand by lowering prices.
The voucher system is better in that prices are kept lower, and conservation is rewarded to individuals, but would also take much more bureaucracy and also opens new forgery.
Of course even if the reduced consumption worked, all we've accomplished is made more oil available for other countries to use. PLUS since we compete against them, our higher prices will hurt our economic viability.
So obviously a world system would be better. But that opens a myriad of issues, especially considering the voucher system. Why does the U.S get 25% share now? Would we suddenly have to PAY China for their unsued vouchers to keep our economy going? It is a reasonable result in the sense of the bigger picture, but not something a country would accept willingly.
It is interesting that OPEC cartel is illegal because it attempts to fix prices. The obvious answer is that we shouldn't given them the monopoly power in the first place by diversifying our fuels that can be produced internally. The idea that I can't be told I can't limit my production to keep prices higher is silly. I can see the argument that resources that keep our economy running are better kept out of "private" control. I don't "own" oil because I'm producing it. I am given the right to produce it in the name of the government.
Of course that opens a wider perspective in ownership. Does "humanity" own the world oil, or just the governments who happen to control the territory of it.
I guess the U.S. was considering invading middle eastern countries in the 1970's oil embargo against us. An amazing assertion of power. Similar perhaps to Japan attacking pearl Harbor in response to U.S. blocking access to oil.
Even liberal John Kerry is urging Bush to demand the Saudi's increase production to reduce prices. There's a great sense of entitlement here.
I really HOPE that oil producers, like Venesuela, do try asserting their soverty by boycotting U.S. oil sales. The sooner the U.S. share of the oil pie is reduced, the better I see the odds that we'll get through the coming oil crises.
Sad scary business all around. OPEC is only scared of damaging U.S. economy which leads their market.
Ideally also, every oil exporting nation should keep a 10% "space capacity" and criteria for accessing it. I see the criterion is perhaps $200/bbl oil. As long as prices are cheaper, I'd promote OPEC to cut into production.
How can conservation be "illegal"? There's no reason for oil exporters to WANT to meet all demands of importers. The sooner this reality becomes clear to all, the sooner we'll be in a place to deal with our dependency honestly.
posted by Ares Olympus at 4:39 PM
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