Ups and downs
I went on a camping trip this last weekend, paid $3.09, and $3.08/gallon for gas on Friday and Sunday, by far records for me in cost per gallon, filling my girlfriend's minivan.
Today I read the Alaskan pipeline will be closed for months, cutting a large fraction of U.S. production. In the bigger picture, temporary reduced production is no big deal, and it'll help extend the lifetime of our supplies, but in the short run, we've reduced the world's "spare capacity" and can't help but increase prices!
Meanwhile I also heard that volcanic dust in the air in the caribbean has reduced the overall moisture content in the air, reducing the likelihood for hurricanes in the gulf of mexico, offering perhaps a "free parking" year to gulf oil production to rebuild.
I wonder how much "we" will rebuild, given the high development costs and high risks. Sure oil companies are flush with profits, but you still don't throw money at losing propositions, if you look at your losses from 2005 infrastructure destruction, and possibly better opportunities elsewhere.
Still oil companies are faced with reduced opportunities for the "easy oil", and have to decide whether the game is still worth playing. Maybe it really is best to keep "downgrading", by buying back stock shares with profits, into a graceful retirement. There may not be too much more consolidation possible between companies.
I heard the Governor of NY on NPR today at noon, talking about tax incentives to alternative fuels - vehicles, fueling stations, and production. However when asked about increasing fuel taxes, he refused the bait - people already pay enough. Meanwhile we don't know how he suggests the federal government raise money to pay for all his proposed subsidies. So we know he means we'll just keep borrowing more money to maintain our unsustainable consumption as long as we can get away with it.
And I must admit I think the recent "fear premium" for oil may just as likely wane in the coming months as oil demand reduces and perhaps we'll be back down to "cheap" oil around $60/bbl, and gasoline around $2.60/gallon, in time for Fall elections. And we can forget about oil for another season. I'm not "predicting", just noting the ups and downs, and we're "due" for a down, even if "down" ends up as holding steady for a while.
I do agree alternative fuels are "the answer", and I agree there is no "clear winner" now to support, so we ought to support many emerging fuels and technologies.
I mainly differ in that I EXPECT, sooner or later, there's going to be a "perfect storm", and our incremental attempts must all fall short. I'd rather "descend our elevation" (consumption) now voluntarily than be faced by serious shortages later.
I'd rather have "market forces" act upon assumed higher prices now with high taxes because that will show our devotion to reducing oil consumption.
I predict ALL efforts to promote alternative fuels will stay marginal as long we assume energy prices can't be increased. The difference between raising taxes to subsidize and borrowing to subsidize is the first costs us NOW, and the second costs more later.
Subsidies are much more messy than taxing consumption. Like the fact that some ethanol is produced at a net ENERGY-LOSS because subsidices guarantee profits. If rather than paying for ethanol production we just raise consumption taxes, then alternative energy will compete or not on its own merit.
If I had my way, I'd promote ~$9/gallon gasoline (adding a $6/gallon tax), transitioned in the next 5 years, or about $0.10/month increase. That's about as clear a signal as the market is going to get as to where we're headed.
Businesses will renew their 5-year plan to account for this "prediction". People buying cars now will make decisions what to buy, knowing this destination.
Well, I suppose my prediction would be that electricity would take up the slack most easily, even if our "grid" is not ready for the new demand. There'd have to be massive efforts to increase the system, and to the degree demand increased too fast, electricity costs will rise as well, which is good for a system in need for expansion.
So I'd guess a "side-effect" of my plan, assuming electricity is the only scalable alternative, that we ought to now allow electricity producers to increase their prices (and profits) to have money available for expansion. Hopefully increased prices for electricity would also expand the economic viabiliy of alternative production, like biomass and wind.
I imagine if we combined (1) Higher gas prices (2) Higher electricity prices, we could displace perhaps 50% of our oil usage in 10 years. That sounds HUGE, but considering we already import over 60% of our oil, we've still failed to even hold even - AND giving the expectations of overall growth, AND expected continued reduction of domestic production, we've got a long way to go.
What will our economy look like with $9/gallon gasoline? (or $0.20/kwh electricity?) Well smaller cars for one I'd bet!
Today I read the Alaskan pipeline will be closed for months, cutting a large fraction of U.S. production. In the bigger picture, temporary reduced production is no big deal, and it'll help extend the lifetime of our supplies, but in the short run, we've reduced the world's "spare capacity" and can't help but increase prices!
Meanwhile I also heard that volcanic dust in the air in the caribbean has reduced the overall moisture content in the air, reducing the likelihood for hurricanes in the gulf of mexico, offering perhaps a "free parking" year to gulf oil production to rebuild.
I wonder how much "we" will rebuild, given the high development costs and high risks. Sure oil companies are flush with profits, but you still don't throw money at losing propositions, if you look at your losses from 2005 infrastructure destruction, and possibly better opportunities elsewhere.
Still oil companies are faced with reduced opportunities for the "easy oil", and have to decide whether the game is still worth playing. Maybe it really is best to keep "downgrading", by buying back stock shares with profits, into a graceful retirement. There may not be too much more consolidation possible between companies.
I heard the Governor of NY on NPR today at noon, talking about tax incentives to alternative fuels - vehicles, fueling stations, and production. However when asked about increasing fuel taxes, he refused the bait - people already pay enough. Meanwhile we don't know how he suggests the federal government raise money to pay for all his proposed subsidies. So we know he means we'll just keep borrowing more money to maintain our unsustainable consumption as long as we can get away with it.
And I must admit I think the recent "fear premium" for oil may just as likely wane in the coming months as oil demand reduces and perhaps we'll be back down to "cheap" oil around $60/bbl, and gasoline around $2.60/gallon, in time for Fall elections. And we can forget about oil for another season. I'm not "predicting", just noting the ups and downs, and we're "due" for a down, even if "down" ends up as holding steady for a while.
I do agree alternative fuels are "the answer", and I agree there is no "clear winner" now to support, so we ought to support many emerging fuels and technologies.
I mainly differ in that I EXPECT, sooner or later, there's going to be a "perfect storm", and our incremental attempts must all fall short. I'd rather "descend our elevation" (consumption) now voluntarily than be faced by serious shortages later.
I'd rather have "market forces" act upon assumed higher prices now with high taxes because that will show our devotion to reducing oil consumption.
I predict ALL efforts to promote alternative fuels will stay marginal as long we assume energy prices can't be increased. The difference between raising taxes to subsidize and borrowing to subsidize is the first costs us NOW, and the second costs more later.
Subsidies are much more messy than taxing consumption. Like the fact that some ethanol is produced at a net ENERGY-LOSS because subsidices guarantee profits. If rather than paying for ethanol production we just raise consumption taxes, then alternative energy will compete or not on its own merit.
If I had my way, I'd promote ~$9/gallon gasoline (adding a $6/gallon tax), transitioned in the next 5 years, or about $0.10/month increase. That's about as clear a signal as the market is going to get as to where we're headed.
Businesses will renew their 5-year plan to account for this "prediction". People buying cars now will make decisions what to buy, knowing this destination.
Well, I suppose my prediction would be that electricity would take up the slack most easily, even if our "grid" is not ready for the new demand. There'd have to be massive efforts to increase the system, and to the degree demand increased too fast, electricity costs will rise as well, which is good for a system in need for expansion.
So I'd guess a "side-effect" of my plan, assuming electricity is the only scalable alternative, that we ought to now allow electricity producers to increase their prices (and profits) to have money available for expansion. Hopefully increased prices for electricity would also expand the economic viabiliy of alternative production, like biomass and wind.
I imagine if we combined (1) Higher gas prices (2) Higher electricity prices, we could displace perhaps 50% of our oil usage in 10 years. That sounds HUGE, but considering we already import over 60% of our oil, we've still failed to even hold even - AND giving the expectations of overall growth, AND expected continued reduction of domestic production, we've got a long way to go.
What will our economy look like with $9/gallon gasoline? (or $0.20/kwh electricity?) Well smaller cars for one I'd bet!
posted by Ares Olympus at 4:20 PM
0 Comments:
Post a Comment
<< Home