I have been watching the gasoline prices slowly creeping up again. Nowhere near what they were in November 2005, but still far higher than I would like to see them. With four cars in the family, one a Suburban, higher gas prices make a noticeable dent in the family budget.
Back in November, when my wife filled up the Suburban it cost $95.00. And I should consider myself lucky; in other parts of the country it would have cost us $120.00 to do the same thing. I don’t know about you, but spending $95 - $120 for what used to cost around $40, and doing it every two weeks does put a bit of a damper on things. The money has to come from somewhere, and that means that either we forego something we as a family were doing, something we were planning to do, or just ignore it and go further into debt.
We are all paying more, and the end is still not in sight. While oil prices have dropped recently, there is no guarantee that happy state of affairs will continue, and every reason to expect that having been in the stratosphere once, they will inevitably do so again. I have read a multitude of articles that attempt to make me feel better about this by pointing out that in Europe they are paying much more; 7-8 dollars a gallon in Norway.
That’s nice. But what these articles never mention is that the high cost of fuel in Europe is driven primarily by the high taxes European countries assess their citizens for the privilege of buying that fuel; taxes significantly higher than we have here in the U.S.
So aside from the fact that we can feel smug and superior that at least our government isn’t screwing us as bad as their governments are when it comes to gasoline, what is causing the problem and how can we fix it?
Leaving aside all the conspiracy theories concerning greedy evil oil companies and not taking the easy way out by blaming it all on George Bush, there are a number of factors at work in the world today that, collectively, are causing the problem.
The leading problems appear to be supply, demand, and anxiety about future supply and demand.
The world is not a static place; big changes are afoot. It has been in vogue over the past 30 years or so to point out how much, as a percentage, of the world’s energy consumption we in the United States account for vs our total population. Typically, this is done to make us feel guilty for being so “wasteful” of resources, so that we will conserve more and cut back on our standard of living to bring us more in line with those who live in mud huts. This is the energy equivalent of the “starving children in India” ploy our moms used on us to get us to eat our peas and broccoli.
One of the things these statistics never point out is why the numbers are the way they are. Even the poorest American living in the meanest ghetto in the country will look like an energy spendthrift simply because people living at the subsistence level in a mud or grass huts don’t use any electricity. And there are a lot more of them than there are of us. So the only way for us to reduce our energy consumption to our “fair share” as it were, would be for us to give up our way of life and go back to subsistence living, or for the rest of the world to industrialize and come up to our consumption levels. As anyone who is not a radical-left environmentalist might suspect, it’s the latter that is occurring.
China and India, the two largest countries in the world, each with a population of over 1 billion people, are moving rapidly in this direction. And as might be expected, their demand for oil is increasing rapidly as well.
According to the CIA World Fact Book, China’s estimated population as of July 2005 was over 1.3 billion. Note that this is more than 1 billion more people than we currently have in our country, over four times as many people as live in the United States.
As the percentage of the world’s population that is becoming industrialized and using energy resources increases, the percentage that we in the U.S. use compared with everyone else will decline. China needs only a quarter of its population to reach our standard of living to equal our energy consumption. That energy has to come from somewhere, and like here, a lot of it comes from oil.
However much oil there may actually be, there is only a finite supply available on the market at any one time. And there is only a finite system of transportation to move it and a finite number of refineries to convert it from a gooey smelly substance into more useful products such as gasoline, asphalt, and plastics.
If your demand is higher than the amount you can produce, transport, and/or refine, prices increase until the demand can be satisfied. Rising demand for raw crude means that more oil must be pumped to meet demand. Rising demand for refined products means that more refineries must be built to meet demand. If either is not done, demand will not be met and prices will rise in competition for the amount that is available. The rising prices will result in more profit for the companies involved, providing the capital needed to invest in more oil wells and refineries to meet the rising demand. As the demand is met, competition will force the prices back down again.
This is how market forces operate and how the market, over time and given no outside influences, regulates itself. At least, this would be true in a perfect world. But of course, we don’t have a perfect world. Not even close.
Oil is not evenly distributed across the planet. Most of it, at least most of what has been discovered so far, is located in the Middle East, one of the most politically unstable places on Earth. So, factored into the cost of the oil is also the potential for supply disruption. This causes contracts for future delivery of oil from these areas to be higher than they would otherwise be to cover the risks. It also means that the people making the extra money off the higher prices are crying crocodile tears when they say they would like prices to be lower and are working to make it so.
They have increased production supposedly to try and force prices down. A “glut” of oil on the market in excess of demand will cause prices to drop until the excess is absorbed by the market. But somehow the extra amount pumped doesn’t seem to be enough to satisfy the demand, just to keep those higher profits flowing in. That might be true if demand were down, but it’s not. They are crying all right…all the way to the bank.
So the solution seems to be for us to drill more oil wells. Unfortunately, we can’t do that. Oil wells are smelly, and they disturb the environment. We can’t drill in the ocean off the coast of California. We can’t drill off Florida. We don’t seem to be able to drill much of anywhere in the continental U.S. We can’t even drill in the ANWR, a frozen, desolate wasteland that 99 percent of the American public will never even see.
Various political tactics are used to move public opinion against drilling in the Arctic National Wildlife Refuge. One of the most popular is often called in sales terms “reduction to the ridiculous”. We frequently hear that “there isn’t enough oil in the ANWR to run the country for more than six months. Why risk the destruction of this valuable wildlife refuge for such a small gain?”
Well, the same could be said for any source of oil, save perhaps for Saudi Arabia. The fact is that we wouldn’t be running the entire country off any one source exclusively anyhow. And, as it turns out, that “insignificant” amount happens to be greater than the total known onshore reserves of the entire lower 48 states. ANWR is capable of producing 1.4 million barrels of oil per day, and can do so for at least 10 years, assuming additional reserves are not discovered and extraction technology doesn’t improve. That’s 1.4 million barrels of oil (assuming pumping at full capacity, which we probably wouldn’t be for various reasons) each day that we wouldn’t have to buy from Saudi Arabia, or Iran, or Venezuela, or any other country seeking our destruction.
So how exactly are we supposed to reduce our dependency on foreign sources of energy, primarily oil? We can’t drill new oil wells – we’ll disturb the environment. New refineries? Not in my back yard! Even natural gas, once touted as a clean source of energy has been getting a bad name from environmentalists.
Don’t even think about nuclear…
Coal? We have lots of coal. Enough to last hundreds of years. Unfortunately, coal is dirty, and mining it, like everything else, harms the environment.
Hydroelectric? Far from building new hydroelectric dams and plants, they are actually talking about getting rid of them in Oregon, to make it easier for salmon to get upstream and spawn. And you thought that because dams produce lakes that they were good for fish! Guess it depends on the sort of fish you are interested in. Dams destroy natural habitat and replace it with "unnatural" habitat, I suppose. Who are we to take the land away from mice and rabbits and give it to catfish and perch? Who knows how many innocent species we have wiped out from all the dams we have built? Building a dam of any size in this country is nearly impossible, and hundreds of small dams have been breached to return rivers and streams to their natural flow. Don’t expect a rash of dam-building to break out in the United States any time soon.
Wind power? Well, it seemed like a good idea at first. However now that we have actually built windmill farms, we have discovered that birds have problems with windmills, similarly to the problems that fish have with dam turbines. Thus, environmentalists are starting to have the same complaints about windmills as they do with dams. Besides they take up a lot of space, and are unsightly and noisy. Forget about it.
Solar? Not ready for large scale use as of yet. Space solar? Nice idea, but we can’t even keep shuttle going. Space solar would require a geosynchronous setup and way more infrastructure than we have managed so far with the International Space Station. Besides, the power is transferred back to Earth via microwave. That has to be bad for something.
Fusion power might work. Except that we haven’t successfully designed and build a process that produces more power than it consumes. Not commercially viable at this stage of the game. And you can bet that once it does become viable (if ever), someone will find some reason why we can’t (or shouldn’t) build it.
I have heard many tout fuel cells as the wave of the future. Clean energy. Hydrogen and oxygen combine, and the only byproduct is good clean water. Except…can you imagine 8 million cars gridlocked in Los Angeles on a hot summer day, all spewing out water vapor?
Almost anything that sounds good in a lab, when you scale it up to the size that would be needed to really do any good, will cause some unforeseen side effect that someone will complain about. I’m not sure there is any way we can come up with any power source that someone won’t have a problem with. Or won’t want in their back yard.
And the dirty little secret that isn’t being told is that there are many people in this country who are happy that gas is costing some of us over $3 a gallon (particularly those of us who own an SUV). In fact, they wish it would cost more! Remember, Al Gore and others see the internal combustion engine as the greatest danger facing mankind in the world. If it costs you $3 a gallon, maybe you will drive less.
And that suits them just fine.