Wednesday, January 11, 2012

Can America Achieve Avocado Independence?

As Jersey is fond of screaming in ALLCAPS, "ENERGY IS A GLOBALLY TRADED COMMODITY!!!" And he is right.

But we shouldn't let that keep us from extracting our own gas and oil.  I'd rather put our own people to work and have a dependable supply system on hand in case of global emergency.  Also, the Canada pipeline, while not giving us energy independence, does allow us to purchase more oil from a friendly neighbor and therefore less from people who hate us.

Jonathan Thompson explains the folly of pursuing energy independence.  He's a green energy liberal, but he doesn't resort to the usual tendentious tactics.  His article is firmly grounded in mainstream economics that comprehends the global market:
The base premise of energy independence is the notion that we started importing oil because we didn’t have enough of it here at home. That’s about as accurate as the idea that Walmart fills its shelves with China-made items because the U.S. is unable to produce those things.
In fact, we get oil from all over for the same reasons we get tomatoes, avocados and cheap electronics from all over the place. It’s not always pretty, and it doesn’t always make sense on some levels -- shipping apples from New Zealand to Colorado just seems wrong -- but it makes sense to the market. Chesapeake says that spending $400 billion per year on foreign oil is “fiscally insane.” 
Yet the U.S. will also spend $400 billion on a variety of exports from China this year, not to mention the billions more we’ll spend on food, clothing, cars and electronic devices from a myriad of other countries. No one calls that fiscal insanity, nor do we hear politicians calling for iPhone independence. (High Country News – Circular Logic of Energy Independence)
So green dreamers like Jersey take a free-market principle and use it to argue against drilling for more oil. The same argument could be made for ceasing all manner of activity, from making our own cars to growing our own food. We could still get cars and food from other nations, but the diminution of supply would drive up prices and a lot of Americans would be unemployed.

The author goes on to explain how us pumping oil like crazy can make a difference in the market, and eventually make prices come down... Which will then make drilling in difficult sand and shale formations less lucrative, slowing operations there, resulting in less supply and higher prices, again making extraction profitable...  And around it goes.

 This is market economics 101, and it is no reason to forgo our own extraction that puts Americans to work

So free market forces are not “right” or “wrong.” The free market is an organic entity sending and receiving myriad internal and external signals every day, and as such is self-correcting, so long as central planners keep “rescues” and “protections” to an essential minimum. 

Also, there are no magic bullets or perfect solutions; only tradeoffs.  Until someone comes up with a viable alternative, oil and coal is here to stay.

28 comments:

Ducky's here said...

The pipeline is just going to ship oil overseas. Our refining capacity is already at 100% to ensure prices stay high.

The true cost of fracking is unknown at the moment.

A good deal of what we drill will cost us environmentally while we ship it to China just as we ship the Alaskan crude to Japan.

Ducky's here said...

The author seems to believe that easily extracted oil is readily available.

Utterly asinine.

Jack Camwell said...

Well, I think energy independence relies heavily on discovering technology that can give us cheap, renewable energy, ie. an alternative to fossil fuel.

Drilling our own oil would certainly help to lower prices for a while, but it's definitely not a long term solution, nor is it a path to energy independence.

I think it would be silly, knowing that fossil fuel is a finite resource, to run completely off of our own resources. This might sound wacky, but I'd be more comfortable knowing that when the rest of the world runs dry, we'd still be okay until we found a viable fossil fuel alternative.

bunkerville said...

Duckey I have to admit has one fact right regarding the refineries.We are pretty close to full capacity. Phiadelphia is shutting down its last two refineries. Once the hub, now caput. A number of other refineries are now owned by foreign entities.

Silverfiddle said...

Ducky: We have a lot of oil, of varying degrees of ease of extractability (is that a word?)

Jack: I agree, but "cheap" and "renewable" are mutually exclusive at the moment.

If we really were on the downside of peak oil, with it all running dry, other technologies would come to the fore, and the oil abundance we were sitting on would probably become obsolete before we used it all.

The endgame has to happen sometime. And yes, it is a finite resource, but what isn't?

The sun may last forever (from our limited human perspective) but the materials need to make solar panels will not. It's all finite.

jez said...

SF: If "extractability" is a word, I still don't want to use it! Horrible! Maybe substitute "availability", or "ease of extraction".

"If we really were on the downside of peak oil, with it all running dry, other technologies would come to the fore"

I wish I shared your optimism. In my opinion, the free market is myopic, by necessity and quite properly, but left to its own devices it would wait for scarcity to drive up oil prices before developing alternatives. I'm not ideologically shackled to the free market, so I endorse publicly funded R&D. The free market is also secretive, and the R in R&D works better when done in the open.

Silverfiddle said...

Jez: To paraphrase Sir Winston, Free market capitalism is the worst economic system except all those other systems that have been tried from time to time.

Scarcity of one commodity is indeed what makes other technologies suddenly affordable.

We use what we have until something better comes along or until what we are using dries up. That's the story of human history.

Look at all the technological advances that were not propelled chiefly by government initiative.

Country Thinker said...

The last two paragraphs are fundamental. The "economy" is an information transfer system on an unparalleled scale. That's why government interventions almost always fail. Bureaucrats have access to far too little information.

Jack Camwell said...

Good point about finite resources Silver. I honestly hadn't thought of that.

My guess is that we're a lot closer to infinite energy technology than we're allowed to know. I'm generally not a conspiracy theorist, but I bet that once we start to "run out" of fossil fuels, we'll magically have a solution that saves the world from falling apart.

But I think we all know full well that infinite energy will never see the light of day so long as there's billions upon billions to be made off of dead dinosaurs.

Jersey McJones said...

You are misrepresenting my position on domestic oil drilling, Silver. I'm not very fond very dirty or dangerous practices, like extracting from shale or sand, and I understand the political reasons why drilling in some places is just too problematic. But the oil companies are sitting on millions of acres they're not even exploring! It's one of the biggest land/sea grabs in history - and they're not even using it!

Why?

Because they understand the market. In the future, not very far off, oil is going to become an extremely valuable and pricey commodity. They are positioning themselves for the future. But they don't tell the public that.

Instead, they pluck the strings of the rightwingers, accusing Obama and the Dem and greens of holding back production (a lie) for their real agenda - getting their taxes and regulations cut.

This "drill baby drill" thing has always been a fake, phony, pseudo-issue.

JMJ

Silverfiddle said...

Jersey! I'm giving you props!

When the government holds back permits, even after all the paperwork is straight, it is not a phony issue.

Anonymous said...

Even if our oil companies managed to overcome the government forces massed against them and ended up exporting every drop of oil we extracted from our own territory -- for profit -- to foreign lands, it would still be a good idea to go ahead and do it, because it would give untold thousands of Americans steady work.

Besides, it can't be wrong to produce a super-abundance of something eery civilized and semi-civilized nation in the world desperately needs.

Like it or not -- till some genius finds the way to reach that alternative energy pie in the sky -- oil is the life's blood of industrialized society everywhere on earth.

Ducky implicitly accuses the American oil industry of deliberately holding back production to maximize profits. It could be -- after all look what the effin AYRABS do with the tremendous advantage THEY have!

As I never tire of saying, established power blocs of ANY sort tend always to want to maintain and aggrandize the advantages they possess. It would be unnatural for them to do otherwise.

SilverFiddle is so right, however, in pointing out the hobbling -- even crippling -- effect government has on industry. And if you don't think GOVERNMENT is huge factor in raising costs exponentially, you don't think period.


~ FreeThinke

Anonymous said...

... a fake, phony pseudo issue. ..."

Jersey!

Overindulgence, too much emphasis, and the heavy use of redundancy has a deleterious, debasing, degrading, diminishing, impoverishing effect on the quality and impact -- and mars the effect -- of rhetoric.

~ FreeThinke

Anonymous said...

... Free market capitalism is the worst economic system except all [the others]. ..."

TOO - friggin - SHAY! ;-)

` FreeThinke

dmarks said...

"o green dreamers like Jersey take "... free-market principle and use it to argue against drilling for more oil. The same argument could be made for ceasing all manner of activity, from making our own cars to growing our own food."

So, not only is Jersey against free and fair trade, he is against domestic production/ I knew about the former. I did not know about the latter.

-------------
Country said: "That's why government interventions almost always fail. Bureaucrats have access to far too little information."

You forget the other big problem with bureaucrats that make things fail: generally bureaucrats are out to enrich themselves at the public expense.

Ducky's here said...

@Freethinker -- to foreign lands, it would still be a good idea to go ahead and do it, because it would give untold thousands of Americans steady work.

------
Tie a can on it.

Take a look at what's going on in Nigeria.
Oil production isn't joining the general strike because a lot of Nigeria's drilling is offshore and it's automated and controlled by a small number of technicians.

Read that --- SMALL NUMBER.

Our offshore rigs aren't any different despite the meme that the fringe right barfs up like Pavlov's freaking dogs every time a right wing commentator rings the bell.

Anonymous said...

Ducky,

You naturally ignored the corollary to the statement you quoted:

it can't be wrong to produce a super-abundance of something every civilized and semi-civilized nation in the world desperately needs.

Like it or not -- till some genius finds the way to reach that alternative energy pie in the sky -- oil is the life's blood of industrialized society everywhere on earth.


Even a few jobs would be better than none, anyway. That fewer citizens on the Dole. HALLELUJAH!

And the USA is NOT Niggerrhea, so naturally we'd do things differently than they. Don't tell me building that pipeline from Canada to the Gulf would employ only a "small number" of men - OR- that the work would only be "temporary."

ALL projects are temporary Think Brooklyn Bridge, and you'll see what I mean. the RESULTS of a project, however, can last for decades, even centuries.

Stop narrowing your focus artificially just to enable yourself take one of your famous pot shots.

~ FreeThinke

Infidel de Manahatta said...

Reality: Oil and coal are here to stay:

Faith: Wind farms are the future.

Faith will always trump reality unfortunately.

Ducky's here said...

No Freethinker the "jobs" argument is trotted out every time someone wants to trash the place.

Now, when the argument is green jobs the right will have the attack dogs at the ready, correct? Not that there shouldn't be critical analysis.

This is all a load of cliches and assorted crap. A serious topic deserves better than rabies radio sound bites.

Silverfiddle said...

"Now, when the argument is green jobs the right will have the attack dogs at the ready, correct?"

Not if they are created with private money.

And speaking of rabies, Ducky's in a particularly scrappy mood today...

Ducky's here said...

That's your hobbyhorse, Silverfiddle.

Private, public --- as long as it promotes growth, so what? Other than the doctrinaire hobbyhorse of the true believer.

You're crown falls out and you find out you need a 4 grand inplant, it makes you scrappy.

Finntann said...

Ducky, if I put up 5000, you put up 5000, and we make 8 other people pay 5000. Take the money, go to the guy down the street and tell him he needs to be at such and such an address from 9-5, Monday to Friday fifty weeks out of the year, did we create a job?

That's the difference SF is talking about regarding public and private investment.

Government tax investment in companies like Solyandra aren't creating real jobs any more than Megabucks is a retirement plan.

I have no problem with government investment in pure R&D, when they get into supporting manufacturing and marketing they've crossed a line.

Sad truth is, as SF said there is no magic bullet. If I could build a car tomorrow, the equivalent of cars today that got 20 mpg and ran on water... that sounds like the fantastic answer to all our problems.

Until you stop and consider what running your car on water would do to supply and demand in say, the City of Los Angeles.

Cheers!

KP said...

"You're crown falls out and you find out you need a 4 grand inplant, it makes you scrappy."

No shit. I am familiar with your pain.

Leticia said...

According to the National Post, “Canada could sell its oil to China and other overseas markets with or without approval of the Keystone XL oil pipeline in the United States, says Prime Minister Stephen Harper. In a year-end television interview, Harper indicated he had doubts the $7-billion pipeline would receive political approval from U.S. President Barack Obama, and that Canada should be looking outside the United States for markets. ‘I am very serious about selling our oil off this continent.

This means jobs for Americans and Obama is sitting on his hands. Waiting for what?

Silverfiddle said...

You're crown falls out and you find out you need a 4 grand inplant, it makes you scrappy.

Uuuuuh! That does not sound like fun. Hope you get it taken care of quickly.

Anonymous said...

Ducky,

You my complete sympathy about your broken crown. However, I know you can well afford the 4K, if you've been telling us the truth about your financial status, so kwitchabitchin 'bout that. Just be glad you have the dough.

I went through an implant, myself, several years ago. It took two full years to complete the process -- bone grafts needed and endless waiting between "stages." Definitely a PITA.

Nevertheless, your suffering adds no strength to your argument.

Best of luck to you -- even if you are wrong most of the time.

!~ FreeThinke

MK said...

"Also, the Canada pipeline, while not giving us energy independence, does allow us to purchase more oil from a friendly neighbor and therefore less from people who hate us."

Well said, drill your own oil and buy from those who don't hate you.

Instead what we have is refusal to drill your own oil and buying from illiterate scumbags who hate you and will always hate you.

dmarks said...

Leticia said: "This means jobs for Americans and Obama is sitting on his hands. Waiting for what?"

Well, what do you expect. Obama's policies increased unemployment 20% since he took office. His "stimulus" packages did not create jobs (and in fact got rid of some jobs), but were payoffs to corrupt cronies.

But there has been some hope on the employment front lately. Why? It's pretty obvious. The last Congressional election gave us again a House of Representatives that acts in the public interest.