I was listening to an oil analysts talk last night…and it appears that fuel oil is going through the roof! Saudi Arabia is pumping oil at capacity, and Iraq is still not on-line (the rebels keep blowing up the pipelines). Meanwhile, Germany is buying huge amounts of bunker oil (for the coming winter). So, are weseeing the beginning of declining oil production at last? Are ENRON-like companies manipulating the oil futures markets? Are SUV sales going to crash (and take FORD and GM with it).
Troubling signs indeed! WHY WON’T the US govet. get serious about this? I would think that by now, people shouldbe awre that there will likely be serious oil shortages in the future…why can’t we have some laws to enscourage conservation?My neighboe just bought a hulking 11 MPG SUV…WHAT are these people thinking??
I think the high gas prices are doing that already, and doing it better than any law could. I’d rather see tax incentives for companies who are putting more money into developing renewable energy resources.
Here’s something I don’t get: Just a few years ago I read in Atlantic Monthly that it was now much cheaper to refine gasoline from natural gas instead of liquid petroleum. Like, under $20/barrel cheap. So that if the price of petroleum ever went permanently above $20/barrel, we could just switch.
So why haven’t we?
Ummm… that’s what the price of something tells you. When it goes up, it means there’s less of it. If people aren’t conserving yet it’s because the price hasn’t gone up enough.
BTW, we’re still waiting for you to return to this thread which you started and abandoned…
I read an article in our local paper yesterday quoting one of our Albertan oil analysts as saying that oil would drop back down to around $40/barrel, but that was where the fundamentals would keep it. Increased demand is the culprit. The demand for oil worldwide went up something like 3-4% last year, and production increases didn’t match it. So the new market price should stabilize around $40, maybe slightly under.
The rest of the $50 price right now is essentially a fear premium. Instability in Iraq, an unknown future in Iran, and possible terrorist attacks on the energy infrastructure.
But $40 oil is still very high - a couple of years ago analysts expected it to be around $25 now. And China is still growing rapidly and their energy demands are going up like crazy.
And we don’t need laws for conservation. Just sit back and let the market do its work. People who would never have conserved before will get a couple of $200 energy bills, and suddenly it will make sense to keep the thermostat down a little. Those Hummer H2’s won’t be flying off the car lots as fast as they did, and now people are really paying attention to hybrids.
Finally, if oil stays this high, and natural gas follows, it puts alternative energy sources like Wind in a much more competitive position. So you’ll start seeing offloading of energy into wind. And nuclear will make a comeback as well.
Because Messrs. Bush and Cheney realize that more conservation and fuel efficiency won’t make their buddies richer?
Cheney: Bush won’t change fuel standards
“But Cheney, who is head of the White House’s energy task force, told General Motors executives that the Bush administration at this point has no plans to pursue higher fuel-efficiency standards, despite reports that Bush’s newly unveiled energy plan could tie more drilling for oil to tougher fuel-efficiency standards.”
BUSH ADMINISTRATION PROPOSES FUEL ECONOMY CHANGES: New Weight-Based Proposal To Increase Pollution and Oil Dependence
“The Bush administration today proposed changes that could weaken the nation’s most successful oil-saving law. The administration’s new proposal will make it easier for auto companies to qualify gas-guzzling SUVs and other “light” trucks for weaker fuel economy standards. Taking this step would lead to increased pollution and U.S. oil dependence.”
Gas-guzzling habits: Bush SUV standard falls short
“While we sit on the brink of war with a nation that resides in the heart of the oil-rich Middle East, and Earth continues its trudge on the path to global climate change, the Bush administration recently mandated a puny 1.5 miles per gallon increase in light trucks and SUVs. …The CAFE standard for cars and light trucks has not changed appreciably in 16 years.”
What Sam and John said. I wish I had the article with me, but in Wired either this month or last month they were showing the huge push China is making to go nuclear…with small pebble bed reactors. Thats what WE should be doing here in the US. They were also making the case that China is looking into using such reactors to create hydrogen as a possible alternative fuel.
-XT
You forgot to mention HALIBURTON!!
There actually are people (lots of them) who don’t think we need a law to deal with what is essentially an economic issue. Every American can make a decision every day whether or not to conserve fuel. And everytime one of us buys a car, we decide how important fuel efficiency is to us.
If the cost or supply of fuel worries you, go out and by a hybrid or choose from any number of fuel efficient cars on the markets. Then encourage your neighbors to do the same.
Okay, I’ll don the tinfoil hat for a moment:
Way back in the bad ol’ 70s, some oil developers wanted to build a pipeline across Alaska. Resistance was huge and it was on its way to becoming an eternal political football. Suddenly (and quite coincidentally, I can assure you), there was a gasoline shortage and long lines at the pumps. Public opinion suddenly swerved to support for said pipeline, the construction of which began almost immediately.
Today we have ANWR and all the political hoopla over exploration there. Resistance is huge and it’s already a political football. We have an occupying force in Iraq, with a president that has an eye on Syria and Iran. Suddenly (and quite coincidentally, I can assure you), we have escalating oil and gasoline prices and dire warnings of shortages.
Well, I said it was tinfoil hat time.
Will $50/barrel oil make tar sand oil economic?
Its already economical (I think the cut off is most like $40/barrel) and the Canadians are seriously ramping up their efforts to exploit tar sands. Other alternative fuels become economical at $50/barrel, so if the price stays there (which I doubt) then you’ll start seeing them come on stream in the moderately near future.
-XT
Perhaps at some point it will be economical to come back and clean up Prince William Sound.
While I agree that we can’t mandate conservation, we have tax laws discouraging it - specifically the truck deduction that has encouraged the purchase of SUVs. But I know that if anyone suggests the repeal of this we’ll be hearing “tax hike” all over.
You know what is going to happen. Toyota is coming out with hybrid versions of their entire line, and they are moving up the learning curve very rapidly. Pretty soon Detroit is going to lose market share as oil prices continue to rise, and they’ll be whining about unfair competition like last time. A bigger hike in standards would give them the kick in the butt they obviously need. There is a one year waiting list for the Prius around me, so it’s not like there is no demand. You’d think they’d have learned from the '70s.
According to Syncrude, their costs are about Cdn$18/barrel. (link)
Of course, some significant proportion of those costs are for the energy required to refine the tar sand into something useable, so the actual cost at the moment would likely be substantially higher. Still, judging by the ongoing boom in Ft McMurray, tar sand oil is very definitely economic.
Count me as one ardent free-trader who is against ***any ** * special tax treatment for ***any ** * type of vehicle (hybrid or SUV). I don’t fully understand the SUV tax break, but from what little I do know it’s nothing more than a loophole that some interest group or other got amended to the tax code. I’d be happy to see this tax repealed and would not yell “tax hike”.
In case you didn’t notice, the era of cheap fuel ended in 73’
June 27, 2000: Oil hits $28 a gallon, and we get this political nugget for the history books:
“I think the President ought to get on the phone with the OPEC cartel and say: ‘We expect you to open your spigots.’ The President of the United States must jawbone OPEC members to lower the price.”
–George W. Bush
“I would work with our friends in OPEC to convince them to open up the spigot, to increase the supply. Use the capital that my administration will earn, with the Kuwaitis or the Saudis, and convince them to open up the spigot.”
–George W. Bush
<Monty Python>
“$28 for a gallon of oil? Luxury!”
</Monty Python>
The tax break for SUVs applies only to vehicles purchased for “business purposes.” cite It’s not as if anyone can buy one and get a major tax break.
As for a tax break for hybrids, I’m for it. It would help people like myself who can barely afford a used car to get a hybrid and make less pollution, use less gas, etc.
There is no doubt that conservation will come because of market forces. However the supply-demand thing is a feeback system and there is a lot of lag in the response of price to demand. For example, not many people are immediately going to get rid of their big gas guzzler. For one thing many can’t afford it and for another the supply of small efficient cars is limited as is that of hybrids.
Lag in a feedback system tends to result in instability unless some sort of compensation is introduced into the system. It seems to me that the supply-demand feedback system has inherent instabilities that require some sort of societal, in the form of government, compensation in the form of regulations in order to avoid them or to ameliorate their effects.
It seems to me that history confirms that dependence on natural market supply-demand actions results in the instability of rapid increases in price followed by price crashes when lots of producers jump on the bandwagon but their output is delayed because of lead time. I realize that there are other reasons for the historical boom/bust phenomenon, but I thing the lag time in the supply-demand system plays an important part in it.