IOGCC: Collectively Representing the States

The Interstate Oil and Gas Compact Commission promotes the conservation and efficient recovery of our nation's oil and natural gas resources.

Monday, August 01, 2005

Let's talk about the Energy Bill...

8 Comments:

  • At 1:34 PM, Anonymous Kathy said…

    With natural gas deliveries into storage disrupted by the hurricanes, and not yet restored, will we have sufficient natural gas for home heating this winter? The US has been lucky to have several warm winters, and perhaps another one is in store for this winter. The politicians talk about "renewables" -- wind and solar -- but none of those work in my natural gas furnace. Conservation is certainly part of the answer.

     
  • At 1:44 PM, Anonymous Vincent said…

    Peter Foster, Financial Post columnist

    September 7, 2005 - Yesterday I pulled into a service station and bought $20 worth of gasoline. Since I'm keen to avoid my first $100 fill-up, and since I expect prices to come down (not least as a reflection of my own actions), I bought just enough to get me around for a couple of days. And I'm not planning any frivolous road trips in the near future.

    The collective result of such actions is to reduce demand, boost inventories and put downward pressure on prices until post-Katrina Gulf Coast refining facilities can be brought back onstream and gasoline can be shipped into North America from offshore. That's how markets work. In the wake of Katrina, however, the deranged chorus that suggests markets don't work, and that we may be on the brink of a new energy Dark Age, is being given way too respectful a hearing.

    Supply doomsters go under the collective banner of "peak oil" theory: the notion that global supply is about to reach its highest possible level, resulting in, as one of the theory's leading proponents, Colin Campbell, has put it, "the end of economics."

    Steven Levitt, author of the best-seller Freakonomics, recently pointed out that peak oil theory is in fact based on economic ignorance and gets reported by a sensationalist media the way shark attacks do. Economists point out that we shouldn't worry about running out of oil because new conservation technologies and energy alternatives will be developed, and the higher the price, the sooner they'll be here.

    Some of the peak oil theorists claim to take a geological perspective, but they seem more significantly motivated by a combination of being not just economically challenged but moralistically over-bloated. Not to mention a delight in frightening people.

    Matthew Simmons, a Texas investment banker and alleged "advisor to George Bush," claims that Saudi Arabia's oilfields are in potentially catastrophic decline. Others believe this applies to OPEC as a whole. But even if this is the case, the laws of economics will not be repealed.

    Mr. Simmons doesn't so much believe that we are about to run out of oil as that the commodity is fabulously cheap. As evidence, he points out that current high oil prices still equate to less than US20 cents a pint. I'm not sure how that is meant to clarify things, except to demonstrate just one reason why we don't run our cars on beer.

    Toronto investment manager and peak oilster Eric Sprott is among those who seriously suggest that mankind may be heading for a new Stone Age. The illustration below, representative of the absurdity of the peak-oil world view, comes from a recent edition of Sprott Asset Management's investment newsletter. In it, Mr. Sprott opines that, after all, the age of oil was a "one-off" event that has determined industrial growth in the past 200 years (He's apparently unaware of the primary importance of coal, which was also once declared to be in perilously short supply, to the Industrial Revolution). But what has determined the phenomenal growth of the past 200 years is not oil but human ingenuity, which the late economist Julian Simon called "the ultimate resource."

    Even that marvellous resource, however, has distinct limitations, and those apply in particular to its appreciation of just how resourceful humans are and how markets work. Economist Thomas Sowell recently likened this mental failing to the concern of the young John Stuart Mill -- perhaps the 19th century's greatest policy wonk -- that since there were so few notes, the world was in danger of running out of music.

    Another grim facet of the doomster conventional wisdom is that resource shortages will lead to "oil wars," as nations decide to simply grab resources rather than buy them. Just like looters in New Orleans! Just like the U.S. in Iraq! No blood for oil! However, that a Chinese state oil company chose to buy PetroKazakhstan rather than annex its home country points to a more sensible geopolitical future.

    There are still enormous policy dangers from Mr. Simmons's recommendation that the world be put on an "energy war footing." Remember Jimmy Carter's dubbing of his response to the 1970s energy "crisis" the "moral equivalent of war?" Remember how bad U.S. energy policies were in the 1970s?

    One astonishing characteristic of resource depletionists and ecological doomsters is that the more wrong they are proved by events, the more convinced they become that they will eventually be exonerated. Julian Simon once made a famous bet with professional alarmist Paul Ehrlich on the price of a parcel of commodities. Professor Simon bet they would decline in price in the ensuing 10 years. They did. Mr. Ehrlich had to pay up but continues to preach doom and gloom. Recently, a friend of the late professor Simon, John Tierney, bet Matt Simmons $5,000 that oil wouldn't reach $200 a barrel by 2010. My money is on Mr. Tierney.

    Meanwhile, according to Professor Levitt of Freakonomics fame, "I expect tons of copycat journalism stoking the fears of consumers about oil-induced catastrophe, even though nothing fundamental has changed in the oil outlook in the last decade."

     
  • At 8:25 AM, Blogger Interstate Oil and Gas Compact Commission said…

    Kathy is right about renewables. While they are the answer for the future, they don't work for us now.

    As for the peak oil theory, this may be true, but ONLY because irrational decisions are being made with regard to accessing our own resources. The United States has plenty of oil, we just need to be allowed to use it, and not be held hostage by OPEC. Anyone agree?

     
  • At 3:35 PM, Anonymous Kathy said…

    The trouble with the Energy Bill is that it doesn't go far enough. We have energy companies making huge profits and the energy bill adds more tax breaks for them. How can Congress justify that?

     
  • At 12:31 PM, Anonymous Anonymous said…

    Absolutely, with our nation’s technology and resources we should be developing news ways to become more energy efficient as well as not as dependent on other countries to accommodate our energy needs. We have the resources here in our own country to be self reliant; shouldn’t we focus on moving forward in those areas?

     
  • At 4:32 PM, Anonymous Vincent said…

    Why can't the federal government force the companies to sell at a lower price? Does that violate some law?

     
  • At 11:36 AM, Anonymous Zack said…

    Everyone speaks of the problem with gas prices being a pain, even airlines being subject to problems, highways are hurting. The answer to most of these things are actually quite simple if we just step back and look at it.

    The amount of coal in America is incredible, yet we do nothing with it. If it was used to create energy for multiple homes, even to use that energy to create and supply a railway that crosses America...that would clear up the airways and highways of planes and semis. Less semis would mean the higways would last longer and save states a great deal of cash from having to constantly maintain them. Electric trains are having incredible success in Europe and it's obserd to not even give this thought a chance. Planes and semis drain a great deal of gasoline where are the trains would use energy produced from coal which we have mountains of...just seems obvious to me.

     
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