Another voice on energy

Last week the man who should have been governor of my native state wrote an op-ed in the New York Sun on a subject occupying the mind of most Americans – expensive energy. (This came to me courtesy of the Club For Growth – I like being on their e-mail list!)

I’m going to pick the piece up about halfway through, when writer Ken Blackwell starts on this point:

The McCain and Bush plans aim to meet our domestic energy needs, and eventually move us away from foreign suppliers. Right now, the world consumes almost 86.4 million barrels of oil per day, and only produces 86.5 million barrels. America consumes about 20 million barrels a day. That tightness of supply and demand accounts for most of the runaway prices. The supply numbers are staggering. There are at least 18 billion barrels of oil under the continental shelf, and possibly as much as 95 billion. Tens of billions more are found in various states nationwide.

But the mother lode is in shale rock. It’s estimated that the Saudis have about 260 billion barrels under their sand. By comparison, with current technology, we can safely recover more than 800 billion barrels of the estimated 7 trillion barrels of oil in the shale rock from the Rocky Mountains. That means that current technology could give us more than three times the entire national resources of oil-rich Saudi Arabia.

Extracting oil from shale rock only recently has become economically feasible. It costs about $70 per barrel to extract and make the oil usable. When oil was $18 a barrel that would have been crazy. But at $138 a barrel, it’s a bargain. And American companies can make money by supplying our nation’s need, and lowering costs for all of us in the process.

Speaking of profits, don’t buy into this tax-the-company mentality. If people want to criticize how much oil executives are paid, that’s one thing. But the profits go to you and me. Almost two-thirds of oil-company stock is owned by mutual funds and pension funds. That means taxing those profits would decrease the return on your 401k or IRA. And most of those pension funds serve union members. So taxing those profits would hurt middle- and working-class Americans. That’s unacceptable.

Not to mention the fact I own a infinitely small piece of Big Oil myself – I don’t even think my dividends could fill up my gas can, let alone my tank. However, the larger point Blackwell makes in this segment of his op-ed is that market economics works. Obviously bringing this production of oil shale on line will impact the price of crude oil itself, almost certainly driving down the price as crude oil-producing nations try to bring it into competition with the price of shale. To them, they would need to get the per-barrel price under $70 to bring back a competitive advantage, while at the same time more efficiencies in the nascent oil shale technology would in turn promise to cheapen its cost.

All along, my point on once again encouraging domestic oil exploration and production has been more along the lines of creating good-paying jobs, with the side benefit of driving down prices to a more manageable level. As I brought up last night about manufacturing, increased transport costs are slowly driving manufacturing jobs back to our shores and the pace might increase if we can more cheaply supply our own energy, instead of importing millions and millions of barrels of foreign oil. In turn, cheaper energy costs free up more money for consumers to spend and improve their lifestyles – soon we’ll have a country where once again people will believe that their offspring will have a better life than they did.

On the other side of the coin are those who wish us to achieve energy “independence” through conservation and regulation, with a heaping dose of subsidies on the side. While a lot of them arrange their lifestyle in such a manner to use less energy, those who have the political power to dictate to the rest of us how we should live don’t tend to emulate that spartan lifestyle. One recent news item that was buried by the partisan media was that Al Gore, despite spending thousands to curtail his energy use, now uses 10% more energy at his Tennessee home.

As well, much to-do was made last year when the I-35W bridge collapse in Minnesota brought attention to crumbling highway infrastructure, but little attention has been given to our energy infrastructure as it ages and becomes less efficient. It’s predicted that Maryland could be suffering brownouts as early as 2011 if more isn’t done to address the problem; unfortunately oppressive environmental regulations make constructing new power lines or pipelines difficult. Again, the opportunity for creation of good-paying jobs is lost because the balance of power between environmentalism and capitalism is well off center. We need to restore the primacy of man over nature because it is possible for both to benefit if energy is harvested and transmitted in a sound, common-sense manner.

We are Americans, we can accomplish this goal. After all, we set our minds to landing on the moon and made that happen so why not a place a focus on the task of using those resources we’ve been blessed with to accomplish much more than conservation or regulation ever could?

Author: Michael

It's me from my laptop computer.

One thought on “Another voice on energy”

  1. Michael,

    An important point on any untapped resources and the “cost” to extract them (especially oil sands and shale):

    The higher costs occur at the beginning and the end of production curve. As production increases (and time goes on), the cost of extraction goes down per unit. In essence, the marginal cost of production decreases — just like in every other industry.

    So the benefit of our own production here in the US is that as we increase our own production, the cost of that production will begin to decrease — even as worldwide market prices begin to decrease as well. This has a leveraging effect of increasing our independence, because “Big Oil” is not stupid. They will continue investing their profits into research and development of alternative energy sources.

    Any of them would LOVE to be the first company to bring to market a viable hydrogen fuel cell. And that is really where the future is. Why?

    Because frankly, electricity is not portable. The appeal of petroleum is that it is (relatively) lightweight, portable, and high in potential energy (and thus can be stored without losing that potential energy).

    While solar and wind sound great, they are not lightweight, portable, and high in potential energy. The electricity generated from solar and wind (and geothermal, too) cannot be stored for long periods of time. And it is not necessarily easy to just “plug your car in”… do you think that parking garages are going to suddenly install 110v or 220v outlets in every spot?

    As for geothermal, it is a great option for heating and cooling where you have the land available for the well system. Not so great in the cities and high density developments.

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