Soaring Oil Price Threatens U.S. Economy
In recent weeks, the price of oil has climbed above $90 per barrel. As chaos spreads through the Arab world, we could soon see much worse. With these facts in mind, it is essential that U.S. policymakers act to protect the U.S. economy from this ever-worsening trend.
The likely impact of a new oil price rise is shown in the graph below, which compares oil prices (adjusted for inflation to 2010 dollars) to the U.S. unemployment rate from 1970 to the present. It can be seen that every oil price hike for the past four decades, including those in 1973, 1979, 1991, 2001, and 2008, was followed shortly afterwards by a dramatic rise in American unemployment.
The distress to American workers caused by such events is manifest, but the economic harm goes far beyond the impact on the unemployed themselves. A sustained oil price of $90 per barrel will add $480 billion to the U.S. balance of trade deficit. Furthermore, there is a direct and well-established relationship between unemployment rates and rates of mortgage defaults.
Thus the $130 per barrel oil shock of 2008 didn’t just throw 5 million Americans out of work, it made many of them default on their home payments, and thus destroyed the value of the mortgage-backed securities held by America’s banks. This, in turn, threatened a general collapse of the financial system, with a bailout bill for $800 billion sent to the taxpayers as a result. But that is not all. The destruction of spending power of the unemployed and the draining of funds from everyone else to meet the direct and indirect costs of high oil prices reduced consumer demand for products of every type, thereby wrecking retail sales and the industries that depend upon them.
Indeed, the world today is already in deep recession. Yet as a result of the systematic constriction of oil production by the Saudi-led OPEC oil cartel, petroleum prices today stand at over four times what they were in 2003. This has imposed a tax increase on our economy of $500 billion per year, equal in economic burden to a 20 percent hike in income taxes, except that instead of the cash going to Uncle Sam, it will go to Uncle Saud and his lesser brethren.
These, however, are said to be our “friends.” As current events in Egypt should make clear, however, there is every chance that someday — perhaps soon — we could wake up and find that the world’s oil is under new management, even less concerned with our well-being than the gang in charge today.
This is a fundamental threat to America and the world economy. We need to take action to protect ourselves from it now, before it is too late. How can we do this?
Looking at the data in the graph, it is clear that cap and trade plans, or alternative methods of carbon or fuel taxation, are not the answer. Indeed, by increasing the cost of energy even beyond those imposed by OPEC, they will only make the economic situation worse.
Instead, we need a policy that will keep oil prices down. The way to do this is to create a degree of diversity and competition in the global fuel market that does not exist today.
Fortunately, the technology to accomplish this is currently available. Flex fuel vehicles can be now be made, at an incremental cost of only about $100 per car, that can run equally well on gasoline, ethanol, or methanol, in any combination, thereby giving the consumer complete fuel choice.
Ethanol has already replaced seven percent of our gasoline, and having a flex fuel auto fleet would allow it to do more. But the real key here is the ability to use methanol, which can be made in nearly unlimited quantities from natural gas, coal, biomass, or recycled urban trash — resources in plentiful supply both here and worldwide. Methanol can be produced for as little as $0.50 per gallon, and its current global spot is $1.28 per gallon, without any subsidy, equivalent in energy terms to gasoline at $2.33 per gallon.
Were Congress to pass a law requiring that all new cars sold in the USA be fully flex fueled, it would change not merely the American auto fleet, but the global auto fleet, as foreign car makers would be compelled to switch their lines over to meet the standard. Gasoline would then be forced to compete at the pump against both ethanol and methanol made from any number of possible sources, all over the world, thereby putting a permanent competitive constraint on the price of petroleum at about the $50 per barrel level. This would protect us from both the greed of our “friends” and the malice of our enemies.
In the last Congress a bipartisan bill, known as the Open Fuel Standards Act, was introduced into both the House and the Senate that incorporated such a provision. As a critical national and economic security measure, it needs to be introduced again, and this time brought to a vote and passed.
The time to fix the roof is when it is not raining. It’s already drizzling. But we can see the storm clouds, and time could be running out.
The best way America can protect itself is to elect a president who understands the basic tenets and history of Islam and is not sympathetic to an imperialist, totalitarian, intolerant, incoherent, backwards and deceitful political ideology that is clearly on the march.
Mr. Zubrin, Welcome to PJM! Many years ago, I read your book about how we can get to Mars and eventually colonize it.
Of course, we won’t be doing that anytime soon, since our Socialist-in-Chief now believes in solar panels rather than space travel.
If you can produce a car for an additional $100 that can use a fuel that can be made for 78% less than gasoline you would not need to pass a law to make it happen.
I do not know Robert Zubrin, but I suspect that he has a major disconnect from the real world.
Exactly.
If this were possible, Mr Zubrin could be a trillionaire by this time next week.
He must not be very persuasive.
Even if the cost were $1,000 per car, it would be a great deal for the average consumer.
So it’s clear there is a fatal flaw with the idea. Electric cars sound great as well, until you look begin to understand the details.
Precisely. This has a strong odor of crackpottery. If methanol can be produced that cheaply without subsidy, it can be blended into regular gasoline in small quantities without special engine modification. Until I see that happen, I have no reason to believe these sensational claims.
Sorry, the economic proof is in the market, not on the back of an envelope.
Exactly
Perhaps the biggest problem with methanol is that it’s very toxic and is easily absorbed through the skin. Massive use in “gasoline” could easily result in a lot of people going blind (it’s particularly bad for the optic nerve) or worse.
According to GM Vice Chairman Tom Stephens, adding flex fuel capability adds around $70 to the production cost of a vehicle. See here:
http://www.reuters.com/article/2010/02/16/gm-ethanol-idUSN1619509020100216
The production cost of the capability is only one of the costs. How much is a post-production retro-fit? Do alternate fuels ruin the engine? Decrease the engine life? Are there fire hazards? Do there need to be additional fire protections? What is the effort to switch fuel types? Where are the additional fuel types carried? How complex is it to install them? Do they have to be permanently installed? Are there risks if the fuel compartements are adequately protected? Can the car blow up or catch on fire? Are the alternative fuel types all safe for usage in conventional engines? What is the impact on the emission control systems? Can the fuel lines get clogged? Do the fuel lines for the alternate fuels cause potential hazards? How much weight is added to the vehicle? Does the vehicle need to be specially designed for the additonal fuel sources? etc x 1000
If it was a miracle, the world would be flocking to pay the $100 or $70.
Read the article more carefully.
Methanol can be produced for as little as $0.50 per gallon, and its current global spot is $1.28 per gallon, without any subsidy, equivalent in energy terms to gasoline at $2.33 per gallon.
Robert Zubrin isn’t proposing producing fuel that is cheaper, but requiring car to be able to use fuel that is slightingly more expensive than gas costs today $2.33 gallon + local state and federal taxes.
Why?
Because the main problem with oil is not high price but the fact that the
market takes a long time to react to oil prices (short run price elasticity in the jargon of economics).
A typical cycle
1) Oil supply drops a little, but people still have to drive their fun but fuel inefficient cars to work demand does not drop immediately but prices go through the roof.
2) People comprise insulate their houses and buy more efficient cars that are more expensive less fun or smaller demand for oil drops.
3) Oil prices collapse, demand takes a long time to increase as people replace their cars with more powerful models.
OPEC countries game this cycle to make enormous profits by reducing
supply in step 1 but never long enough for alternatives to develop.
If we change the environment that will allow alternatives to develop
and deployed quicker we protect ourselves.
This is especially true if the alternatives costs are mostly capital and not operating. Even if capital costs may not be recovered from projects completed at the wrong time with respect to oil prices. These projects will continue to operate as operating profits will exceed operating costs cutting into OPEC market share.
The Idea here is to cheaply reduce OPEC countries ability to extort money from everyone else.
kamil
Read the comments carefully. The assertion that methanol can be produced that cheaply is disputed. I certainly don’t see that claim substantiated anywhere. I declare hogwash. Show me were I can get MeOH for 50¢ a gallon, and I’ll convert my truck. And so will a few a hundred million other people.
You assume that if methanol can be produced at $0.50 presumably in the most modern manufacturing plant in a good logistics and regulatory environment means that you will be able to buy it at that price locally. Do you buy your oil(or anything else) at the manufacturing price of the lowest cost producer or the price determined by supply and demand?
Mr Zubrin stated that the current global spot price is $1.28.
According to a petrochemical trading site the price in US was $1.06 per gallon on Jan 7 (You have to pay to get more up to date information).
The wholesale price for methanol now is around $1.28 per gallon. I would say that it can be made for $1 per gallon and M85 could sell for $2 per gallon retail. The 15% gasoline in M85 can be made from methanol as well using the MTG process.
FlexFuel means 85% gasoline…only 5% less than the current standard of 90% for “non-FlexFuel”.
You are suggesting cars can run on 100% ethanol or methanol for a $100 modification. Is that really possible?
Actually, E85 is 85% ethanol and 15% gasoline. I have a 1999 Ford Ranger that is E85 capable; but it gets such lousy mileage on E85 that it actually costs more to run it on that “alternative” fuel even when E85 was a dollar a gallon less than regular fuel. Right now around here on Colorado’s Front Range, E85 (when you can find it) is only about 35 cents cheaper a gallon.
A boondoggle and a waste of time, money and corn.
E85 is 85% Gas 15% ethanol.
E85 is 85% ethanol and 15% gasoline.
Uh, no.
http://en.wikipedia.org/wiki/E85
Animal…putting ALL the other variables of ethanol being discussed, off the table, ethanol blending is ONLY marginally more efficient for cold weather engine operation and a minute variable to cleaner air dependent upon where one lives.
ALL ‘by-product’ processing is expensive unless such a by-product has an extensive DIVERSIFIED market position. Ethanol does NOT have any large diversified market position and therefore remains a nonviable fuel energy product.
Magnetic energy is the ONLY viable replacement for combustion engines but nobody is even close to exploring that option for domestic use….as it would kill most of the automobiles valuable repeat sales and after market that todays auto market and the national economy has come to rely on.
Since we are not allowed to produce our own oil to keep prices low, and since ethanol has been used not to improve our cost structure, but to improve the wealth of corn farmers, I don’t expect methanol to be a solution. Whatever the virtues of methanol, it certainly has environmental impacts that will delay it’s introduction. And most present day cars cannot use it.
Traditional gasoline is the best fuel. It could be produced cost effectively if only the private producers were allowed to do it. They should even be encouraged to develop it. As should methanol manufacturers, if they can compete without subisdies.
Ethanol or methanol do not have the same energy output as gasoline, so are less efficient and the motorist will pay more for the same distance traveled.
Also there is no benefit producing alcohol from corn as the conversion process needs as much energy to produce a gallon of methanol as that gallon will supply to the vehicle.
The energy for conversion has to come from somewhere and the corn has to be cultivated, harvested and transported so somewhere you cannot do without petroleum.
Basically the citizen is going to pay a lot more.
It is a bit more efficient producing alcohol from sugar cane and so cheaper to import but the lobbyists have seen to it that it is taxed sufficiently to avoid competition.
An acre of hemp will produce 4 times the ethanol as an acre of corn, that would reduce by 75% the cost of producing ethanol over corn, but the government will not allow this, why?
Because cellulosic ethanol technology isn’t ready for prime time, maybe?
Nope, that’s not the correct answer, not even close, care to guess again?
I used 10 percent ethanol fo a while and ended with a worse running engine and 15 percent less gas mileage. I don’t recomend ethanol unless we are totaly out of options.
Natural gas on the other hand burns much better than gasoline and is plentiful. Of course Obama doesn’t want to encourage it’s use.
I HATE that argument all of those enviro-Nazis keep making that even if we started drilling for oil off our coasts, it would be ten years before we saw any substantial amounts of oil. We have been wanting to drill since the early 1990s, and if we had started back then, we would be energy independent right now. Also, had we built all of the nuclear reactors we wanted back in the late 1970s, we probably wouldn’t even need the foreign oil, what with all of our domestic energy needs being taken care of by domestic oil drilling plus our nuclear power plants. But the enviro-Nazis will never admit that, so we continue with our dependence on foreign oil. If we had a president with some real backbone, we would ignore the enviro-Nazis, declare a state of emergency, and drill off our coasts, in Alaska, and build as many nuclear power plants as possible. We also have some of the biggest natural gas reserves in the world which, thanks to the insane enviromentalists, we don’t take advantage of.
So here’s the deal. We can either start acting rationally and start drilling for more oil and build more nuclear power plants, or we can continue being dependent on what a bunch of monarchs and dictators wearing towels ont their heads want from us. The choice really is up to us.
Not only is the ten year claim a out and out lie, the effect of new drilling on the price, as was pointed out by someone who knows these things, would be immediate. Something to do with prospects or something. As for this ten year deal, the infrastructure for oil exploration, production, and transportation already exists in the Gulf Coast. I heard two years mentioned a while ago. Someone PJ/oil person viewer could provide better information than I.
There is enough oil shale to last for a century. The costs would come down if the free market was allowed to work.
And the environment impact isn’t the issue with energy at all. If for no other reason than that every barrel of oil the US would produce would be far cleaner than a barrel produced by any other country. What does the most damage to the environment is NOT letting the US produce. So, it’s not about the environment; it’s about political power, just like health care.
The high oil prices triggered the real estate crisis, but those mortgages were doomed from the start. There is simply no way those people would be able to pay them when they went variable no matter how good the economy. The assumption that people could refinance when home prices rose depended on the bubble enduring forever, and that is not possible.
Hey, I have a better idea. How about the US government gets the Hell out of the way and let US companies actually drill for oil in OUR country, let them mine our coal, our oil shale/sands, and then let the free marketplace decide what people want to put in their cars. The government has done enough damage to our energy supply. The answer is not more government, but less.
Bullcrap.
The solution is to start aggressively drilling here and now for our own oil. According to our own government we have more fossil fuel reserves than any other nation:
http://www.humanevents.com/article.php?id=34233
http://epw.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=f7bd7b77-ba50-48c2-a635-220d7cf8c519
What we lack is the political will to explore and drill. We have a powerful, elitist eco-Marxist group controlling the Democrat party and wielding outsized influence over the media and institutions of education that work daily to restrict access to and use of our own energy.
It will take a real crisis for the public to throw off the burden of the extremist environmentalists.
I would like to mention the fact that there is more coal in the United States than anywhere else. Coal can be economically converted to liquid fuel. That costs something, but the resulting fuel does not have to be imported.
The US has 27% of the world’s coal. How much of this can be easily mined is something I’m still not clear about, but there are many decades worth of coal right here in the US. Quite a lot of it is locked up and unexploited in government-owned land. We could be energy independent quite easily. Using coal can buy us the time to build the nuclear power plants we need for our baseload electricity.
France, which is about the size of Texas, has quietly built 30 modern nuclear power plants to provide their baseload. They are not in danger of blackouts. The UK is most certainly in danger of blackouts because the EU has them in a regulatory stranglehold.
I think the best kind of engine to have is diesel, because ethanol forms a stable “azeotrope” with water in the air which is 95 percent ethanol and 5 percent water. That water does indeed damage engines and exhaust systems. Methanol, by the way, is quite a potent nerve toxin, and can be absorbed through the skin, which makes it more of a health hazard than the ethylene glycol in antifreeze.
Methanol is produced economically from both coal and natural gas. Just google methanol and coal or methanol and natural gas. On a per mile basis it is less expensive than gasoline. Yes, you need to fuel more often because it has fewer miles per gallon than gasoline, but the cost per mile is less.
Here’s an interview with the CEO of Methanex, the world’s largest methanol company (most of their methanol is natural gas based) discussing flex fuel cars:
http://www.bloomberg.com/video/64411762/
dannyboy….Methanol is not ethanol! Methanol has one carbon atom while ethanol has two.
I thought that Obama already solved the soaring oil price problem with a law hidden in ObamaCare requiring every American citizen to purchase a Volt electric car made by Government Motors Union Workers..?
Okay, so the solution now is that every vehicle must display a government approved FlexFuel seal adjacent to the mandatory impregnation of an image of Obama’s face.
How is that Change and Hope thing helping off-shore drilling, nuclear power or OPEC leaders saying, “Life is a bitch!” to Americans going? We have enough Chinese and Indians to bury every person in the USA, including the fat ones. Jihad will take the heads off of what is left over.
Anyway, this is an interesting article – academically. There are still over 55+ million clueless, mindless Obama worshiping droids to deal with before this nation can even consider doing anything that makes sense.
And if the Super Bowl 45 pre-game show interview, the commercials and the half-time show are any indication at all; we have a terribly painful long way to go.
We could be drilling for our own oil. We could be building new nuclear power plants. We could be building new oil refineries. We could be energy independent.
But expecting a sensible energy policy from someone who vowed to make everyone’s utility bills “necessarily skyrocket” is fantasy at best.
We have to start electing leaders who have a healthy dose of skepticism when it comes to anything the Big Green lobby wants. Only by marginalizing these far-left radicals and exposing their lies can we hope to return any measure of sanity to our energy policy. However, we’ve allowed ourselves to be unduly influenced by these people and their curious anti-human agenda to the point that our children are effectively brainwashed, repeating their propaganda without question. Our politicians are no better.
The laws of physics and economics should guide us as they once did, not fairytales about man’s destruction of the planet. The simple truth that we all know but won’t acknowledge is that man can only temporarily affect the environment and that the Earth will restore balance on its’ own.
Have decades of regulations proven to be so ineffective that we constantly need more of them, ever strangling our ability to provide our energy needs until we are forced to look to hostile regimes to supply us with what we already have, but can’t access due to our ignorance? When will we wake up and boot these politicians from office and replace them with someone who has at least a little common sense?
Yep
Note that only 1% of US electricity is generated from oil today, and only 1% of US oil demand is due to electricity generation. So while it is important to build more nuclear power plants for other reasons, it won’t impact the oil market.
You can see the raw numbers here for electricity generation by power source:
http://www.eia.doe.gov/cneaf/electricity/epm/tablees1a.html
and here is a graph that shows both oil demand by sector and electricity generation by source:
http://en.wikipedia.org/wiki/File:LLNL_US_Energy_Flow_2009.png
Have you thought about where you’d get the uranium from? Because the way I see it, that’s not going to make you “energy independent”.
Hint: very little uranium is actually mined in the US. Australia’s the biggest exporter, followed by canada, kazakhstan and russia. That’s two thirds of the world’s production. The US mines about 4%.
I’ve also done the numbers once before, and the US would have have to MASSIVELY increase its production of oil before it could threaten OPEC’s ability to keep setting prices as they do now.
Has anyone come up with a plausible explanation of the Q4 2008 collapse in oil prices?
If you read reports outside of the MSM, you would have found:
Firms like Goldman Sacks buying up entire tank farms of oil. Basically firms like GS were converting dollars into commodities and then holding onto those commodities.
Iran was purchasing old oil tankers and using them as stationary platforms to store excess oil production.
There were tankers full of oil sitting off shore, held in place as their cargo was being held off the market by speculators.
Natural gas supplies, resulting from new finds in the USA, were exploding. This means that commercial clients that can use either oil or gas (i.e. heating) switch over to gas.
The oil price collapsed because all the oil was held off the market due to speculation, suddenly flooded the market as prices dropped,. It was basically panic selling by people who held on too long.
Don’t blame the speculators though. The problem was triggered by the Fed flooding the market with dollars. Fiat money is based on faith. If you no longer have faith in your currency, you replace the fiat money with hard assets (oil, grain, gold, pork bellies, etc,.)
Actually, the House of Saud has said they’ll ship us more oil but, we don’t have the refinery capacity to handle the increased availability of more crude. That crude would just sit offshore in tankers. America has not built a new refinery in over 30 years. Why? Because of ignorant left wing ‘environmentalists’ who sue to stop construction of new refineries, the NIMBY crowd. Couple that with a growth in demand and you have a recipe for disaster. Perhaps when the maggot infested left wingers have to pay 8-10 dollars for a gallon of gasoline for their 20+ year old oil burning Volvo POS they’ll see the light. But, I’d guess they’d prefer riding a bike in the rain to shop for groceries or pick up their government check.
Complete nonsense. The US didn’t suddenly run out of refining capacity in the worst recession in 80 years when overall US fuel demand is down. Lack of refining capacity doesn’t drive crude prices up.
America has not built a new refinery in over 30 years. Why?
Because it would be stupid. Refining capacity in the US rose dramatically from 1979 until 2008. Instead of building refineries, we are closing them because demand is down. API does not expect US gasoline consumption to ever rise to the 2008 level again.
Yes. President Bush signed an Executive Order that repealed a prior EO that banned drilling in the Gulf of Mexico. The next day, the price of oil peaked and began falling the following day.
Yet as a result of the systematic constriction of oil production by the Saudi-led OPEC oil cartel, petroleum prices today stand at over four times what they were in 2003.
Actually, the most important member of OPEC is the Democratic Party. They keep more oil from coming to market than the Saudi’s do. Plus, they are regulating other industries into the grave.
What we are seeing from the Democrats is a sustained war on Blue Collar America. You see, those spikes in unemployment when Democrats control DC are no big deal — as long as government payrolls expand and government workers keep their retirement plans. We are no longer a nation with a government, or a government with a nation, but a government and a bunch of suckers.
Flex fuel vehicles are fine, but let’s produce our own oil and gas. We won’t do that until we get rid of the Democrats (and I mean that in a nonthreatening way).
Yes, let us burn even more of the world’s food supply. As if having the Dept of Agriculture burn it wasn’t bad enough.
I like your train of thought until about there- then you lose me.
I love the constant refrain about ethanol and ‘food supply’. Only here in the US would we allow the farm lobby to hijack energy in order to prop up corn prices. As if mandating every damn food in the universe use Corn Fructose isn’t enough of a prop as it is.
Cane sugar is vastly more efficient in terms of energy yield (as in its positive – unlike corn. Or freaking WOOD CHIPS!?! Do these people study Glycolysis who come up with this?) when compared to corn. Once we had a thriving cane industry in here in the US South East. Guess who killed it?
And all of this doesn’t even touch on sugar beets – which have a similar yield in sugar as cane, while being grow-able in places like South Dakota. The entire argument against flex fuel is predicated on the inanity that we *HAVE* to use corn (or wood chips. Or grass. Or the emanations from political talking heads).
Which is patently nonsense.
And of course, none of this touches on the enviro-NIMBYism that forces us to discard solar in the Mojave (God Save the Spotted Desert Dung Beetle!), offshore drilling, or 4th Gen nuke plants.
Do we want to address the Trade Imbalance or not? Do we want American jobs or not? Do we want Energy Independence or not?
So far, the answer is a hell of a lot of ‘or not’.
1-2% of all the money that goes out in “green” energy subsidies comes back as political contributions. The rest of the money funds the green lobby.
Finding a workable energy program for the country has nothing to do with it.
Look at Spain. It destroyed it economy with green energy subsidies, but the left does not see it that way. The left sees all the money if funneled to its friends. That is how Obama sees it too.
any similarity to Carter oil prices? this is the crisis Obambi wants to avoid at all cost, even is it means Mubarak being removed now (and it means now) so to get the mid-east in calm again…
Too bad for the suffering of the people, but maybe this is what’s actually needed for the rest of the Obambi fans to get their feet on the earth again, and for a reaganesque showdown in 2012
DR.
Excellent comments. These ideas along with nuclear, natural gas, expansion of drilling in the U.S. and clean coal could put our economic engine back on the tracks.
Sadly for all of us it will NEVER happen under Mr. O, NEVER. As with his forgeign policy Mr. O and his cohort have proved to be amateurs and incompetents in all they do except for spending money on old disproved Rube Goldberg ideas.
Still hold on to your ideas, as 2012 isn’t that far off and perhaps Mr. O will leave us then so we can get on about our business out here in the sticks. Until then I think I’ll just take another nap. Wake me when he’s gone.
actually the environmentalists will litigate it to death and it will not happen. We have basically put ourselves in a position that prevents us from doing anything because of law suits. Nothing happens till the law suits are settled and even then another suit will be brought. Besides, as evidenced by the Obama administration not issuing permits for drilling in the gulf even after the courts threw out the regulations. They will do what they want, the law? the law is only a suggestion to them.
Actually, the laws that gives Big Green its power to stop new energy development are the Clean Air, Clean Water, and Endangered Species Acts. Unless and until these laws are repealed or rewritten, we’ll never be able to do what we know we need to do.
Our own government has given the greenies the tools of our destruction. Look at the EPA’s shutting off of the water in California’s Central Valley. Despite defying the Constitution’s General Welfare Clause, that action is currently legal.
If I were California’s governor, I’d go in there with troops, turn that water back on and dare anyone in Washington to stop me. The idea that some insignificant fish is more important than the peoples’ food supply should be grounds for several impeachments.
Would someone on PJM please study the economic system known the Petro Dollar that is the foundation for the US economy..?
Then maybe all these questions why no alternative energy, or no drilling off the coast, and why we have no choice but to purchase oil at increasing quantities is locked into the very fabric of the economic system. If we stop buying Petroleum from Saudi Arabia, the US dollar collapses.
Basic economic principles drive the Nation, The US government removed the US dollar from gold and replaced it with Petroleum based backing in 1973. anything below a certain level of purchase will trigger collapsing US dollar.
this is the real world.
This article is nonsense. In order to significantly reduce our dependence on non-North American oil ( I don’t have any problems with buying oil from Canada) we would have to convert our entire corn crop into fuel and that still wouldn’t do it. Ethanol for fuel makes food more expensive and higher food prices will do as much damage to the economy as higher oil prices.
The solution to our indirect dependence on Middle East oil is more domestic production and exploitation of resoures like oil shale. Not only will it free us from energy imports from outside North America it will employ Americans in high paying jobs. Between Alberta tar sands (1.7 trillion barrels) and American Shale (1-3 trillion recoverable barrels) North America liquifiable hydrocarbon reserve dwarf the rest of world’s oil reserves. It takes less water to get the oil from shale as it does to produce ethanol and is therefore more enviromentally friendly as well.
We don’t need more ethanol! It has had a disastrous impact on the price of food worldwide – see Egypt. Last year almost 40% of the US corn crop was destroyed by conversion into ethanol. It takes diesel to grow, refine and distribute, negating any “benefits” from using it. It absorbs water like a sponge, and even now is causing damage to the engines and exhaust systems of tens of millions of cars. Ethanol is not “competing” with gasoline – it recieves large government subsidies – and is mandated for use. How is that competitive?
I wrote an article last year which was published at American Thinker on this subject: http://www.americanthinker.com/2010/11/the_biofuels_scam.html
We have massive amounts of energy in the form of oil, natural gas and coal just waiting to be unlocked. But until the Progs are no longer in control, we will be unable to access it.
Friends;
The above comments contain many mistaken ideas;
1. Flex fuel does not mean “85% gasoline.” Flex fuel means able to run on any combination of gasoline, ethanol, or methanol, in any proportions. The most common alcohol fuel sold in the USA is E85, which is 85% ethanol, 15% gasoline. In Brazil, 100% ethanol fuel is sold and used by flex fuel cars.
2. Methanol is not an environmental hazard. In fact, windshield wiper fluid is 1/3 methanol, and we dump billions of gallons of it directly into the environment every year, without any environmental impact.
3. Use of ethanol does not cause food shortages. It causes an increase in grain production, and thus agriocultural R&D, and thus crop yeilds per acre. The food vs fuel argument is a Malthusian conceit, and is false for exactly the same reason why the “population bomb” argument claiming that increased world population would cause global famine proved to be false. Farmer produce in response to demand. The more customers, the more production, and the cheaper the product. That is why, despite the fact that the world population has doubled since 1968 when Paul Ehrlich (the mentor of Obama’s Science advisor John Holdren) wrote The Population Bomb, people everywhere are eating much better today, not worse. Interestingly, the “food vs fuel” argument has been widely promoted by the Glover Park public relations firm, which is registered with the US Department of Justice as an agent of the United Arab Emirates, and which is also the primary PR firm responsible for promoting Al Gore’s global warming hysteria campaign.
4. While nuclear power is an excellent source of electricity, it is not a remedy to our oil depdendency. We only get 3% of our electricty from oil. Our problem is that we get 93% of our transportation fuel from oil. We need an alternative source of liquid fuel. Methanol can do the job. It is very cheap, and can be made from coal, natural gas, biomass, and recycled trash. The problem is that the cars on the raod now can’t use it, leaving oil with a stranglehold on the transportation fuel market. If we continue to allow that stranglehold, we will allow our economy to be wrecked at transfer world financial power to the Islamists. We can, however, break that stranglehold simply by requiring that all cars sold in the USA be flex fueled, thereby giving the consumer fuel choice.
5. Here’s a question for the doubters: In whose interest is it that Americans do not have fuel choice?
Robert Zubrin
http://www.energyvictory.net
Maybe we Americans should start protesting in the streets that we want drilling for our own oil and we want it ASAP and we want more nuclear power plants and we want them ASAP, etc etc. Since the Arabs are having some degree of success, perhaps we should take our lead from them.
This always leaves me with so many questions as to why regardless of the congressional makeup or who is in the White House nothing has been done about our energy problems. So whom is buying off whom? I personally would have been taking on the anti-nuclear power people decades ago and building plants, locating our oil reserves and drilling. If anyone thinks we are going to have the time to do any of this once Iran, the Soviets and Chinese come down on us you are nuts.
Dr. Zubrin,
I appreciate your article, and have always enjoyed your opinions. But I have to respectfully disagree here. First of all, 3 of the 4 countries that supply our oil come from the North American continent, and none of those are members of OPEC. What the Saudis and others want to do to the global price of oil affects us because oil is fungible, not because we have to buy *their* oil. Therefore, even if we were to become energy-independent, the price of American oil would still be affected by the global supply and demand.
Further, no matter who is in charge in the Oil Kingdoms of the Middle East, they will have the responsibility to keep their respective populations happy. The best way to do that will be to drill and sell oil. It is, after all, still a business. Currently, OPEC’s management of maintaining scarcity to hold up prices, while still keeping demand high enough to fund their economies, is likely at an efficient point; no government takeover by radicals will change that math. The only change would be a US foreign policy change to not accept imports from that country, where we’d be restricting our own supply.
But that’s fairly fuzzy foreign policy stuff. I’m most disappointed that as an engineer, you don’t address the fact that oil-based fuels, like gasoline and jet fuel, represent a stable, portable, easily extractable source of energy that is currently unparalleled by any other fuel source. The best we can hope for is to replicate hydrocarbon fuel by other means than oil refining. I know you didn’t want to get terribly technical with this audience, but I’d be curious to see a comparison of the cost in terms of energy and cash between refining gasoline from crude oil and manufacturing methanol from “natural gas, coal, biomass, or recycled urban trash,” as well as a comparison between the extraction of energy from those fuels in modes of transportation.
Perhaps for another article.
One last quibble: That chart should have two separate Y-axes, with one on the left for oil price and one on the right for unemployment (or vice versa), shouldn’t it?
Thanks for writing and stirring the discussion.
Regards,
Jon
To the extent that methanol makes economic/technological sense…and you make a good argument…why not start with fleet vehicles? Since these tend to put on miles much faster than the average private automobile, the cost of the conversion would be amortized more rapidly, and the problems of fuel supply would be much simpler than for private vehicles.
In general, successful new technologies start with niche applications before expanding out to a broader market.
Like solar and wind power, ethanol is a technological dead-end which can never fully replace what we currently have, will cost billions to implement and which will need to be replaced itself before long.
So why not start out by moving in the direction of technologies which can actually stand a chance at replacing our current ones fully? Every billion we dump into solar and wind is a billion not going to wrestling the very considerable problems with fusion energy generation to the ground. Every billion spent on ethanol in all it’s many forms is a billion which could have gone toward figuring out how to make hydrogen work in cars and trucks freeing us once and for all from being energy dependent. I just read earlier today about Range Fuels, down in GA. The business has sucked $156MM in federal funding and $6MM in state funding to produce ethanol from wood chips. Except it’s being shut down. So a total of $162MM of taxpayer money has been thrown down a rabbit hole chasing an technology that was stillborn.
I completely agree that we need to ditch oil – but we’re not going about it in a very smart way, in my humble opinion.
I wouldn’t worry, dear leader’s outreach program to the Islamic world will be showing results shortly.
The fact that we are blessed with enormous, accessible, oil deposits off our own coastline and the largest oil reserves in the world in the form of shale or tar sand petroleum and still import the majority of what we consume illustrates just how foolish our energy and environmental policies are. Those facts also prove that the free market and common sense remain substantially in retreat.
Perhaps when the economy double dips voters will begin to realize just how damaging it is to have government energy policy controled by environmentalists and progressives. I am not holding my breath.
Our capacity to be self destructive has over taken our ability to reason.
CaptJim #3, nicely said, I think he is on one of those outter space trips with President Sputnik.
Mr. Zubrin:
“This is a fundamental threat to America and the world economy. We need to take action to protect ourselves from it now, before it is too late. How can we do this?”
Very simple. We import 52% of the petroleum we consume, (sixth row from the top under “petroleum statistics”):
http://www.eia.doe.gov/energyexplained/index.cfm?page=oil_home#tab2
This MEANS that we rely on domestic production for 48% of our consumption, (a fact that I think gets rather lost in the overheated media hype, which leads to very negative policy decisions).
The media focuses on the transportation uses of petroleum, since the automobile industry is, to judge by the amount of advertising they buy, one of media’s main income streams…plus, gas lines and traffic jams make “sexy” video, but transportation only accounts for about 30% of the petroleum we use. Industrial uses comprise another 30% and Commercial and Residential consumption combine for 41% of our petroleum consumption, (pie chart):
http://www.eia.doe.gov/energyexplained/index.cfm?page=us_energy_use
Now presently, configuring an automobile to run on coal or natural gas is not cost-effective,(though both have been done), it would be certainly possible to increase coal and natural gas utilization, either through electricity production or direct consumption,(home appliances and residential and commercial heating),to reduce petroleum consumption of the Industrial, Commercial and Residential segments.
(The Japanese have been way ahead of us in the use of Natural Gas, in the form of LNG…I started my seafaring career aboard the “Aquarius” class of LNG tankers shuttling between Indonesia and Japan).
http://i65.photobucket.com/albums/h228/Visseraa/LNG/LNGAquarius.jpg
The Aquarius was built and launched in 1977, mind you, and is still sailing today, so the technology is mature and proven.
And as luck would have it, coal and natural gas are our “long suits” here in the United States…but the Puddin’head of the United States wants to subsidize wind and solar, huh?.
Ah well, what GE wants, their Undocumented President delivers for them, I s’pose.
I don’t think that a target of increasing consumption of coal and natural gas in these sectors by 10% over a 5 year period would be unrealistic, and that leaves a lot of non-consumption “slack” to be exploited elsewhere.
This leaves the transportation segment of our Petroleum consumption.
Petroleum companies are finding a great deal of shore-based domestic oil reserves, the Bakken field in North Dakota/ Montana, with recoverable reserves estimated between 3-4.3 billion barrels, for example. This is in addition to the continuing finds in Alaska, although, again, the media hype has made an “issue” out of drilling in the ANWR.
And then there’s offshore domestic production. This is a graphic that is popular among those of us who work in the Offshore Oil Patch:
http://blog.tmcnet.com/blog/tom-keating/images/no-oil-zone-thumb-590×453.jpg
There’s potentially a LOT of domestic reserves in the “No” zones that are closed to exploration and production.
If we were allowed to go find it and then produce it, we wouldn’t be having this discussion, would we?
The other factor to consider is that OPEC, often being a lot smarter than the people who bow down to them, will likely ramp up their production in an effort to keep the petro-dollars flowing into their coffers by making our domestic sources economically unfeasible.
That’s okay though, since the point of the exercise is to maintain a supply of cheap energy to fuel our economy and way of life. My car doesn’t care if the gas I burn is from oil pumped from Alaska, Mexico or Kuwait, and it doesn’t care if the refinery was located in Romania, the Virgin Islands, or Baytown TX.
All things considered, I would rather burn up THEIR super giant fields FIRST, while keeping our reserves as “trumps” so that when the day comes that no more oil comes out of their ground, they and the handbasket of headaches that is part and parcel of the Middle East can fade back to the feature pages of the “National Geographic” from whence they came.
The bottom line is that we are literally sitting on mountain ranges of coal with oceans of natural gas trapped inside, and a vast moat of hydrocarbons just offshore, but we are having knock-down drag-out political bar-fights over the 52% of oil we import.
Is it just me or does this seem like too many people are acting like certifiable imbeciles on this issue?
There’s something fishy in those numbers. They state 52% “Dependence on Net Petroleum Imports”, but it’s not clear how they calculate that. Using their other numbers:
Comparing crude production to crude imports, we get 9,013,000/(9,013,000 + 5,361,000), which is 62%. That number is more in line with what I’ve been reading elsewhere. Maybe 52 is a typo.
Just keep looking down
U.S. Petroleum Consumption 18,771,000 barrels/day
snork…whats missing in most all these kinds of discussions on oil is…how much of our domestic oil produced, is [exported] to the world markets.
the ‘prime directive’ is, and should be, energy independence. the risk of not having fuel is greater than the possible high cost of available fuel, or the efficiency of a fuel like methanol relative to gasoline. as a fuel for cars and trucks, gasoline is peerless. but mr. zubrin makes a good point. methanol is a viable fuel alternative, despite its drawbacks. More favorable market conditions will allow creative solutions to be tested. in my opinion, if the supply of methanol is less finite than gasoline, then its long-term viability increases. and then, if there is no gasoline, then viability becomes necessity. sure, any solution needs to be cost effective. but if you have no gasoline, then methanol suddenly becomes practical.
Before you get too starry eyed about ethanol, talk to a dozen mechanics about what it does to engines. Ask drivers about what it does to horsepower and m.p.g. T.Boone had it right when he tried to convert us to burning natural gas.
Talk to the controlling eco-extremists about why there have been no nuclear plants built in 30 years. Ask them also about no expansion of refineries and botique blends, which cost more, do less, and slow production. Ask them about endangered species, logging, mining, and ranching against eco-protectionist regulations.
For the efficient people and product movers of the high speed rails, talk to Amtrak about their financial success.
There are a few rats in the wood pile. Green energy is our ticket back to the 7th century.
Yes. If we’re going to have a “bridge” technology to take us through the next few decades, it’s use of more CNG. Particularly in fleet vehicles. Many bus systems run on it now.
CNG is a perfect compromise: there’s significantly less carbon and pollution (note that those aren’t the same thing) to make the greens happy, and unlike the green fantasies, it can be done now, and economically.
“Ask them also about no expansion of refineries and botique blends, which cost more, do less, and slow production.”
Just to be fair about it, I think the lower cost of production and laxer safety and pollution standards overseas had a LOT more to do with our declining refining capacity than the eco-moonbats yammering did.
As I pointed out above, my car doesn’t care where the gasoline was refined, and frankly, it makes a lot of sense to site the refinery close to petroleum field, since you usually find natural gas with awl/url/oy-yull, and natural gas can be used to run the refinery rather than being burned as waste.
The analysis works at the current price, but do we have the capacity? Is methanol production scalable to the levels we need without losing its economic value.
Of course! It’s so simple! The only thing we need to fix an over-regulated and half-strangled domestic fuel and energy industry is…. more overweening, strangling federal regulations!
No, what we need is LESS regulation, not more. Remove the moratorium on drilling in ANWR. Remove the moratorium on drilling in the Gulf. Remove the moratorium on drilling on the East coast, the West coast, or anywhere else in the United States and its territories. Remove the moratorium on shale oil. Remove the moratorium on coal oil. Remove anything blocking the construction of new power plants, whether oil, gas, coal, hydroelectric, geothermal, wind or solar (yes, these treasonous bastards are obstructing even the creation of “green” energy sources.)
And drill, baby, drill. Drill until the cows come home and go back out again. Flood the market with AMERICAN fuel till the price drops to a dollar a barrel— then pump out a little more.
If oil prices get high enough for a sustained period of time there will be alternative energy sources coming out of our eyeballs. America had an opportunity in the 70′s to do the right thing to cut our dependence on foreign oil, but prices dropped back down and all was forgiven and we walked away from any alternatives. The current resurgence of alternatives was spurred by $140 a barrel oil, but again the priced dropped after the election and we are listening to the eco-nuts again. This slow climb is not going to end as there is greater demand than ever for oil and regardless of our capacity to refine it the cost is going to remain high as India and China become huge consumers. If we are smart we will build those nuclear plants, try every combonation of possible fuel sources, and any idea we can to make electricity, but as stated by many here it takes leadership, which we sorely lack as a nation. We need an end of eco-terrorism and government over regulation. We need to let the marketplace find the answer for the future.
If methanol is the answer it will be widely made and used because it is cheap and works, but more importantly makes a profit. Regardless of whatever else people bring products to market to make money and if the product does that then it will be come a part of the future. When adventures fail to produce a profit then their backers go elsewhere. The government backing losers such as corn ethanol only screw the natural market progression. If you can make money putting out an inferior product by receiving gifts from the government, why the heck not. But we all pay for this BS, so we must put an end to government interference and let the market decide what the next best thing is.
oil is going up from us printing dollars to buy t-bills to fund obamas utopia. Expect an across the board price surge in committees.
Diesel can be make from coal. Just face it though. Only Palin has the backbone to brush the greens aside ant tap our resources. She is not part of the green fraud.
One of the many reasons Palin is She Who Must Be Stopped to the left. They know the Gore/GE/carbon exchange gravy train will screech to a halt if she gets her hands on the brakes.
we send most of our money for “imported” oil north to the hosers in Canada not to the Middle East …
This is just more utopian BS wrapped around “green” nonsense …
Both methanol and hydrogen are produced from natural gas, and are more expensive and inefficient than using methane directly.
Compress natural gas could be used in ships, trains, and maybe trucks. Of course this requires new engines, but we have no forseeable shortage of methane.
What a waste of time and effort. If you have not figured out by now that this oil crisis is controlled, it is time for you to take your meds.. We have enough oil, natural gas, coal and not to speak of our nuclear energy capable ability,at our disposal. When did we as Americans start letting some bureaucrat or some tree huger tell us what we could and could not do. Our founders, would have shot the tree huger out of the tree and tared and feathered the bureaucrat. There is no honest reason that Americans should be held hostage, except pure greed by our politicians! We have more oil than Saudi, we have enough coal for over 500 years of energy. We have some of if not the largest natural gas deposit in the world and nuclear for as long as we want. Wake up America!!
No one commenting seems to be aware that methanol made from sugar cane in Brazil is much cheaper than that made in the US from corn. In their bid to simultaneously kiss environmental & farmer ass, our politicians have screwed us (E10 would be cheaper), the environment (fertilizer runoff damages the GoM worse than Macondo), the environment again (no net energy gain from corn based ethanol) and food consumers around the world (higher corn prices).
Thanks, guys.
What ticks me off about the “Drill baby, drill” mantra is that the congressional Republicans and GWB had 6 years to get ANWR & other drilling going. It was only in the face of $4 gasolinea that a last minute grasping at straws to help Juan McCain motivated W to rescind 41s executive order banning offshore drilling.
Also, as far as H2 powered anything, you have to start with where are you going to get it? Do the math for how many square miles of solar panel it takes to generate the power to electrolyze enough H2 to offset the energy equivalent of gasoline and diesel consumption.
If you want a coal powered car, buy a Nissan Leaf or a Chevy Volt.
Wind is where you get the power. Wind on the grid is foolish but you could easily build an H2 refinery with windmills. The biggest obstacle to H2 production is that it is a net energy is negative. That won’t matter if the input has a zero price.
The cost of wind energy is not zero. Nor solar. We’re not using these because they’re too expensive. Depreciation and maintenance are real money.
I like your name for Juan McCain, it fits him perfectly. Our government screws us again just like in the 70`s. Obama trying to be Ragenist is more like that peanut farmer Carterist!
There is no silver bullet. It will take all potential solutions combined to solve this problem. Natural gas can be used as a motor fuel. Coal must be used for electricity. Nuclear for electricity. Oil is waiting in Alaska, California, and offshore but we have to be allowed to get it. Everything must be used before we experience another 2008 and the economic devastation is brought upon us.
This is a cut and paste about the U.S. natural gas reserves. It is an undervalued and under utilized commodity and it does not come from corn:
Below are three estimates of natural gas reserves in the United States. The first, compiled by the Energy Information Administration (referred to as the EIA), estimates that there are 2,587 trillion cubic feet (Tcf) of technically recoverable natural gas in the United States.
The price of oil is rising because the demand is increasing while the supply is falling. The supply of oil from the Gulf of Mexico has been restricted in addition to the Alaskan supply line throttling back for maintenance and replacement of corroding pipe.
Our government could ease the threat by exerting pressure on speculators. The US owns 727 million barrels of crude which could put the fear of a price dive into futures speculators if they thought releases of US crude were imminent. It would take a lot of courage for government to flex its huge market muscle. But, it will not happen. The government doesn’t give a damn about its citizens, they are after all only taxpayers.
“Thus the $130 per barrel oil shock of 2008 didn’t just throw 5 million Americans out of work, it made many of them default on their home payments, and thus destroyed the value of the mortgage-backed securities held by America’s banks. This, in turn, threatened a general collapse of the financial system, with a bailout bill for $800 billion sent to the taxpayers as a result. But that is not all. The destruction of spending power of the unemployed and the draining of funds from everyone else to meet the direct and indirect costs of high oil prices reduced consumer demand for products of every type, thereby wrecking retail sales and the industries that depend upon them.”
I would agree with this assessment but there is a pesky fly in the ointment and that is the U.S. Stock market which I have watched on a daily basis for years waiting for it to react to this gloomy scenario to no avail. Today, as I write this, the S&P 100 index is at a 19 month high and the NASDAQ is at a ten year high so, go figure.
I would further dispute the good Doctors advice about ethanol which, at present, is derived from edible farm products driving up the cost of food while diminishing its supply and being of questionable effectiveness in reducing the so called carbon footprint.
Alternative sources of fuel are certainly worthy of exploration and development but, in my view, continuing to overlook and downplay domestically available conventional fuel sources, including nuclear, and the ongoing science directed at making these sources safe and less damaging to the environment is a major mistake, one that could be immediately corrected. Yes, it would take some time to recover from years of increasingly overbearing and authoritarian environmental control of this vital industry but these are desperate times, dramatic steps are required and unshackling the industry and by natural extension, the economy, from excessive rules and regulations is the shortest, surest way out if it continues to be done responsibly giving the BP spill due consideration, meaning not using it as an excuse to promote the Green agenda. Accidents can and will happen even in the best of circumstances. Learn and move on.
Scientific and economic progress by government edict is a recipe for continued, feckless reactions to a problem increasing in urgency at an alarming, exponential rate. It is quite obvious that a prestigious position as an elected representative of the people does not require any business experience whatsoever and an advanced degree in Law from a prestigious university is a hindrance as should now be obvious. In a free market, alternative fuels will appear when they become competitive in terms of cost and efficacy. The government needs to get out of the way and let the free market work as intended.
Since no one has mentioned this yet, it is common for 100% methanol fuel to be used in auto racing. http://en.wikipedia.org/wiki/Methanol_fuel#Racing says:
Beginning in 1965, pure methanol was used widespread in USAC Indy car competition, which at the time included the Indianapolis 500.
So, yes, you can run cars on methanol.
I drive a Kia Rio, and have as a geek test ran it for months at a time on 50% ethanol. I regularly got 30 mpg while doing this, and better on the highway. (Mixing E85 and E10 at the right fraction gives you E50). And, yes, I know this violated the warranty, and could have gummed up the engine if water got in.
My point is, we already aren’t far from running cars on alchohol. But ethanol from corn sucks. Methanol from coal would be fine; no effect on food prices, etc.
(While we’re at it, we could start making GASOLINE from coal the way they do in South Africa, but the environmentalists stand in our way.)
I am sorry to report, however, Dr Robert Zubrin has been placed under medical supervision…
Good grief, THIS again. The price of oil rises, and we’re going to trot out the usual bromides about how we need some brand new Unobtanium-fueled technowizardy to protect us from the rapacious scum in the Middle East.
Oil prices are rising for one very simple and utterly predictable reason: the second round of “quantitative easing” (“QE2″) introduced by the Federal Reserve several months ago. The Federal Reserve has printed up and injected into the global economy $500 billion extra dollars.
What does elementary economics tell you happens when you increase the supply of dollars massively? Obviously, their value falls. It takes less oil, for example, to buy a dollar. Or conversely, you can buy less oil for a dollar. Since oil is priced in dollars, because most of the Saudi oil is sold to the United States, oil prices ALWAYS display the effects of inflation first. The rise of oil prices 4-6 months after the Federal Reserve began printing money like a banana republic is as inevitable and predictable as the rising of the Sun.
You’ll want to keep in mind the chairman of the Fed, Ben Bernanke, explicitly said that the purpose of QE2 was to boost inflation a bit. Well, it worked. Welcome to the world of higher inflation! This is the world your government thinks is better for you. But don’t worry, your house prices will shortly be going up again (or so they say), so you can take out a HELOC to pay for your $6/gallon gas.
“because most of the Saudi oil is sold to the United States,”
Say what??? Please do some research.
Oh, and let me add: the price of oil is not rising STEEPLY as it is because the demand for oil has suddenly shot up, or the supply contracted. China did not SUDDENLY order up 50% more oil than it’s been using before. Half the oil tanker fleet has not SUDDENLY gone into drydock. The only thing that has changed SUDDENLY is how many dollars there are out there in circulation.
And as I said, keep in mind this is the world the government thinks is good for you. This was done deliberately, by people who knew exactly what would happen. Higher inflation is supposed to bring up house prices, encourage companies to hire (before their savings get ravaged by inflation), and the high oil prices are supposed to soften you up for the taxes necessary to support high-speed rail, cap ‘n’ trade legislation, “green” energy subsidies, ethanol subsidies, and all the other goodies your Democratic President and his allies on Capitol Hill want to enact.
Don’t expect their allies in the mainstream media to clue you in, either. There will be plenty of stories about higher gas prices, but they’ll all be about how we need alternative fuels, conservation, carpool lane construction, high-speed rail construction, bus and train subsidies, higher fuel economy standards, and a bazillion other meddlings in your life by those New York/DC folks who know better than you.
There is no difference between you and obama. Only you want the government to make create a market for flex fuel. Free market doesn’t work that way buddy.
oil futures prices are best guesses where prices will be by speculators, and lockin prices by users and consumers . if there are position size limits upon speculators then the futures prices are the real prices of a commodity. the government is not enforcing position limits and large speculators can drive the price, having the government do the same thing doesnt really help us much. neither does having the government punish speculators and unhedged producers by dumping oil. they already do that with gold . we need an honest price determination method for commodities.
Flex fuels? What a joke. Just unleash fossil energy development and start building nukes (Thorium could do it). We have plenty of energy resources. This is not the time to be leaving them in the ground.
Ethanol, on the other hand, is a big part of the problem. With food prices soaring, it is insane to be using food for fuel.
If methanol can help, the only need is for deregulation. The government shouldn’t be imposing flex-fuels capability or anything else. Is Mr. Zubrin aware that if flex-fuel capability makes sense, markets will offer it and people will buy it without government dictates, which only serve to override market solutions and impose inefficient technologies.
just say drill and the price will drop. approve expansion of the refineries and the price will bdrop. that’s what bush did when we hit 4 bucks a gallon
Anybody remember 9/11?
The whole country came together. We were all begging for leadership to end our crippling dependence on imported oil. The president could have ordered a hundred new, safe nuclear power plants and we would have made any sacrifice to see that they were brought online as fast as possible.
Instead, he told us all to go shopping.
For one simple reason: he and his VP were in the oil business. They wanted peak oil prices.
And they got them.
Anybody feel a little gullible?
It seems to me that it is not the threat of using up all the oil that drives the lock-down of access to our own [domestic] oil, even if that were to be a problem: but it is the despotic structuring that could make that kind of swindle even possible.
Oil is just one of the pegs on which to hang the idea, easily manipulating the forces promised with globalism as a weapon to be used against those who have lost sight of the power of a free people. The machinery of state needs energy more than the people and will freeze solid with a small measure of resistance — the reaction to that very corruption has grown enough already to force even more radical measures to throttle American productivity.
The government itself is being consumed by its own fraud.
The oil, the energy of the people, are not the property of our government, as much as they would like us to think so and act as if it is a fact already. The covert operations to accomplish making us all subjects of the power-elite are easily seen in the avalanching patten of laws that are unconstitutional in the first place. The government at all levels is no longer a source of protect but rather a collosal drain on all resources and nothing more.
As they now seem to choose to believe that we will swallow the idea that our rights can be voted away; doing so, they promote a lawlessness that has not been seen in this country ever before.
As in other parts of the world today, the regime becomes more and more an enemy of the peple.
They provide nothing.
They are begging for their own demise.
This is a terribly over-simplistic view of the effects of high oil prices. They certainly do act as a drag on the economy (use the tax analogy if you must), but they did not cause the recession. The Federal Reserve did that when it began to raise interest rates.
Those higher interest rates caused commercial projects to become unprofitable which led to lay-offs. Add to that the schmucks who had bought “too much house” and found that, at higher interest rates, they could no longer meet the payments.
The real fallacy of this piece, though, is the call for flex-fuel vehicles. The very last thing we need is to encourage the consumption of more ethanol. Worse, perhaps, than high oil prices is the diversion of corn production from food into ethanol production.
A very disappointing article from PJM.
Shef…”We were all begging for leadership to end our crippling dependence on imported oil. The president could have ordered a hundred new, safe nuclear power plants and we would have made any sacrifice to see that they were brought online as fast as possible”
Very little oil is used for electricity production in the US. Any impact of 100 new nuclear plants on oil imports would have had to be mainly indirect.
Now as to you ethanol boys…y’know, ethanol would be a great thing if some genius biochemist could dope out how to make it from kudzu instead of foodstuffs.
And as far as the Brazilians and their sugar ethanol production, it beggars the question of why, if sugar ethanol is so keen, is Brazil drilling for petroleaum off its coast like mad?
Build all the nuke power plants you want and you’ll hardly make a dent in oil consumption. Contrary to popular belief very little electric power is produced in the USA with oil as a fuel now. Less than 1% in 2009 and that has been falling every year.
http://www.eia.doe.gov/cneaf/electricity/epa/figes1.html
Drill baby drill!!!
I’m afraid Dr. Zubrin’s article is shorthand for his book, so a number of you missed details in your comments.
1 – A flex-fuel vehicle running E85 can theoretically also burn M85, which would be made largely from natural gas.
2 – There is no competition for food resources and we have more than enough natural gas to power all cars with M85 without imports. It’s also more efficient than E85.
3 – The name of the game is not powering all our cars with M85 or E85; it’s removing the monopoly power from OPEC so that they cannot gouge us at will or due to speculation. Right now, if they say gas is $10/gallon, you will pay $10/gallon or you will learn how to garden, horseback-ride or steal – period. With flex-fuel fleet, if gas is $10/gallon, very few people will buy it. YOU THEN HAVE OPTIONS.
THEREFORE – Doing this plan, which costs nothing but $100 more for a new car, effectively limits what everyone will be forced to pay for ANY of the three forms of fuel. That $100 will pay for itself in two weeks.
Why is no one selling M85? Because cars are not officially rated to run on it, and it’s another layer of infrastructure. You don’t sell things people can’t buy yet, period.
Both ethanol and methanol are lousy fuels period. It takes far more energy to make them than than their heat value, and either is highly corrosive. Compressed natural gas is feasible, but the weight/mass of the containing tanks destroy the vehicle’s handling abilities, making the vehicles unsafe to drive. Propane works well, as it is at low pressure, but what would be the real cost of providing fueling stations, and the price is very high per gallon. Methanol is highly toxic in relatively small amounts.
Gasoline is explosive at ratios of about 14% to 18% fuel to air mixture. Methane is explosive at 5% to better than 50% fuel to air mixture. What is the value you place on your life?
Electric vehicles have no effective fuel gage. Moreover, when they run out of electricity, which happens rapidly when it happens, the vehicle has to be towed. Battery life is relatively short, and the rate of decay of storage capacity in batteries is high.
The scam of CO2 warming of the atmosphere is nothing but a flim-flam game, as any competent chemical engineer could tell you. Its perpetuates are involved in organized crime fleecing the taxpayer.
Diesel fuel gets the best mileage, and is the safest fuel to use, but smelly.
The USA has enough energy reserves in coal, natural gas and petroleum to last at least 1,000 years. Carbon dioxide is needed for green plants to grow. Higher levels of CO2 would be a great benefit.
Laurence M. Sheehan, PE (civil-CA)
Robert, you quoted prices from methanol; presumably this is based on the current mix of feedstocks being used. Do you have data on what methanol costs/prices would look like if it were made entirely from natural gas, at various assumed nat gas price levels?
The reason I ask is because there are probably limits on the availability of cheap biomass which would become constraining if methanol demand were to really take off.
@wbm & animal; Don’t count on Wikkipedia on being correct on anything! The “E” in E85 refers to the ammount of alcohol (ethanol) in the gasoline mixture. Ethanol has a lower energy density than gasoline or diesel, (fewer btus’). Less heat, more fuel consumed to move a specific ammount of weight the same distance at the same speed. That’s why E85 is such a loser,the price differential makes it economicaly unattractive. Also on older cars it requires a complete retrofit of the fuel system (and a thorough cleaning thereof), before it can be used in concentrations above 15%. Hoses, fuel filters and ignition timing all need to be changed. Concentrations > 15% mean replacing carb/fuel injectors due to the fact that it will disolve or corrode components.
Time for a food grain cartel to form up. Directly tie the price of food grain to oil. Set a oil to grain price ratio that jacks up the cost of food grain as oil prices rise. A few major grain producers to start, others would join in. Price of oil would quickly fall. OGEC (Organization of Grain Exporting Countries) vs. OPEC. Sand and oil is not too appetizing, nor is it very nutritious.
There is a need for domestic methanol production. The first small scale plant was announced last week in Michigan here:
http://detroit.cbslocal.com/2011/02/06/gastechno-test-of-methanol-process-a-big-success/
There is a future for methanol in America as a fuel.
The ONLY variables influencing high crude oil prices are:
Corrupted Wall Street and Commodities practices.
Corrupted, long term domestic exploration and production policies.
Corrupted, long term refinery production policies.
IF the U.S. adopted a ‘Foreign Cap’ pricing policy that triggered expanded domestic sourcing and production for [domestic] use ONLY, the corruption in the crude oil markets would disappear or be significantly curtailed.
The U.S. Strategic Oil and Gas Reserve Policy (1950′s) has been one of the very few remaining guarded secrets. Simply put, we have a very long term abundance of oil and natural gas!
There is no reason NOT to do what Zubrin has proposed because our cars will NOT be forced to only use gasoline anymore.
Dr. Robert Zubrin – Energy Victory
http://vimeo.com/tag:zubrin
Flex Cars
David Blume – Alcohol Can Be A Gas
Part 1
http://www.youtube.com/watch?v=Jew3ah24Zj4
Part 2
http://www.youtube.com/watch?v=9vq7km9TWL0
“Yet as a result of the systematic constriction of oil production by the Saudi-led OPEC oil cartel, petroleum prices today stand at over four times what they were in 2003.”
-Are the Saudis purposefully constricting production, or are they just running out?
http://www.guardian.co.uk/business/2011/feb/08/saudi-oil-reserves-overstated-wikileaks
“According to the cables, which date between 2007-09, Husseini said Saudi Arabia might reach an output of 12m barrels a day in 10 years but before then – possibly as early as 2012 – global oil production would have hit its highest point. This crunch point is known as “peak oil”.
Husseini said that at that point Aramco would not be able to stop the rise of global oil prices because the Saudi energy industry had overstated its recoverable reserves to spur foreign investment……”
Robert Zubrin is correct however in his assertion that we need to find sources of energy other than crude oil to fuel our economy. For 30 years we have pinned our hopes on Saudi & other Mid East oil. That was a grave error in policy that we have allowed to go on far too long.