Make Oil Not War (Via Balanced Energy Supply-Demand Policy)

4 05 2008

Following is some perspective on how market forces are driving the developed economies of the world toward market-driven solutions for the energy supply-demand problems the U.S. and the world faces. It offers good news from an intermediate to longer term viewpoint on the energy development. Investors Business Daily wrote the following editorial on Friday, May 2, 2008.

The Ship Turns

By INVESTOR’S BUSINESS DAILY | Posted Friday, May 02, 2008 4:20 PM PT

Energy: Call it the paranoid theory of petroleum. Somehow, dark forces behind the scenes keep us from doing anything about soaring oil prices. In fact, something is being done to bring down oil prices. And you’re doing it.

For some, rising oil prices prove that oil companies and petrotyrants around the world must be in cahoots to create energy shortages. By that theory, we can do nothing about it. Eventually, government will have to step in. But in fact, even as our own dithering Congress refuses to help ease the energy crunch, things are already changing — thanks to you, the consumer, and you, the producer. That’s right: It’s the private sector that’s doing it.

One of the glories of a capitalist system is that price signals are allowed to work. When the price for a good rises, that means it’s in scarce supply. When the price falls, it’s relatively abundant. This signals to users and producers they must change their behavior.

For users, higher prices mean finding ways to do with less. For producers, they mean finding ways to produce more. The confluence of these two forces usually results in lower prices. This is what’s happening now with oil.

It’s true that the booming economies of China and India are sucking up ever more energy. But guess what? As the price of crude has soared from $30 a barrel to $50, then to $70 and past $100, we’ve all changed our behavior.

For oil companies, it has meant drilling for more oil. According to data from a variety of sources, world oil output has jumped by 11%, or 8.5 million barrels a day, since 2002, to 83 million barrels a day.

Contrary to the predictions of petro-paranoids, private oil companies are producing flat out — even though government entities such as the Organization of Petroleum Exporting Countries and the U.S. Congress work to keep prices high.

Fueled by the high prices, new sources of oil are being discovered. They include the 33-billion-barrel bonanza recently found off Brazil’s coast and other huge finds in the Caribbean and Asia.

The U.S. itself has 656 trillion cubic feet of natural gas and 112 billion barrels of oil on federal lands alone — there for the taking if only Congress would allow it.

But even without it, we’re going gangbusters. As the American Petroleum Institute recently noted, “an estimated 4,577 (U.S.) oil wells were completed in the first quarter of 2008, up 12%” from last year and the highest rate since 1986. U.S. oil companies are going back to tapped-out wells and pumping oil that wasn’t economically recoverable at $25 a barrel but is at $100.

That’s the supply side. What about demand? U.S. fuel demand in the first three months of 2008 was down 1.4% from a year earlier — the third straight quarterly year-over-year decline in a row. Gasoline consumption has risen about 1.5% a year since 2000. But Energy Department data showed demand in the first quarter edging down for the first time in more than two decades. In short, the tide has turned.

The New York Times notes that U.S. car buyers have suddenly gone ga-ga over small cars. One in five purchases is now a compact or subcompact, while SUV sales are off 28%. “It’s easily the most dramatic segment shift I have witnessed in the market in my 31 years here,” said George Pipas, Ford Motor’s chief sales analyst.

So, even as Congress twiddles its thumbs, the private sector is doing its thing — adjusting to the market to make things better. The bad news is, there’s no guarantee that oil prices won’t go up more. The good news, as recent trends show, is that it won’t last.

(end of article)


No man, or even a nation, is an economic island. Ideologically driven environmentalist groups such as the Sierra Club have worked to limit the development of oil resources in the U.S. and on its coastal waters. Still private energy companies have developed new oil reserves both in and outside of the U.S.. And U.S. consumers have sought to limit their oil-related living expenses by purchasing more fuel efficient vehicles.

Even with this positive news, the U.S. economy and our very way of life remains vulnerable to economic exploitation from OPEC (Organization of Petroleum Exporting Countries) in terms of artificially high petroleum prices. A little sabre rattling from a few Iranian gun boats in the Persian Gulf region causes worried oil markets to jump by $XXX per barrel (it is called a price premium due to supply risk & uncertainty).

To the degree that the U.S. has to rely on imported oil from the Middle East and other politically unstable areas of the world, our military forces will of necessity and on occaision need to be involved in combating potentially destabilizing political uprisings that threaten such oil supplies and our economic well being. At least part of the impetus for the U.S. to now be involved in Afganistan and Iraq and to have involved itself militarily in defending the oil supplies (i.e., the “interests”) of Kuwait and Saudi Arabia in the past, has been to ensure the uninterrupted steady supply of petroleum being sent to the U.S. to drive our economy.

For those of us who are for peace in the U.S. and in the world for that matter, it is inconceivable that anti-war advocates are not enthusiastic, committed supporters of a balanced U.S. energy policy…one that would support both energy conservation (progress in limiting demand) and the safe development of energy supplies in the U.S. (progress on expanding supply), It is unreasonable and short sighted of these groups to be against all forms of energy development as they reveal themselves to be. The answer of the reasonable people in our country needs to be YES to developing clean coal, safe nuclear power, natural gas, and enviromentally responsible development of domestic oil supplies in the continental U.S. – in the coastal waters, in Alaska (ANWR), and in the lower 48 states.

This issue needs to be looked at from the standpoint of the national good, not just from the presumptive narrow values and viewpoints of special interest groups. The U.S. public needs balanced, responsible leadership on policies affecting current and future energy supply and demand, rather than the unreasonable obstructionism being providd by the Sierra Club and the democratic leadership in the U.S. congress and some statehouses in the nation.





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