Wednesday, April 30, 2008

Gas Prices - A Load of Hot Air?

When George W. Bush is the man making the most sense, you know you've got problems.

But yesterday, he stood up in front of the nation and was surprisingly honest about America's imminent fuel crisis - admitting "If there was a magic wand to wave, I'd be waving it."

Petrol prices in America have been rocketing up. Prices at the pump have more than doubled since George Bush took office and in all fairness, not all of the blame can be laid at the doorstop of the White House. America's reliance on oil has been an Achilles heel for many years. The worry is that we've reached breaking point.

Presidential candidates Clinton and McCain are both launching rhetoric designed to tackle the rising fuel costs, but President Bush is right. There is no magic wand to solve the problem of expensive fuel and the only way forward is a longer term solution.

But what's causing the rocketing fuel prices?

One of the major reasons oil is becoming more expensive is because there's less of it. For decades, we've known that oil is a limited resource and the 'black gold' that does remain buried is getting more and more expensive to pump. Hence rising prices.

Secondly, global demand is increasing. Both India and China are becoming major oil consumers and the more demand there is for a limited resource, the more the suppliers can charge for it.

Thirdly, there's simply less oil in circulation. Before George Bush advocated invading Iraq, Saddam Hussein's regime produced 3.5 million barrels of oil a day. Since the invasion, the same country has struggled to sustain 2.3 million barrels of oil a day and this oil costs more to produce because of the increased security. That's more than a million barrels of oil taken out of circulation every single day.

Lastly - and importantly - the real 'oil giants' of the world (the OPEC members like Saudi Arabia) are holding the world's oil supplies ransom. They control the vast majority of the available oil resources and because demand is increasing, they can charge pretty much what they want for it.

Although President Bush has called for OPEC to release more oil for sale, you can't really blame the Organization of Petroleum Exporting Countries for refusing to do so. At the moment, they can sell their oil for a specific price. If they released more, that price would drop. Therefore, to meet the same profit level, they'd have to sell more of their commodity. It's basic business to charge the most that they can for their oil and the fact that we're all still willing to buy it suggests that this is a very successful strategy.

OPEC is a very powerful organisation. Their stranglehold on the oil industry inspired the gas crisis in the 70's, when the Shah of Iran warned America: "You buy our crude oil and sell it back to us, refined as petrochemicals, at a hundred times the price you've paid to us...; It's only fair that, from now on, you should pay more for oil. Let's say 10 times more."

Basically, the reason oil is so expensive these days has little to do with the White House. It's the law of supply and demand and the manipulation of OPEC. The only influence the federal government has on the price of petrol is in the tax they stick on it - which both John McCain and Hilary Clinton advocate dropping during the summer to cut the price at the pump.

It's an impotent gesture. For the average consumer, an entire summer's worth of savings would realistically only save them $30 or $40 dollars.

What can we do?

In the short term, the easiest solution to the oil crisis would be to find a new and plentiful source of cheap oil, to lower the overall cost of fuel and cut the legs from under the OPEC blackmailers.

George Bush suggests drilling in wildlife reserves in Alaska, which might well produce a plentiful new supply, reduce America's dependence on foreign oil and give us all a break when we fill our tanks.

There are several problems regarding this, however.

Primarily, drilling for oil in Alaska would devastate the wildlife. Wiping out species of birds and animals all for the sake of a cheaper fill-up seems rather wrong.

Secondly, it's a short term solution. Oil is running out. How much oil is there in Alaska? How long will it be before that runs out as well?

And thirdly - perhaps most importantly - the continued burning of oil and other fossil fuels is permanently damaging the environment. The question of how long the Alaskan oil will last might prove to be redundant if we oven-bake the globe exploiting it.

Alternative Suggestions

There are alternatives - and one of the reasons America's in such a crisis at the moment is because these alternatives are being explored in an utterly incompetent fashion.

The most touted solution to the oil crisis are alternative sources of energy. Sustainable organic fuels. Clean and renewable energy generation. The technology exists now and with sensible investment, we could solve the world's energy crisis practically overnight.

But misguided environmentalists and greedy politicians have utterly messed up the whole process.

As far as gas prices go, oil used for generating power could be diverted into the fuel market if America adopted clean, safe nuclear power. Instead, we still have costly, cumbersome and environmentally apocalyptic coal and oil fired power plants.

Nuclear power is clean and safe. France has successfully relied on it for decades. Yet the shadows of Chernobyl and misguided environmentalists argue about the perceived 'danger' of nuclear power and stand in the way of America finally fixing it's rickety and outdated power grid.

This is the twenty-first century, yet California continues to have 'brown outs' and power cuts because of primitive power-plant technology. This is really unacceptable.

When it comes to fuel itself, an alternative to petrol already exists - ethanol. Clean, cheap and easy to produce, ethanol could pretty much replace petroleum with very minor upgrades to most vehicle's fuel system.

Yet greedy politicians have created an ethanol stranglehold almost as wretched as OPEC's claw-like grip on the global oil market.

Ethanol is produced from organic crops. The vegetation you use to produce ethanol effects the power to production ratio involved in making it. In Brazil, sugarcane ethanol generates about eight times as much energy as it takes to produce.

In America, however, the vegetation of choice is corn - which has a pathetic one-to-one power to production ratio. Basically, it takes as much energy to make corn-based ethanol as the ethanol actually produces when poured into a gas tank.

That's simply unsustainable.

But it gets worse. The likes of environmentalist Al Gore have pushed so hard for the production of ethanol that they've given American farmers enormous subsidies to produce it - and whacked a 52 cent import tariff on ethanol imported from overseas.

This means that American farmers are using food-crop to produce ethanol, rather than corn flakes, which is shooting up the cost of food across America. In addition, the expensive fuel they produce is no cheaper than imported gasoline. What's worse, the cheap ethanol from overseas (that could be mixed with American petrol and actually bring the pump-price down) is no longer priced competitively because the government has slapped a tariff on it.

Basically, Al Gore and his cronies have successfully tied up American ethanol production with so much red tape, graft, greed and corruption that it's effectively a dead end. A self serving money-generating gravy-train for a few politicians and thousands of farmers.

If we're going to end the fuel crisis and finally give America sustainable and cheap power, here's what we need to do:
  1. Build nuclear power stations to replace the coal-fired ones. This will make a huge difference to the environment (but put thousands of coal miners out of work. Still, it worked in England.)
  2. End the subsidies for farmers to produce ethanol from corn. That corn will return to the food-market and lower the cost of groceries across the country.
  3. End the tariff on imported ethanol. This will mean that cheap, efficient ethanol can be mixed with petrol in the short-term to lower the price at the petrol pump.
  4. Research and develop cheap, clean efficient alternatives to oil. They already exist. We just need to make them practical.
Given the corruption and incompetence in government, plus the stranglehold of the misguided environmentalists, I can't see this happening any time soon.


Tom said...

Primarily, drilling for oil in Alaska would devastate the wildlife. Wiping out species of birds and animals all for the sake of a cheaper fill-up seems rather wrong.

That seems highly unlikely. ANWR is 19 million acres, while the footprint that would be taken up by drilling would be about 2,000 acres. Modern drilling techniques are quite good, meaning that they can drill at an angle, so that the pumps and pipes take up a small amount of space.

Roland Hulme said...

You'd know better than I would, Tom! Although I have also heard reports that the amount if oil in Alaska might be pretty minute, so the whole operation would still prove pretty inconsequential given America's huge demand for oil (and I can't claim the higher moral ground here. My '85 Firebird is pretty far from what you'd call 'fuel efficient.') Be interested on your opinion, though.

Tom said...

Well, Wikipedia says it's 6.8 billion barrels. While not huge on the world stage, compare that to the 21 billion barrels of oil the US has in reserve.

I'd also support the construction of new ocean drilling rigs, which seem to me to also be part of the solution.

Of course, the eventual goal needs to be more energy-efficient vehicles. I actually like the Chevy Volt range-extended vehicle concept, which gets a 40 mile all-electric range, and then has an engine that lets you drive beyond that radius.

We need to start building nuclear powerplants ASAP, to be able to power this sort of thing... since solar power won't help much when vehicles are left to recharge overnight. Reprocessing uranium is also a good idea, so we don't run out over the course of centuries.

Re: cutting the tax... in NY, the federal, state, and local taxes add up to about 65 cents a gallon. That's like saving $8 bucks each time you fill up. I don't drive much, so it's not a huge deal for me... but for people who fill up twice a week, that's a lot.

Ethanol seems like a sideshow, propped up by the farm lobby. I think biodiesel is more likely to work out, especially in a REEV like the Volt.

Roland Hulme said...

The Volt sounds like it would be perfect for my commute!

I think they can only cut federal tax on gas, which is univerally about 20c a gallon, which only adds up to about two dollars per fill up. That'd save Tina about twenty six bucks over the course of the summer and me about fifty four because of the monstrosity I drive!!

State tax would remain (which is why you pay more for gas in New York. Mwuh ha ha! The Garden State finally has it's moment. While we're at it, take THAT high gas tax Pennsylvannia!)

I'm in agreement on US produced ethanol. Biodiesel does seem viable but then again, as you constantly illustrate, I don't know all that much about it!