Tag: oil

It’s beginning to sound more and more like a Palin vs. Obama Presidential race.  My biggest fear is that conservative and independent voters around the country will wake up on November 5 and find out, much to their surprise, that it’s John McCain that won the office of President of the United States and only then will they wake from their stupor and see, and regret the silliness of what they’ve accomplished.

Talk about a bill of goods.  The sales pitch that the Republican supporters swallowed hook, line and sinker is something to behold.

The Democrats used their meeting to tell a richer, more expansive national story, one more or less in tune with the party’s platform and aspirations. In contrast, as we go to press, the Republicans are staging an elaborate fraud, the purpose of which is to divert the public’s attention from their disastrous mismanagement of government and to deceive voters about their agenda. Rick Davis, John McCain’s campaign manager, admitted as much when he said, “This election is not about issues. This election is about a composite view of what people take away from these candidates.” (The Nation Editorial Board – 8/3/08)

They are once again getting snookered by the pandering politicos who run the radical right.  Evangelicals, ever the willing suckers, are getting sucked in yet again.  Same thing with rednecks, soccer moms, and erstwhile social conservatives of all stripes.  “Join us again, [wink, wink].  We’ll string you along for another four years!”

The Senate held a Bipartisan Energy Summit today with some of the nation’s top experts (from MIT, Google, CSIS, CERI, and Shell’s CEO). (Although, regrettably, the nation’s top energy expert, Sarah Palin, was unable to attend and bring her deep knowledge and wisdom to the table for conversation.)  And, this hearing was reasonably (even very) well attended.  Senators Dorgan, Bay, Landrieu, Domenici, Bingaman, Pryor, , Conrad, Dewine, Salazar, …. It is a very rare Hill hearing that has so many of the principals at the table.  The room was, in addition, standing room only with literally hundreds of people in the room and several tables full of journalists (and bloggers). And, to be honest, people actually seemed to be paying attention to questions, to speakers, with Blackberries dominating the attention of just a few of members and not that many in the audience.  An indication of the political (and, hopefully, substantive) interest and importance of the issues at hand.

One specific exchange, after the fold, merits attention.

   What are the benefits?  Kotchen and Burger estimated that the oil had a value of $374 billion (writing in July 2007, they assumed a long-term price of $53/barrel), but that it would cost $123 billion to extract and market.  The net return of $254 billion is divided consists of industry rents of $90 billion, Alaska tax revenues of $37 billion, and Federal tax revenues of $124 billion.

Under the authors’ understanding of incidence, consumers wouldn’t benefit much at all because oil prices would not fall noticeably.  Still, drilling makes economic sense if the loss of environmental amenities is valued at less than $1,141 a person (per American, not per Alaskan) and that was with a price of oil roughly half of today’s price.

At today’s price of oil, a rough estimate of the benefit — not counting environmental costs — is over $600 billion.  So the whole issue seems much more important than I had thought just one hour ago.  Some approximation of taxes and transfers and auctions are available, so these gains can be redistributed to some extent if you wish.

That’s economics professor Tyler Cowen at his blog, Marginal Revolution.

The point that Cowen brings up is a profound one.  The common argument against expanding oil drilling both off-shore and in ANWR has been twofold: the amount of oil is not significant enough to alter the world price (which will always be true), and the value of the oil does not significantly outpace the amount of environmental damage that would be caused.

But when the price of oil changes, the value of the oil does as well.  Indeed, if the price of oil continues to rise in the long term, the value of the oil will be significantly more than the value of the environmental damage (to the extent that any value can be placed on that – but, it is easily imaginable that at future oil price X, the profits will be significant enough that huge sums from it could be used to finance environmental cleanup in many places).

Therefore, I predict that at some point, the value of the oil in ANWR will be large enough that it is politically irrational not to exploit it.  The oil in ANWR will become a sort of national trust fund, where at a certain expected value, the government is certain to exploit it.  I see no way of avoiding this, or by which this is not the rational course of action.

This is not what you think, I believe for transportation and energy we certainly CAN and will end that dependency. What few of us think about is all the products using petroleum as part of their manufacturing process. Follow me below the fold for a partial list of the thousands of items we use everyday tying us to oil for years to come.

At times, we might forget that there are a good number of very bright, extremely dedicated, and fundamental people working in Congress. Elected officials and staff. Our funding system that seems to drive member after member to be begging, tin in cup, for funds can make the entire process look open to purchase.  The traditional media mania for ever lower quality reporting magnifies this, making foolish shallowness the norm.  Reality is far from this and it is worthwhile at times to take a moment to consider that reality.

An e-mail came into me today that reminded me of this, a letter with perhaps the best single word I’ve seen to summarize Republican truthiness when it comes to energy issues but a letter with substance.

Drillusion

Thank you Representative Earl Blumenauer.