(07-22-2009 04:33 PM)JOwl Wrote:  

Owl 69/70/75 Wrote:As long as we are going to be dependent on oil (and for reasons that I've outlined, I hope you now understand that even with the most aggressive and successful--and lucky--alternatives development program, that's still a long way out) it makes sense to produce as much as we can domestically and import as little as possible. From an economic and national security perspective, I think that's obvious. Less obviously, it's also true from an environmental standpoint. First, the process of bringing oil in by tanker from overseas imposes far greater environmental risks than domestic drilling--three are more spills from tankers than from drilling, the potential for a catastrophic spill is greater from a tanker than an oil well, the mere act of transporting the oil burns fossil fuels that are not needed is we don't haul the oil in. Second, the process of drilling domestically under greater environmental controls is far safer than drilling in some third world countries that are more than willing to look the other way on safety and environmental issues in order to create the economic resource flow.

This I don't really agree with. I'm with you that we don't have any good alternatives to oil in the medium future. But I also think that going hard and fast after every drop of oil we have in order to keep prices low now will just make it that much more painful once the current sources start to dry up, and feels like the energy equivalent of financing our current lifestyle with our kids' wealth. Despite the obvious pain, there were definite salutary effects associated with the high oil prices of 2008 (fewer miles driven, consumer focus on fuel efficiency, investment interest in alternative energy). Rather than going for the big score that will keep us swimming in oil over the short term, I think we're better served by limiting production and allowing a bit of that pain, which will give market incentives a nice long lead time to work their magic and enable as smooth as possible a transition out of oil.
Further, I think the hip pocket argument can be extended to all domestic drilling - anything we don't drill now is oil we'll have access to in the future. If you believe, like I do, that prices are going to go up over the long term, then I say let's use their oil now while it's cheap and go drill our oil later when it's more valuable.

JOwl,

Interesting point. If I make an observation - I think the one thing that you seem to focus on here, maybe to the exclusion of everything else, is just the price of oil (and energy more generally, I'm guessing). I guess that's the obvious costs. But I think he also hints quite strongly at the soft benefits of breaking our dependence on foreign oil, particularly of the half-a-globe-away kind. In some conspiracies, we sent our fighting forces to Iraq specifically to guarantee the oil supply. This alone could be a major benefit of reducing our needs there. Does this and other soft benefits he mentioned get consideration here?

(And I say this, while at the company I work at, while we recognize the soft benefits, we're ultimately not allowed to include/estimate the "monetary value" in any business cases being built.)

Owl69/70/75 (and JOwl),

Any consideration to a possible tax floor on oil prices as part of either of your thought processes? Robert Samuelson (the columnist) seems to be on the bandwagon of this one a bit, whereby oil prices would have to be a certain level. If the spot prices are below it, it would be taxed to raise the costs to that level, with the taxes aimed toward alternatives. It also would pretty much open up investigation and investment in other sources, as they become more cost effective, such as oil shale (which I'm guessing JOwl probably wouldn't like). It is a bit regressive, in that it probably guarantees higher gas prices, but it would probably get folks thinking about being more economical.

There are definite advantages and drawbacks to this type of proposal. I'm open to other people's thoughts on this one and its potential impacts.

(07-22-2009 09:33 PM)gsloth Wrote:  JOwl,

Interesting point. If I make an observation - I think the one thing that you seem to focus on here, maybe to the exclusion of everything else, is just the price of oil (and energy more generally, I'm guessing). I guess that's the obvious costs. But I think he also hints quite strongly at the soft benefits of breaking our dependence on foreign oil, particularly of the half-a-globe-away kind. In some conspiracies, we sent our fighting forces to Iraq specifically to guarantee the oil supply. This alone could be a major benefit of reducing our needs there. Does this and other soft benefits he mentioned get consideration here?

(And I say this, while at the company I work at, while we recognize the soft benefits, we're ultimately not allowed to include/estimate the "monetary value" in any business cases being built.)

Owl69/70/75 (and JOwl),

Any consideration to a possible tax floor on oil prices as part of either of your thought processes? Robert Samuelson (the columnist) seems to be on the bandwagon of this one a bit, whereby oil prices would have to be a certain level. If the spot prices are below it, it would be taxed to raise the costs to that level, with the taxes aimed toward alternatives. It also would pretty much open up investigation and investment in other sources, as they become more cost effective, such as oil shale (which I'm guessing JOwl probably wouldn't like). It is a bit regressive, in that it probably guarantees higher gas prices, but it would probably get folks thinking about being more economical.

There are definite advantages and drawbacks to this type of proposal. I'm open to other people's thoughts on this one and its potential impacts.

Re-reading my comment, I realize I forgot to frame it -- I was in fact responding specifically to 69's statement that "it makes sense to produce as much as we can... . From an economic ... perspective I think that's obvious". For me, it's not obvious.
But to your point, I guess I'm not particularly swayed by the soft benefits argument. The environmental impacts of oil transport are certainly not nothing, but they strike me as a second- or third-order effect in terms of oil's environmental impact (in other words, I think a small decrease in production/consumption would provide more environmental benefit than we'd get from transport savings due to domestic production).
And as long as our economic survival is tied directly to oil, we're still going to go fight wars over it (yes, I'm one of those conspiracy theorists). I don't see domestic production getting us to self-sufficiency (and even if it does, I don't see it lasting an appreciable amount of time before reserves are exhausted), so I don't see increased domestic production as sufficient to change our approach to securing reserves. I think the only way we stop fighting wars over oil is a huge eruption of populist outrage (very unlikely, as most Americans seem not to care what happens to non-Americans) or by making it to the tail end of a long-term shift away from oil to sustainable technology(ies) (also unlikely, but I remain optimistic because I see no other choice).


I think the tax floor on oil prices is a very intriguing idea. I see it as a better formulation of the $4 floor on gasoline idea (which is also intriguing).
I do have a major problem with the $4 gas concept -- if it applies to all US gasoline sales, then there's no way on God's green earth that a supplier/wholesaler/whatever would EVER charge less than $4. In other words, just the threat of the tax to get the price up from its "true" value would cause pre-floortax prices to settle at (or above, but certainly never below) $4, meaning no additional tax revenue is collected and there's simply a huge wealth transfer to the suppliers. And suppliers would want to supply way more than customers would want to buy -- meaning suppliers would eventually start fighting fiercely over customers using incentives other than price. I'm thinking the end game is full service like you've never seen before (probably "with release"). I'd much prefer the govt actually be able to collect the tax and use it for energy research, but I just can't see a way to structure the price floor that doesn't end up with the suppliers taking all the economic benefit from the consumers with the govt getting nothing (may be a failure of imagination on my part).
I'm not entirely sure, but I'm thinking the price floor on oil idea wouldn't suffer from the same problem as the price floor on gasoline (or at least not to the same extent). Since oil is sold in a global market, it seems there would be more opportunity to identify the "true" price of it, and then levy a tax up to the floor level. Of course, instituting the floor would bias the market price upward somewhat because America's demand profile would be changed (demand would remain flat, rather than increase, as the price oil continues to drop below the floor). But it would be a small upward bias in price, allowing the tax to actually lead to tax revenues.

Some responses.

I do favor an energy tax. We're not going to get rational consumer decisions when gasoline is $2/gallon. Cap-and-trade is one way to do this--not my favorite, but certainly not as bad an approach as Obamacare is for health care. The biggest problem with C&T is that if it is simply laid on top of our existing tax structure, it has potentially devastating effects on our economy. C&T offset largely by tax reductions elsewhere, with the net revenue gain dedicated to infrastructure improvements to facilitate reducing energy demand (high-speed trains, mass transit, electric grid improvements, etc.), is a viable approach.

By economic impact of domestic drilling, I mean reducing the flow of dollars overseas, not making oil cheaper. The cheapest oil is in the middle east--until you factor in all the indirect costs (dollars drained out of the economy, lives lost in the desert, flow of funds to terrorists, etc.). Right now we have no leverage with OPEC, except the kind of leverage that wears camos. Sugar cane ethanol at least lets us play our ethanol suppliers against OPEC. Domestic production gives us leverage, depending on how much we find--and oil markets are so volatile that producing as much as 1% more of demand domestically could be huge. Last summer's spike resulted from what was probably less than a 1% imbalance between supply and demand, to give you an idea.

Bottom line. Look at the numbers. You can believe or not believe whatever you want out of the rhetoric from both sides--and IMO there's been far more heat than light on both sides. But when you look at the numbers, when you comprehend just how vast this problem is, when you compare the impact of proposed solutions against the magnitude of the problem--you will quickly realize that there is no piecemeal solution. We need all hands on deck--conservation and alternatives and drill here, drill now--if we hope to make a dent in the problem.

Look at the numbers, and you will see that under the Obama energy "plan," we will import more oil in 2015 than we do today. That is not an acceptable outcome.

Look at the numbers.

(07-23-2009 08:08 AM)Owl 69/70/75 Wrote:  Some responses.

I do favor an energy tax. We're not going to get rational consumer decisions when gasoline is $2/gallon. Cap-and-trade is one way to do this--not my favorite, but certainly not as bad an approach as Obamacare is for health care. The biggest problem with C&T is that if it is simply laid on top of our existing tax structure, it has potentially devastating effects on our economy. C&T offset largely by tax reductions elsewhere, with the net revenue gain dedicated to infrastructure improvements to facilitate reducing energy demand (high-speed trains, mass transit, electric grid improvements, etc.), is a viable approach.

By economic impact of domestic drilling, I mean reducing the flow of dollars overseas, not making oil cheaper. The cheapest oil is in the middle east--until you factor in all the indirect costs (dollars drained out of the economy, lives lost in the desert, flow of funds to terrorists, etc.). Right now we have no leverage with OPEC, except the kind of leverage that wears camos. Sugar cane ethanol at least lets us play our ethanol suppliers against OPEC. Domestic production gives us leverage, depending on how much we find--and oil markets are so volatile that producing as much as 1% more of demand domestically could be huge. Last summer's spike resulted from what was probably less than a 1% imbalance between supply and demand, to give you an idea.

Bottom line. Look at the numbers. You can believe or not believe whatever you want out of the rhetoric from both sides--and IMO there's been far more heat than light on both sides. But when you look at the numbers, when you comprehend just how vast this problem is, when you compare the impact of proposed solutions against the magnitude of the problem--you will quickly realize that there is no piecemeal solution. We need all hands on deck--conservation and alternatives and drill here, drill now--if we hope to make a dent in the problem.

Look at the numbers, and you will see that under the Obama energy "plan," we will import more oil in 2015 than we do today. That is not an acceptable outcome.

Look at the numbers.

I agree that reducing the dollars flowing overseas would be ideal, but my sense is that if we focus on drilling our reserves the real result will be short term stabilization of (too-low) prices, and then we'll end up in an even bigger bind when we run out. I don't trust us to keep moving forward on conservation and alternatives; the political will to move beyond oil will wilt if we can just drill more and keep prices down (future be damned). Just look at what a political football the Strategic Petroleum Reserve can be: Clinton tapped it in 2000, and Bush stopped filling it in 2008 (and if I remember correctly, Obama eventually shifted sides and supported tapping it just before the election).
Now, if we were able to pass a tax to keep prices high _before_ we start drilling, I'd be a lot more in favor of increased drilling.

It's like the decision to be made by the parent of a junkie former child star -- do you give them unfettered access to their last pile of cash (and watch it go up their nose), or cut them off hoping they'll finally be motivated to clean up their act (which also saves that cash for the future when they'll be better able to use it).

Of course, the real choice isn't a binary one -- I'm not against somewhat increased domestic drilling. But when I hear "drill here, drill now" it sounds like a call to go hard and fast after last every drop we have-- and that concerns me. (Maybe I'm misinterpreting).

All in all, I think we agree in a broad sense, but maybe disagree on the details. In my mind, your ANWR arguments would hold for a wider range of potential drill sites than just ANWR itself.

(07-23-2009 11:24 AM)JOwl Wrote:  

(07-23-2009 08:08 AM)Owl 69/70/75 Wrote:  Some responses.
I do favor an energy tax. We're not going to get rational consumer decisions when gasoline is $2/gallon. Cap-and-trade is one way to do this--not my favorite, but certainly not as bad an approach as Obamacare is for health care. The biggest problem with C&T is that if it is simply laid on top of our existing tax structure, it has potentially devastating effects on our economy. C&T offset largely by tax reductions elsewhere, with the net revenue gain dedicated to infrastructure improvements to facilitate reducing energy demand (high-speed trains, mass transit, electric grid improvements, etc.), is a viable approach.
By economic impact of domestic drilling, I mean reducing the flow of dollars overseas, not making oil cheaper. The cheapest oil is in the middle east--until you factor in all the indirect costs (dollars drained out of the economy, lives lost in the desert, flow of funds to terrorists, etc.). Right now we have no leverage with OPEC, except the kind of leverage that wears camos. Sugar cane ethanol at least lets us play our ethanol suppliers against OPEC. Domestic production gives us leverage, depending on how much we find--and oil markets are so volatile that producing as much as 1% more of demand domestically could be huge. Last summer's spike resulted from what was probably less than a 1% imbalance between supply and demand, to give you an idea.
Bottom line. Look at the numbers. You can believe or not believe whatever you want out of the rhetoric from both sides--and IMO there's been far more heat than light on both sides. But when you look at the numbers, when you comprehend just how vast this problem is, when you compare the impact of proposed solutions against the magnitude of the problem--you will quickly realize that there is no piecemeal solution. We need all hands on deck--conservation and alternatives and drill here, drill now--if we hope to make a dent in the problem.
Look at the numbers, and you will see that under the Obama energy "plan," we will import more oil in 2015 than we do today. That is not an acceptable outcome.
Look at the numbers.

I agree that reducing the dollars flowing overseas would be ideal, but my sense is that if we focus on drilling our reserves the real result will be short term stabilization of (too-low) prices, and then we'll end up in an even bigger bind when we run out. I don't trust us to keep moving forward on conservation and alternatives; the political will to move beyond oil will wilt if we can just drill more and keep prices down (future be damned). Just look at what a political football the Strategic Petroleum Reserve can be: Clinton tapped it in 2000, and Bush stopped filling it in 2008 (and if I remember correctly, Obama eventually shifted sides and supported tapping it just before the election).
Now, if we were able to pass a tax to keep prices high _before_ we start drilling, I'd be a lot more in favor of increased drilling.
It's like the decision to be made by the parent of a junkie former child star -- do you give them unfettered access to their last pile of cash (and watch it go up their nose), or cut them off hoping they'll finally be motivated to clean up their act (which also saves that cash for the future when they'll be better able to use it).
Of course, the real choice isn't a binary one -- I'm not against somewhat increased domestic drilling. But when I hear "drill here, drill now" it sounds like a call to go hard and fast after last every drop we have-- and that concerns me. (Maybe I'm misinterpreting).
All in all, I think we agree in a broad sense, but maybe disagree on the details. In my mind, your ANWR arguments would hold for a wider range of potential drill sites than just ANWR itself.

I'm not quite sure why you're failing to understand that taxing oil is a major element of what I'm talking about. We won't get rational energy decisions until gasoline costs $4-$5/gallon.

Here's how I'd approach it. We use 20 million barrels of oil a day, 7 from domestic production and 13 from imports. We need to make the 13 million number go to zero. Split it into thirds.
Conservation advocates, find 4-1/2 million barrels worth of savings.
Alternatives advocates, find 4-1/2 million barrels worth of alternatives.
Conventional energy advocates, find 4-1/2 million barrels worth of oil, gas, coal, and nuclear.

Instead of flapping your gums arguing that the other guys are wrong, prove that you are right.

(07-23-2009 11:40 AM)Owl 69/70/75 Wrote:  I'm not quite sure why you're failing to understand that taxing oil is a major element of what I'm talking about. We won't get rational energy decisions until gasoline costs $4-$5/gallon.

Maybe because you wrote a four screen post laying out your thoughts and didn't once mention the word "tax", or even allude to the concept?
My point is, I need to see us pass the tax law _first_ (before cheap domestic oil removes the incentive to be forward-thinking on the issue).

(07-23-2009 11:40 AM)Owl 69/70/75 Wrote:  Here's how I'd approach it. We use 20 million barrels of oil a day, 7 from domestic production and 13 from imports. We need to make the 13 million number go to zero. Split it into thirds.
Conservation advocates, find 4-1/2 million barrels worth of savings.
Alternatives advocates, find 4-1/2 million barrels worth of alternatives.
Conventional energy advocates, find 4-1/2 million barrels worth of oil, gas, coal, and nuclear.

Sounds reasonable. Are those targets is achievable?

(07-23-2009 11:40 AM)Owl 69/70/75 Wrote:  Instead of flapping your gums arguing that the other guys are wrong, prove that you are right.

?

Responding to JOwl but not quoting to save space.

Considering that you were responding to a post that began "I do favor an energy tax," I think the question was valid.

One bit of misinformation needs to be corrected. Don't get any illusions that domestic drilling will be cheap. It's going to be quite expensive, actually. The days of looking for cheap energy solutions are behind us. I do find it ironic that last summer the mantra of drilling opponents was that we wouldn't get enough oil to make a difference and now the worry is that we'll find so much that prices will drop and the conservation movement will lose momentum. The current worry is far more realistic, not because it will lower prices, but rather because it will give us leverage to insulate us from price spikes. If we find so much that prices really do turn down (a possibility, but not the most likely one), then the tax should take care of that.

As for whether the goals are realistic, that kind of proves my point. If it's questionable whether any approach can address even 1/3 of the problem, then obviously it's idiotic to argue that any one of the three is not needed.
I think the alternatives goal is easily attainable if the government would just tax oil and otherwise butt out. We could be getting almost that amount by importing sugar cane ethanol today if we could get rid of the Grassley/Harkin/Durbin/Obama/Nelson/Hagel/Bayh/Lugar (got some from both parties--good) subsidies for corn ethanol (proof that government involvement does more harm than good), and the biggest deterrents to wind and solar are state utility regulatory commissions and federal power transmission rules.
The conventional energy piece requires drill here, drill now, plus 50-100 new nuke plants (with lots of electric cars), plus some progress in coal gasification/liquification technology (the problem is that the liquification/gasifcation processes give off to much CO2; perhaps it could be injected into oil wells to increase production, perhaps it could be piped offshore and bubbled up through kelp beds to enhance growth, feed fish, and be harvested for biofuels).
The conservation piece requires massive capital investment in things like high-speed trains, electric power for all trains, mass transit, improved power grids, etc. This would probably take the longest to implement, but these savings are more valuable because they can be permanent.

So, yes, each can do about a third, but none can do it all.

All things in moderation. Sitting on our reserves while drawing down the reserves of the Middle East will impoverish us to the level of Yemen if carried too far. Using up our reserves without making plans for alternative sources of energy is just as shortsighted. I like the idea of increasing domestic oil production as a bridge policy while alternatives are developed.

Other that that, domestic drilling carries with it domestic jobs, domestic revenue for allied and support businesses, and domestic taxes on both the individuals and corporations that would benefit. These are things we need now, and aren't getting.