Lynne Kiesling
Sunday’s Dilbert is a funny and accurate send-up of the idea of achieving “energy independence”. Punchline:
Oil is a fungible commodity. The capitalist system virtually guarantees that you’ll end up buying the lowest cost oil from source unknown to you.
Scott Adams clearly learned more from his econ classes at Amherst than most politicians and many other folks have.
Thanks to John Atkinson for the heads up. Check out his regular energy roundups at Winds of Change.
I beat you to the punch: http://www.truthonthemarket.com/2006/02/18/one-of-many-much-needed-lessons-about-foreign-oil/
Why, so you did! It’s a classic.
On the other hand, if EVERYONE bought higher mileage cars–their tastes, as in Dilbert’s case, change–(and drove no additional miles), then the demand for oil (in general) would fall, and the equilibrium price of oil would also fall, right?
So oil is fungible, but a shift in the market demand curve for oil still matters…
The smugness rolling off the blog posts referring to that cartoon compelled me to point out that there are reasons beyond not understanding fungibility to want to use less oil:
http://mdahmus.monkeysystems.com/blog/archives/000273.html
Short summary: If it weren’t for our addiction to CHEAP oil, we’d probably have been able to treat the Saudis like what they are: a country which encouraged their own citizens to attack us on our own shores.
Unfortunately, only a few would read Dilbert’s statement the way Dogbert does. Typical consumers would probably view it as “wow, that person is willing to pay more for their car to get better gas mileage” or maybe even “wow, that person cares about the environment.”
Here in Northern Virginia, however, the statement a hybrid car suggests is “wow, that person wants to drive on HOV lanes without carpooling.”
M1EK is spouting the same ole’ stuff from back in the day on rec.sport.football.college
Short summary of my reply to him: The US economy is addicted to cheap oil, sure, but other countries have economies addicted to oil at their current price as well. The difference in per capita petroleum use is just not enough to make a real difference.
Also, a large proportion of the petroleum usage difference that does exist is because of heating oil anyway. That’s why Canada consumes considerably more petroleum per capita than the US, and why Iceland, Sweden, and Norway do as well. As to why Luxembourg consumes more per capita, well gas taxes do have something to do with that, as does Belgians traveling to Luxembourg to buy gas.
In addition, about the economies, energy use per $1000 of GDP produced is somewhat lower in the US than in Western Europe as a whole. (And considerably lower than Canada and Eastern Europe.)
M1EK is spouting the same ole’ stuff from back in the day on rec.sport.football.college
Short summary of my reply to him: The US economy is addicted to cheap oil, sure, but other countries have economies addicted to oil at their current price as well. The difference in per capita petroleum use is just not enough to make a real difference.
Also, a large proportion of the petroleum usage difference that does exist is because of heating oil anyway. That’s why Canada consumes considerably more petroleum per capita than the US, and why Iceland, Sweden, and Norway do as well. As to why Luxembourg consumes more per capita, well gas taxes do have something to do with that, as does Belgians traveling to Luxembourg to buy gas.
In addition, about the economies, energy use per $1000 of GDP produced is somewhat lower in the US than in Western Europe as a whole. (And considerably lower than Canada and Eastern Europe.)
Other useful statistics:
http://www.eia.doe.gov/emeu/iea/wecbtu.html
Western Europe uses roughly 30 quadrillion BTU worth of petroleum, on a population roughly similar to the US, which uses 39 quadrillion BTU worth. (And the US has lower per capita use than Canada, which has higher gas taxes.) An increase in the world price of oil is going to affect Western Europe hard as well. The US has a decent supply of domestic oil, which although fungibility applies, still acts as a hedge for the economy as a whole. The domestic oil producers do well when the price goes up, even if the economy as a whole suffers.
What does “addicted to oil” really mean? I mean, we’ve just gone through a period of extraordinary oil price volatility, with nary an economic hiccup.
We’re a rich nation, and the price of oil almost makes no difference to our economy (within the limits of the prices that we’ve seen recently, and probably some amount higher than those prices).
Contrast this with the 1970’s, where we WERE addicted to oil, and where an oil price shock more or less ruined the economy for a good long while.
What does “addicted to oil” really mean? I mean, we’ve just gone through a period of extraordinary oil price volatility, with nary an economic hiccup.
We’re a rich nation, and the price of oil almost makes no difference to our economy (within the limits of the prices that we’ve seen recently, and probably some amount higher than those prices).
Contrast this with the 1970’s, where we WERE addicted to oil, and where an oil price shock more or less ruined the economy for a good long while.
“Addicted to oil” means that we haven’t done shit to Saudi Arabia despite the fact that the money and the personnel for 9/11 came from there; and their state religion continues even today to incite their young men into similarly zealous anti-Western frenzies.
Why haven’t we done anything? We’re afraid of what would happen to the SUV-driving suburbanite if the Saudi royal family lost their grip.
That’s screwed up. Imagine if FDR had said “well, the Japanese DID attack us on our own soil, but darn it, we can’t AFFORD to fight back”.
“Addicted to oil” means that we haven’t done shit to Saudi Arabia despite the fact that the money and the personnel for 9/11 came from there; and their state religion continues even today to incite their young men into similarly zealous anti-Western frenzies.
Why haven’t we done anything? We’re afraid of what would happen to the SUV-driving suburbanite if the Saudi royal family lost their grip.
That’s screwed up. Imagine if FDR had said “well, the Japanese DID attack us on our own soil, but darn it, we can’t AFFORD to fight back”.
I’ve got an acquaintance who is the former business manager of the American embassy in Saudi. He’s a lifelong State Department employee. He’s the biggest appologist for the Saudis that I’ve ever met.
His point is that the Saudis are changing, at their own pace, and that if we push them through things like embargoes, we will inhibit that moderation that he says is happening.
My only point is that, the reason that we haven’t done to Saudi what we did to Iraq has more to do with the attitudes of State Department employees and other libs and almost nothing to do with oil addiction. I think that us suburban SUV drivers could handle an embargo just fine.
I’ve got an acquaintance who is the former business manager of the American embassy in Saudi. He’s a lifelong State Department employee. He’s the biggest appologist for the Saudis that I’ve ever met.
His point is that the Saudis are changing, at their own pace, and that if we push them through things like embargoes, we will inhibit that moderation that he says is happening.
My only point is that, the reason that we haven’t done to Saudi what we did to Iraq has more to do with the attitudes of State Department employees and other libs and almost nothing to do with oil addiction. I think that us suburban SUV drivers could handle an embargo just fine.
As of Nov 05 (latest data in the table), the top suppliers of crude to the US were:
Canada: 53.3 kbbls/month
Mexico: 49.7
Saudi Arabia: 38.0
Nigeria: 34.8
Venezuela: 30.3
Total Persian Gulf: 63.9
Total OPEC: 139.2
Total Non-OPEC: 168.7
Total Imports: 308
Total domestic: 142
We’re a larger supplier to ourselves than OPEC, and SA is only a fraction of the OPEC total. If the Saudi family fell, I think the people of SA would be worse off than the US.
As of Nov 05 (latest data in the table), the top suppliers of crude to the US were:
Canada: 53.3 kbbls/month
Mexico: 49.7
Saudi Arabia: 38.0
Nigeria: 34.8
Venezuela: 30.3
Total Persian Gulf: 63.9
Total OPEC: 139.2
Total Non-OPEC: 168.7
Total Imports: 308
Total domestic: 142
We’re a larger supplier to ourselves than OPEC, and SA is only a fraction of the OPEC total. If the Saudi family fell, I think the people of SA would be worse off than the US.
Why haven’t we done anything? We’re afraid of what would happen to the SUV-driving suburbanite if the Saudi royal family lost their grip.
There is a lot to that, but as I said (and demonstrated with statistics), you underestimate the way to which German and French (and other European) foreign policy is also tied to the Saudis and anothers. Per capita use of petroleum is not all that lower in Germany and France, and not having any domestic production of oil does mean that they don’t have a hedge for their economy as a whole if the price rises.
In addition, the same forces that hold us hostage to the Saudis, to the degree they exist, prevent us from raising gas taxes. Most of the suburbanite SUV drivers have money; the per capita GDP in the US is higher than in Europe. Even taking into account commutes and everything else, we could afford higher gas prices, though it wouldn’t be pleasant.