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August 23, 2005

Oil Baby

Fareed Zakaria has a spot-on editorial today on how much tougher oil makes our foreign policy. It's almost laughable how many sore spots and tricky situations our hydrocarbon dependence has landed us in. In the American drama, oil is the screenwriter and we're the hapless dunce who keeps stumbling into his prewritten traps.

It kinda sucks.

But it's not hard to rationalize that oil dependence was a necessary tradeoff for our modern influence and technological achievement. That's perfectly fair. What's so strange is that now, while we're on the cusp of new technologies that could end our addiction, while we control literally thousands of advances and options that could drastically reduce our dependence, we prefer instead to wait till crisis hits, till prices jump so high that oil becomes a curse and change becomes a necessity. We're demanding that the day come when our switchover will be instant rather than gradual, and that's going to hurt.

Some hyperrationalists on both sides of the aisle like to refer to market mechanisms now. When oil ceases to make economic sense, we'll cease to use it. The market will take care of us, tuck us in at night, read us stories, and make us breakfast the next morning. But the market fails. The many costs of oil, from global warming to geopolitical instability, aren't included in the pricetag of crude. And when they do come clear, they still won't get you at the pump. They'll nail us in emergency appropriations for wars and massive outlays to deal with rapid climatological change. We'll have long seen it coming, but the market won't have noticed until it hits. Zakaria's piece today is a good explication of one of those market-hidden prices, oil's irritating ability to prop up most everyone we want knocked down. Read it.

By the way, The Oil Drum, your goto blog for all things crude and peak, has moved. You can, and should, find them here.

August 23, 2005 in Energy | Permalink


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Brad DeLong posts on a FT article discussing a new Goldman Sachs forecast of $60 oil for five years, and 'super spike' prices above $100 barrel. This forecast is above the consensus of analysts, BUT

A good argument can be made that $200 (adj for inflation) is more likely. That's about $4.00 a gallon at $100/barrel and $7.00/gal at $200/barrel.

IMO, $4-5.00 gal. is about what it will take to get the US doing some very serious rethinking about alternatives to the 70% of US consumption for just transportation. We could cut that percentage in half if we were serious about fuel economy in cars AND trucks, along with other transportation measures.

Posted by: JimPortlandOR | Aug 23, 2005 1:57:46 PM

But the market fails.

I don't know why that concept is so difficult to accept.

Posted by: Adrock | Aug 23, 2005 1:59:43 PM

shouldn't added for some to accept.

Posted by: Adrock | Aug 23, 2005 2:01:00 PM

History shows that markets do a pretty good job much of the time getting people stuff they want for cheap. History also shows there have always been people who hate markets at all times for any number of reasons real and imagined.

Alleged market failures have been pointed to for generations as an excuse for all kinds of government intervention, much of which has had negative consequences, intended and not.

That is why some people are skeptical of those who declare that markets fail.

Sometimes when markets operate, some people just have to eat a shit sandwich. If its the American middle class this time, at least we can say that they brought it on themselves. THis situation will be a lot more just than the pain and misery of previous market changes.

Posted by: Neil Paul | Aug 23, 2005 2:38:32 PM

"its the American middle class this time, at least we can say that they brought it on themselves."

"Let them eat cake", said Marie Antoinette just before the guillotine.

Posted by: bob mcmanus | Aug 23, 2005 9:34:07 PM

When people have every chance to influence their diet, its hard to sympathize with them suffering the results of their choices. I am much more sympathetic with developing countries potential suffering if peak oil comes about. THose people will suffer for our choices, not their own.

Posted by: Neil Paul | Aug 24, 2005 9:30:33 AM

I am not surprised that "we" haven't done anything. The problem, I suggest, is the nebulous nature of "we." We, as a Society, would benefit greatly be acting soon to avoid a crisis. Unfortunately, that "we" is not the group who controls the process. That is the privately held Oil Companies, who have their own interests (maximizing profit, as do all companies). Why in the world would we be surprised that they do not shut down *their* current cash cow *and* incur the expenses of transition in order to avert some future crisis for *everyone else*. No, I suggest that the private economics answer they see all too clearly is to wait until a crisis is near so that they can continue to suck as much $ from current operations as will be avilable and so that *others* will step in to cover the costs.

Posted by: Cathexis | Aug 24, 2005 10:20:32 AM

We drive SUVs, not the oil companies. We decline to car pool because it would be inconvenient, not the oil companies. We buy houses in the far away suburbs, not the oil companies. We are not helping matters.

Posted by: Neil Paul | Aug 24, 2005 4:15:43 PM

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