 | Oilwatch Monthly - March 2008 | The Oil Drum: Europe | France and Italy: is nuclear power the way for energy independence? |  |
User login
Personnel
Editors
Contributors
Peak Oil Primers
Archives
- December 2008
- November 2008
- October 2008
- September 2008
- August 2008
- July 2008
- June 2008
- May 2008
- April 2008
- March 2008
- February 2008
- January 2008
- December 2007
- November 2007
- October 2007
- September 2007
- August 2007
- July 2007
- June 2007
- May 2007
- April 2007
- March 2007
- February 2007
- January 2007
- December 2006
- November 2006
- October 2006
- September 2006
- August 2006
- July 2006
- June 2006
- May 2006
- April 2006
- March 2006
Vital Trivia
License
This work is licensed under a Creative Commons Attribution-Share Alike 3.0 United States License.
GAIA Host Collective
A real, if possibly unavoidable problem, exists in this comparison, and that is the role of taxes.
The price of oil went up 3% in Germany on Jan. 1, 2007 when the German Mehrwertsteuer went from 16 to 19 percent - and that price rise had nothing to do with the broader market for oil. However, it did make oil 3% more expensive for most German purchasers (as always, exceptions are written into the tax code). Of course, the price paid for imported oil did not change - but the price for everyone following that importation did.
The difference in the level of oil taxation between Europe and the U.S. is profound, making many comparisons between the two economies difficult in this area.
As a second, not easily quantified, point - I am fairly certain that German contracts with Russian oil and gas suppliers are longer term, and significantly below current prices - much to the unhappiness of the Russians. Who occasionally turn off the spigot in turn. Being able to pay cash and commit over the longer term has allowed various Germany energy companies to buy fuel at a discount rate, when compared to countries like Italy or the UK. Changes in exchange rates are not likely to play a major role in this case, as neither the German companies nor their Russian counterparts were likely thinking of the dollar as being the primary currency of the transaction. However, the whole area seems quite murky, which is not really a surprise - I personally assume that German energy companies consider how they handle their Russian counterparts to be a matter of the highest discretion, in part because it is clearly corrupt, depending on your perspective. Schröder comes to mind, for example.
Comparing like and like is a very important concept. Unlike and unlike can not be compared as I have pointed out when EROEI is used to analyze electricity and ethanol.
When comparing like and like as with oil one must be careful in the United Sates. There are at least two kinds of oil that look the same, have the same energy content and are used identically but are really different and can not be compared. One is of course domestically produced oil such as in Texas and Alaska among many other places. This amounts to about 5 mbpd. The much larger kind of oil in the United States is imported oil. It is not the same. Why? Because it has to be paid for. It does not really have the same energy content as domestically produced oil. How come? Because the price that is paid to the foreign producer represents his share of the energy content of the oil which he gets for extracting it.
The EROEI concept completely ignores this since it does not consider price as relevant. What the United States is really doing is expending a large portion of its energy as represented by the dollars paid for foreign oil. Of course it gets the economic gain from that oil, but it is not as profitable as domestically produced oil. The result is a system which, because of the low taxation of oil, is similar to an energy sink which is constantly draining energy to pay foreign producers their share of oil's energy.
This is a vicious circle where dollars have to be conjured up in ever larger amounts to keep the thing going. With a national policy of globalization and the export of jobs to low wage countries, the costs of maintaining 1 million military overseas and the 2 wars in Iraq and Afganistan, the American economy is collapsing under the strain. In previous times the United States was more self sufficient in energy and did not have to expend a large portion of it to obtain more oil. Now it only collects the economic gain on imported oil and not the total energy gain as with domestic oil (which also is in decline).
It seems to me that the only way this can continue for long, if it can continue at all, is for the United States to either dramatically reduce it's standard of living which is politically not feasible or for the rest of the world to accept the funny money dollar gushing from the Fed's electronic well. Since the dollar is the main international currency, it would mean high global inflation for a long time and probably forever if allowed to continue. It is up to foreign powers to stop this since the United States is an oil addict that can not help itself.
Most long term oil contracts are still based on market prices (with an agreement to use an agreed index, with an agreed adjustment formula for quality/technical parameters). It's exceedingly rare for oil producers to sell oil on a long term basis with a fixed price.
similalry, long term gas contracts have variable prices based on market indices.
Adding some points to Jerome a Paris's:
On the issue of taxes, you are right that the picture is totally different for the end consumer, and as a transatlantic comparison, the above only applies to importers.
I note however an interesting factoid: the then German government saw fit to raise fuel taxes during the Second Energy Crisis.