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285 comments on The US Offshore Drilling Argument: The Debate Between "Starting Now" and "Waiting a While"

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mdsolar on June 30, 2008 - 2:43pm Permalink | Subthread | Parent | Comments top

Perhaps we've gone a little far afield. I'm arguing that we should invoke our standby gas rationing plan to achieve sufficient conservation so that the price of oil drops to $20/barrel. With or without CAFE, this is reduced consumption. Reduced availability of gas will spur the transformation of transportation even if Detroit tries to market M3 Bradley's as commuter cars. We just get that reduced availablity cheap rather than expensive.

Chris

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Name on June 30, 2008 - 4:13pm Permalink | Subthread | Parent | Comments top

mdsolar,

You propose rationing a use that accounts for about 40% of consumption in a country that absorbs about 25% of global consumption?

Better be very inelastic.

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mdsolar on June 30, 2008 - 10:41pm Permalink | Subthread | Parent | Comments top

The world is looking for about 5 million barrels a day of spare capacity. I'm suggesting that we provide that through conservation, reducing our consumption by about that much. That would be about 25% of our use. Carpooling is enough to make that happen. After that we need to look at technological change to eliminate oil use from transportation. We want to keep ahead of any increase in world demand so that the price of oil stays low. Once we are no longer using oil, we might want to revisit drilling off of Florida for export since without similar dicipline in other countries, the price of oil will rise again once we are completely out. At this moment, the US is the only country that can unilaterally affect price in this way. I think we should.

Chris

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Gail the Actuary on June 30, 2008 - 10:46pm Permalink | Subthread | Parent | Comments top

If we were to do this by reducing out auto and personal truck use, we would have to reduce driving by more than 50% (since these categories make up a little less than 50% of our petroleum use. I don't see that happening.

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mdsolar on June 30, 2008 - 11:03pm Permalink | Subthread | Parent | Comments top

It is pretty clear that using oil for home heating does not make sense anymore, electric space heaters are cheaper. http://mdsolar.blogspot.com/2007/12/jet-fuel.html

That gives you about 10% for free. Trucking is the other big use, but trains and ships can be used instead giving substantial fuel savings. No, you don't have to cut car transportation as much as that to bring the price of oil down below $20/barrel. The tricky part is keeping it down with serious technological transformation. That means relying on the "white markets" in our standby gasoline rationing plan to free up appropriate resources to push things forward. http://www.osti.gov/energycitations/product.biblio.jsp?osti_id=6307185 Supporting these markets through steady cuts in rations down to zero makes the whole thing very exciting.

Chris

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Half Empty on July 1, 2008 - 8:53am Permalink | Subthread | Parent | Comments top

How do you get millions of owners of cars, SUVs and trucks to accept rationing if oil is only $20 a barrel?

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Name on July 1, 2008 - 9:03am Permalink | Subthread | Parent | Comments top

And how do you expect the new middle classes of China and India to resist SUVs if oil is $20 a barrel. It is an international commodity.

Prisoner's dilema.

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mdsolar on July 1, 2008 - 9:41am Permalink | Subthread | Parent | Comments top

There is no dilemma if our intention is to end our use of oil. There is a limit at which others can take up SUVs since they cost money. Thus, demand growth cannot outpace our cuts in use if they are sufficiently rapid. Once we are out of the oil market as consumers, we won't have as much leverage on price since we are only the third largest producer. But, we might tighten supply at that point and force conservation elsewhere. We've done a simlar thing with tobacco, forcing open foreign markets while reducing our own consumption. Some Asian currency readjustments back in the eighties were mainly about selling US tobacco.

Chris

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Name on July 1, 2008 - 2:02pm Permalink | Subthread | Parent | Comments top

We ration oil use in the US to reduce demand and lower the international price to $20/barrel.

Emerging markets could not replace our demand because they could not add cars in sufficient quantity or size as fast as we can retire them.

If foreigners react to the reduced price with increased demand, we could decrease US oil exports to punish them later.

Argument assumes:
1) We have enough control over demand to lower the price 700% without increasing supply.

2) Change in our saturated auto market (population 300M) with a decade of roughly constant vehicle count, can be faster than change in emerging economies (population >3B)including the world's third largest auto market, which has exhibited roughly 20% compound annual growth in vehicle count since 2004.

3) We would then have enough control over supply (having bacome net exporters without increasing production) to increase the price dramatically.

...

"In 2006, China overtook Japan to become the world's second largest car market, trailing only the United States, with sales of 7.2 million units, up 25.13 percent from a year earlier. The country was also the world's third largest vehicle producer, after Japan and the United States.

Vehicle ownership in China was 44 for every 1,000 people. This compares with the world average of 120. The United States had 750 vehicles for every 1,000 people.

Dong said the domestic car market had huge potential as the country had 57 million motor vehicles by the end of last year. Among them were 21.5 million privately owned cars, according to latest government figures. "

http://www.autoobserver.com/2008/01/china-car-sales-production-to-hit-re...

"The automobile industry in India is the tenth largest in the world with an annual production of approximately 2 million units. India is expected to overtake China as the world's fastest growing car market in terms of the number of units sold and the automotive industry is one of the fastest growing manufacturing sectors in India. Because of its large market (India has a population of 1.1 billion; the second largest in the world), a low base of car ownership (25 per 1,000 people) and a surging economy, India has become a huge attraction for car manufacturers around the world." -Wikipedia

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mdsolar on July 1, 2008 - 2:24pm Permalink | Subthread | Parent | Comments top

Forcing conservation is not punishment. It helps reduce global warming. If we succeed in making our transition off of oil using cheap oil, then it is true that the price rise if demand goes up again could be even steeper since there will be much less of the cheap-to-produce oil left. But, this is no secret so those who want to continue to increase their use of oil should expect to pay more and more and more. It is just that the US has the ability to choose to make its transition at low cost, a choice that is not available to others aside from inside OPEC where some are moving quickly on renewables.

And yes, it takes a while to get the income to afford an SUV so SUV adoption will not be all that rapid even with cheap fuel.

Chris

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Gail the Actuary on July 1, 2008 - 1:26pm Permalink | Subthread | Parent | Comments top

Virtually no oil available; everyone nearly broke.

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285 comments on The US Offshore Drilling Argument: The Debate Between "Starting Now" and "Waiting a While"

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