Thursday, March 20, 2008

$825 Billion A Year for Oil

Energy expert Gal Luft writes today in the Miami Herald about America’s potential ruin from oil dependency. A notable point on the real price of oil to the United States:

At current oil prices, this country [the United States] sends overseas $460 billion per year to finance the daily buying of 12 million barrels of imported oil. This amount of money is about the size of our defense budget and three times the size of the ''economic stimulus'' package recently passed by Congress. But the real economic impact of oil dependence is hidden to most Americans. Energy economist Milton Copulos (who passed away this month) calculated last year that the grand total of all external costs associated with foreign oil dependence -- including the cost of oil-related defense expenditures, amortized cost of supply disruptions, and lost economic activity and tax revenues -- stands at $825 billion per year.

Luft goes on to warn:

If oil prices climb to $200, as President Hugo Chávez of Venezuela recently warned, this wealth would double again. While the value of the dollar and the U.S. economy is shrinking, OPEC's monumental wealth enables its countries unprecedented buying power. As an illustration, at current oil prices it would take OPEC just six days to buy GM and three years to buy a 20 percent voting block in every S&P 500 company. It is hard to see how such buying power amassed by oil producers would not upset the West's economic and political sovereignty. At the current rate of investment, foreign governments are likely to be increasingly willing to translate their wealth into power, dictating business practices, vetoing deals, appointing officers sympathetic to their governments, dismissing those who are critical of them and imposing Islamic laws on Western corporations.


mike's spot said...

Its a scary thought to consider- that the US well and truly does have a price tag on its freedom.

Warren Wilczewski said...

While in Moscow, I had the chance to speak to people in the energy business. Whether from the government or the industry side, their message was quite consistent: the only way to increase America's freedom of maneuver in the world is to reduce its oil consumption, and therefore its oil imports. How, after all, do you ask Russia to behave itself when oil is at over $100 a barrel?

Amanda said...

All the more reason why the US government should give full attention to finding alternative energy sources. Not only is it a bad economic policy, but it is also a bad foreign policy and a terrible environmental policy.

We need to think of some solutions, and we need to think of them fast before we further deplete oil resources, worsen our economy and get everyone mad at us.

Here's some solutions I found that New Zealand is proposing to fix their oil problem.
* get people out of cars, by boosting public transport and walking/cycling infrastructure, and bringing in congestion charging;
* reinvigorate our railways, thus slashing the tonnage of goods hauled long distance by trucks;
* complete rail electrification, allowing goods trains to be hauled by electric locomotives;
* conserve energy, by adopting new energy efficiency technologies and conservation measures;
* provide financial incentives to encourage households, farms, businesses and hospitals to generate their own power, e.g., through solar hot water heating, fuel cells.

erich said...

Help with the math please. At 12M/bls/day that works out to 240.9 B gal/yr. At $100/bl. that would work out to $240.9 B at point of origin, not $460.

Or to make it even simpler, say crude is $110/bl, or $2.00 gal., and thus the per gallon $US sent overseas are about half of what is stipulated.

While security (polite term for theft)costs and externalities might even be understated, I am having difficulty understanding how we get to what seems to me double the exported $US for just the crude. Where is the error?

acarr08 said...

This proves how much we should be focusing on public transportation and reducing oil consumption. The other day I was listening to the radio channel 103.1 in Los Angeles and one DJ was discussing tips on how to lessen gas consumption. Some of his tips were:
1. Take items out of your trunk to lessen weight, which improves gas milage
2. Keep your car out of the sun because gas can actually evaporate when left in the sun.
3. Visit websites such as Mapquest which now feature functions which generate the lowest gas prices near your home.

It is time we take a more direct stance on rising gas prices and do something about it. We should learn from countries like England and France whose sophisticated public transportation systems have saved millions. I looked on the government climate policy webpage and found they are focusing on initiatives like Clean Energy-Environment State Partnership which is “a voluntary state-federal partnership that encourages states to develop and implement cost-effective clean energy and environmental strategies.” Also they are focusing on systems like the voluntary inclusion of the energy label. I think it’s time to go beyond that and do more things like the DJ in L.A. take it into our own hands as well as push for better public transport.

Anonymous said...

One more comment. The answer to energy lies not so much in finding new alternative sources of energy, but in reducing demand. A big source of energy is housing, which could/should consume ZERO energy.

Next is transportation. Cutting trips in half is the same as doubling transportaion energy supply, and MUCH easier to achieve, by hundreds of means. One reason we have a perceived energy problem is we DON'T have anything close to free market in energy, with the public thinking they benefit from low (as opposed to honest/accurate) energy prices. So we subsidize hydrocarbons, and give folks what they think they want, resulting in sprawl, separation of work and home, using high energy forms of distributing goods and ideas, etc. etc,. DOE is essentially a PR firm to market hydrocarbons ( actually even more for nuclear energy- look up its budget). Only those sources that can be easily monopolized are subsidized. What we have created is a monster of illusion and delusion.

Krys said...

What it boils down to is the basic cliche that everyone knows: "money talks, b.s. walks." Those with the big bucks can pretty much do what they want despite our naive "everything is great" attitude.

Like Amanda said, we need to find other alternative solutions and not just because we're all tree hugging hippies. We need to find these alternative sources to protect our freedoms.

Amanda said...

Yes, alternative solutions are a must. Unfortunately, our country thinks that ethanol made from corn is the answer, and it is most definitely NOT. By increasing ethanol production, we are taking land that could be used to produce food to feed our nation and the starving world. Since ethanol makes more profit, many farmers are now selling their corn to the gas stations, raising the prices of food globally. In addition, ethanol is not much cheaper than gas because you have to transport it by truck to the gas stations. These transportation emissions plus the factory emissions it takes to produce ethanol negates it's environmental benefits. Too bad both Obama and Clinton plan on increasing ethanol production.