This is the beginning of my attempt to argue that the Bush Administration is waging war on the wrong problem. It is not the Arab control of oil that is the issue, but America's dependence on oil. By declaring the moral equivalent of war on America's energy problem, investing in energy independence with mass transit, renewable and domestic sources of energy, we could attack the root of our problems with the middle east and other countries.
The Bush Administration has (so far) allocated $322.6 BILLION for the Iraq War. While the stated reasons for the war were false, other than Bush apparently wanted to take out Saddam, many people, including myself, feel that an obvious goal of the war was to secure access to Iraq's oil supplies.
Oil. This is the fuel that our country runs on. Our dangerous dependence upon oil has resulted in war, attempts to extend our political and military influence into regions that have oil or may have oil reserves. Much of our nation's military and diplomatic resources are devoted to protecting access to foreign sources of oil.
What if this same $322 billion had been used for investment in mass transit and new energy supplies here in the US, including nuclear generation, ultra clean coal technology and renewable energy sources. How far could we have gone towards weaning ourselves off our dependence upon oil supplies from Arab, Venezuelan and Russian sources, countries that are more than willing to use their control of oil as a weapon against the US?
It is interesting to look at how the US meets its national energy requirements.
Oil 39%
Natural Gas 24%
Coal 23%
Nuclear 8%
Hydroelectric 3%
Other (renewables) 3%
Oil is by far the major energy source for America, with natural gas and coal essentially tied for second.
It is accurate to state that the majority of crude oil use is for transportation purposes, while nuclear and coal are used primarily for the production of electricity. Hydroelectric and renewable fuels make up less than 5 percent of total energy use, primarily as fuel in the production of electricity. The only residential and commercial use of crude oil is for heating oil, primarily in the older portions of the northeast.
An important point to recognize is that almost no crude oil is used in the generation electricity, the energy source used by most commercial and residential end-users with the exception of transportation use, which is almost all crude oil
The US has never had a national energy strategy, preferring to let the "free market" dictate the development of energy supplies. Generally, this just meant that the major oil companies were able to decide how much oil was produced and, through their control of refineries, how much gasoline was produced.
Even in the early 1900's, the government realized how dangerous it would be for one company to have a monopoly on oil production and refining. The government's breakup of the Rockefeller Standard Oil of Ohio Trust into 33 smaller companies was originally intended to reduce the market power of Standard Oil. But over time, the companies have been reassembling themselves attempting to create larger firms such as Exxon-Mobil, Chevron-Texaco and other large oil firms created out of the merger of small, by oil industry standards, companies.
The small number of large vertically integrated oil firms has destroyed the meaning of competition. Oligopolistic industries do not compete using simple supply and demand considerations. Unlike competitive industries the point is not to be efficient. The best thing you can do is keep competitors from entering the market by leasing and controlling all the raw resources. The goal of an oligopolistic industry is to behave as a monopoly, maximizing profits for all firms in the industry. This is true for an industry as incestuous as the oil industry where all the top executives are familiar with each other and in many cases related by family or marriage.
From the White House to the newsrooms, Americans are being told to adjust to the new, higher gasoline prices. Prices will go up due to increasing scarcity of oil, increasing production costs, terror premiums, etc. There is nothing that can cause prices to decline other than for a very short period. World demand is just too great.
The negative effects of high oil prices on our economy are being debated. Will higher energy prices ignite inflationary pressures in the economy? How will American firms remain competitive if energy prices soar? How will house holds pay for gasoline? There is seldom a discussion of the positive effects of high oil prices because, except for the owners of the oil companies, there are none.
The US consumes 16 million barrels of oil per day, of which almost 11 million is imported. At current oil prices in excess of $55 per barrel, the US is spending $605,000,000 per day on oil imports.
Look at what $322 billion could do to reduce the demand for oil.
The most obvious area of investment is mass transit. Getting people out of their cars and into light rail and busses would do the most to reduce oil demand. People like being able to get out and go where they want without waiting. Somehow, mass transit has to be made easier than it currently is.
A new bus costs between $125,000 and $150,000 (at least in the LA Transit Authority). If LA had $5 billion they could buy 5,000 buses for $750,000,000 and the rest, invested at 4 percent, would generate $170,000,000 annually.
You could start 100 of these busses on north-south streets and 100 on east west streets and every twenty minutes another 100 on the same path. You could do this for 8 hours and have almost all the busses on the streets running north-south, east-west and passing all points every twenty minutes (assuming two hundred are out of service at any time). In LA, busses would never be more than ¼ mile from any point.
The best thing is, you could almost do this almost for free. The $170,000,000 in interest would pay for almost all maintenance, salaries and fuel. Imagine how people would use public transportation if it were free and had a connection every twenty minutes, at worst. Almost 40,000 people per hour could be moved around LA, freeing disposal income currently used for transportation and insurance for other more enjoyable pursuits.
At the same time, almost 300,000 cars would be removed from LA streets.
Assuming an average commute of 40 miles and average fuel efficiency of 20 mpg, this would save 4,800,000 gallons per day of gasoline, or slightly more than 100,000 barrels of oil per day.
Granted, not everyone loves the bus. But people learn to love free items very quickly. Especially when there are so many busses on the street that you do not have to learn schedules and routes. Busses are traveling east - west and north - south.
If this were done in the top 50 metro areas in the country, we could save 5,000,000 barrels of oil per day, or roughly 45 percent of our total petroleum use. And we still would have $72 billion left over. What could we do with that amount?
During WWII, Germany developed coal gasification technologies that allowed it to fight the entire war without any crude oil. The US has the largest supplies of coal in the world - almost 150 years worth. But coal is a dirty fuel, with much more greenhouse gasses, sulphur and particulate matter in the emissions than even oil. Coal gasification eliminates or reduces much of the emissions.
In the Powder River Basin of Montana, private firms are attempting to resurrect the coal gasification technologies used by the Germans. For $2.5 billion, a new, ultra-clean plant could be constructed that converts coal to gas at a cost of around $35 per barrel, with an output of 30,000 barrels per day. 10 of these plants, located in the Midwest could produce 300,000 barrels per day for "only" $25 billion.
Together these two actions could reduce imported oil by almost 5,300,000 barrels per day, or almost half of our daily imports. This would have two effects. First, the US trade balance would improve as we purchased less oil, and secondly, world oil prices would decline with the surplus in production capabilities.
The Energy Bill recently passed by the Senate was nothing more than a giveaway of public funds to private oil companies, intended to increase the production of oil and perhaps, in a decade or so, provide more refinery capability. Of course, to pay for the new oil refineries and the more expensive crude supplies, the price of gasoline will have to increase.
The Energy Bill only barely touches the easiest way to control prices. Reduce demand. Not only would energy prices decline but the need for the then current administration to project military power to control oil supplies would disappear. Global warming issues would be resolved, in a generation or two.