Big Oil not solely at fault for high prices

Big Oil not solely at fault for high prices
By KEN MIDKIFF
Published Friday, June 27, 2008
(http://www.columbiatribune.com/2008/Jun/20080627Comm001.asp)

Pogo famously said, "We have met the enemy, and he is us."
Although Walt Kelly’s ’possum was a cartoon character, in reality we find ourselves in the same situation when it comes to the high price of gasoline. Today it is about $3.85 a gallon in Missouri and even higher on the West Coast and for our neighbors to the east. Gasoline prices in Illinois are currently a bit above $4 per gallon, and that is also the national average.

Although it is only human to want to blame someone, such as "greedy oil companies" or "environmentalists," the fact is we all are to blame. We have used oil and oil products, such as gasoline, as if there were no tomorrow, prodded on by our president, vice president, multinational oil and gas corporations and oil-producing nations.

Neither of the presumed presidential candidates - Barack Obama or John McCain - has had much to offer in the way of solutions to high gasoline prices. There have been some rumblings from the two camps about a temporary halt to federal gasoline taxes or investing in alternative energy. This dearth from the two parties’ presumed candidates is because oil shortages are not subject to political solutions. No amount of rhetoric, oratory or promises will make oil come out of a dry hole.

To counter our "dependence on foreign oil," politicians at the state and federal levels have been promoting ethanol, mostly by throwing money at it. As has been pointed out many times, ethanol could not make it in a true free-market economy. Rather than being supportive, environmental groups have decried the government largesse flowing to ethanol, which is extolled as a "green solution" by those who view "green" only as the color of money.

A corn grower pointed out that right now, ethanol production is subsidized at about 85 cents per gallon. Remove that 85 cents, and ethanol plants would be money losers and would go belly-up.
There are other problems with ethanol:

Some scientists - led by David Pimentel of Cornell - claim it takes more energy than it produces. The corn grower I spoke with told me that, because of more efficient production, the ratio he obtains is currently 1:1 (I do not know how he determined this). In short, it takes him a gallon of energy to produce a gallon of energy. Economists use the formula EIoER - Energy Invested on Energy Returned. If it takes more investment than is returned, that’s a loser.
If every kernel of corn in this country were converted to ethanol, that fuel would meet about 7 percent of our energy demands. If we were to meet all of the country’s energy demands, every square inch of the United States would be planted in corn. This would no doubt annoy the people of New York City.
One unintended consequence of converting so much corn to ethanol is that food prices have skyrocketed to the point that people in developing nations can’t afford groceries and are literally starving.

Bottom line: Don’t blame environmentalists for solutions based on ethanol or for our tax money going to support ethanol production.

Those who say environmentalists are responsible for high gasoline prices are probably thinking of opposition to drilling in the Arctic National Wildlife Refuge or to drilling on public lands. That’s all true; we are opposed to such.

A bit of information is in order: The amount of oil in ANWR would meet total U.S. demands for about seven months (or as long as two years, depending on whose data are used). But we use about 20 million gallons per day, and the most that could be achieved per day in ANWR is about 876,000 gallons. To achieve this modest amount for a modest period of time, we would have decimated a relatively pristine area. Maybe ANWR isn’t very inviting to humans, but caribou love it. Caribou and drilling equipment, pipelines and other accoutrements of the gas and oil industry don’t get along very well.

As to public lands, there’s lot of exploratory drilling going on, but so far no one has hit the mother lode. Besides which, these lands belong to all of us - not to Exxon/Mobil, BP/Amoco or Sinclair. If there is a large oil deposit out there - which at this point is doubtful - it belongs to everyone, not to a few industries.

I would be among the last to let oil companies off the hook, and indeed there is little doubt that Big Oil is profiting from our miseries, but the United States peaked in oil production in 1970, and at that point, oil became an international bargaining chip, with the OPEC embargo of 1973 documenting that.

But rail against them all we want, our current shortages and high prices are not caused by the oil companies. When the easily accessible oil in the Middle East is diminished or runs out, the remaining oil will be hard to get to and of lesser quality and value. After our "oil crisis" in 1970, when domestic demand far exceeded available supplies, we turned to oil from other countries. Now, there’s much data to suggest that other oil fields in the Middle East, South America and Canada either have peaked or soon will.

Even in oil-rich Saudi Arabia - where a few decades ago, sheiks who now own Lear jets were riding camels - the oil supplies are finite. Sooner or later (and most geologists would guess "sooner"), we will no longer be able to depend on that country to up its production.

Neither environmentalists nor even oil companies should be singled out for blame. It is those other four fingers pointing back, and they’re pointing back to you, and you, and you, and me (yes, even liberal environmentalists use too much, so maybe we are partly at fault).

Environmentalists have been advocating conservation and efficiency, not profligate use. We have been pushing for getting our energy from wind, solar and other renewable sources, not fossil fuels that are finite and nonrenewable. We have advocated higher fleet mileage standards, which were long in coming, but some baby steps have been taken.

But it is likely there will be temporary reprieves, as the high price of crude will stimulate going back to areas in which oil production was previously uneconomical. As a result of this, high prices might stabilize or even go down for a while, but the trend is ever upward. We’re paying about $4 a gallon now; the prediction is for $12 or $15 in a very few years.

It is a simple matter of supply and demand. Demand is high, but the supplies are low and questionable.

But make no mistake. The era of easily accessible, cheap oil is gone. Tomorrow is here.
Pogo was right.