Why $100 Oil Maybe a Good Thing
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Oil is approaching the once unimaginable $100 mark. The obvious reaction is to panic. This has to be bad right? Maybe it is not so bad.
The market determines what companies produce to meet the demand of consumers. This rule applies from video games to illegal narcotics. If there is enough demand someone will probably attempt to supply it. For future generations $100 oil may be exactly what we need.
Develop renewable energy
Until the recent high oil prices alternate energy sources and their development were considered financially unfeasible. Now we are seeing renewed interest in alternates such as wind and solar. For example in an earlier post I recommended purchasing First Solar. First Solar is a profitable maker of solar panels and is
We are seeing green campaigns and a renewed interest in recycling. We are also seeing some of the very big automakers that oppose changes now embracing hybrids. Toyota has gone through several generations of their hybrid platform, improving it with each revision. It takes time and with high oil prices companies can get the time to develop and REFINE their products. Sometimes it takes time and $100 oil maybe the right time for these companies and technologies to flourish.
Encourage energy efficiency
In addition high-oil prices make people change their behavior. Most people need a push before they change their consumption habits. This is perhaps equally important as developing other energy sources. The U.S. SUV infatuation is starting to wane as fuel prices take up larger portions of the household income. It is estimated that if vehicles in the U.S. were as efficient as those in Europe, oil consumption would fall by as much as 3 million barrels a day (roughly 4% of world demand).
Eliminate Wasteful Symbols of Excess
The super oil profits have manifested itself in the form of an unprecedented building boom in the Middle East. From artificial islands to crazy skyscrapers, symbols of petrodollar wealth is going up left and right in the Middle East. This is not the most efficient use of resources.
Stop Killing the Earth, and Me
Polluting the air, changing the environment, and killing people. These are the externalities of big oil. It is no coincidence that the occurrence of cancer is high in areas where there are oil refineries. That is why one of the most reknown Cancer Centers - M.D. Anderson is based out of Houston, TX, a big oil city.
The Petrodollars make for bad public policy
The unfortunate problem with oil is how profitable it is. In the near term, politicians get lobbied by oil interests such as refiners, oil drillers, oil services, and even the car companies keeping fuel efficiency standards down for cars and pushing generally bad energy policy. Take a look at our CAFE requirements set by the U.S. Government. Though auto and materials technology has improved, our CAFE standards have barely budged.
I recently came across a campaign to get 35mpg by 2020. In other words an improvement of about 5mpg over 13yrs. That’s just ridiculous. My next car will get 37mpg mixed and it is not even a hybrid. Why can’t the U.S. up their requirements sooner?
Petro Dollars. When you got em, you love em. When you don’t? Well just suck my exhaust sucker.
Update [12-2-2007] : Looks like Congress has come to an agreement 35mpg by 2020 is what it will be. Weak, but like I said I think the auto industry knows it is very easy to do and so they just fight it so Congress feels they did something substantial. Pathetic.
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Great post. I’ve said this for several years now: high oil prices is good for this country because of the innovation it will spur. I’m hard-pressed to call it “innovation” at this point, however, because I find it ridiculous that progress has been so slow in the field of alternative energy.
This reminds me of an article I read in Wired (Dec 2005): http://www.wired.com/wired/archive/13.12/gas.html
I totally agree with this article. I think we need to move away from fossil fuel eventually. In long term that’s the only way.
I like what you said except your point on CAFE standards. Those standards won’t effect consumer behavior positively and if anything will make things worse - let me explain. The goal of CAFE standards its to make more efficient cars that will help us use less fuel. But the problem is that when American consumers have cars with more fuel efficiency they increase the amount that they drive and in effect negate any fuel savings. And that is simply because of American consumer behavior. Now - if we did something like a gas tax, etc. that but some of the burden on American consumers then we might make some progress. Democrats in Washington like CAFE because it puts the burden on the auto makers - which is good for them because they aren’t making voters mad directly by doing it. I’ve been doing some work with the AAM, and the facts of this issue really aren’t making it out to everyone.
I never considered that.
I’d like to see:
1. Mandatory mileage standards higher.
2. Increase gas taxes to change consumer behavior.
3. Increase in mass-transit budgets. With the money we spend in Iraq we could probably give each top 10 metro area a more viable public transit option.
First time visitor, but I REALLY liked this post. It really is a shame that we can bump up that 35mpg sooner. I like where they’re headed on direction, but it does seem slow. One of the analogies I’ve heard is that it is like turning a giant cruise ship; you need to have 30 people running 45 different gears/shifts to get the giant to move and it takes a long time to turn. Big Oil is the BIGGEST of these ships I’m sure and turning that boat must take time… Besides, there is still billions upon billions of dollars left out on the table - how can all the people in oil turn away from that even with Solar nipping at their backsides?