NationStates Jolt Archive

http://cta.ornl.gov/cta/Publications/pdf/ORNL_TM2005_45.pdf

I spotted this report in another thread just now, and it reminded me of a question that's been floating around in my head for some time.

Why are we (and by "us" I mean the US congress) worried about being to reliant on "Foreign sources of oil"?

We live in an age of increasing globalization, where we let market forces drive WHERE things are produced and how resources are allocated...right?

We know that oil prices are SUPPOSED to go up and down based on demand and supply, right?

We also realize that with other nations increasing their demand for oil, the suppliers of oil can charge almost anything they want and people will still buy...right? That the price of oil is extremely elastic, and we have yet (at 58 dollars a barrel) to find the limit.

We do realize that the price for oil is GLOBAL and not LOCAL, right? That is to say that oil dug up in Texas, Russia and Saudi Arabia costs the same on the market...right?

We realize all these things; global markets with global prices on a product with an extremely elastic price that is determined by factors OTHER than the source of the product...but we are worried about where our oil is drilled.

Someone care to explain why? I'm not sure I understand. The article didn't help me one bit so far. I'm gonna read it again tomorrow.

The problem is percentages of our oil imported, as opposed to what could be produced domestically.

Especially as a good portion of the world's oil is in the hands of some... unstable nations.

...okay, fine. I'll let my bad side come out and say Primited Medival 12th century kingdoms are in charge of the oil and the kings and princes of those kingdoms are sucking the oil out specifically to enrich themselves and their families, not their kingdoms, and that's a touchy-feeling subject amoung politicions as we offically say DEMOCRACY IS GOOD but then Bush is good friends with the Saudi Royal Family.

quite simple. if you rely on foreign oil, you can't control it. most people and countries prefer to get control on the important things at life, or they will feel "unsafe".
if country had to get huge amount of oil from other countries and someday it suddenly stop because of the interests of the country that supply the oil, it will harm her. the only way to prevent it from happen (except of good relations with the oil suppliers), is to reduce to minimum the relyness of foriegn oil.

We live in an age of increasing globalization, where we let market forces drive WHERE things are produced and how resources are allocated...right?


But that's just it , the US doesn't. It can't abide a situation where it has to 'stand in line' and sees nothing erroneous about using it's political and military clout to ensure that its' first in line when it comes to the dishing out of oil. Beware: this is geo-politically naive, aside from being a completely arrogant way of doing things. The fact that demand in China is rising faster than you can order a bag of prawn crackers means that competition is only going to get tougher and the US may have to find more imaginative ways of dealing with this problem. Failing that it will probably just declare war on whoever's got the most oil to stop it being sold to the 'wrong' customer

*SNIP*

We do realize that the price for oil is GLOBAL and not LOCAL, right? That is to say that oil dug up in Texas, Russia and Saudi Arabia costs the same on the market...right?

We realize all these things; global markets with global prices on a product with an extremely elastic price that is determined by factors OTHER than the source of the product...but we are worried about where our oil is drilled.

Someone care to explain why? I'm not sure I understand. The article didn't help me one bit so far. I'm gonna read it again tomorrow.


Crude Oil varies in quality depending on where it is extracted from, and thus varies in the amount of money needed to process and refine it, thus affecting final price.

Some oil is easier to obtain as well, either by ease of extraction due to the terrain, or by proximity to the surface. This also affects price.

So while the final price of refined oil may be the same on the world market at the end, the price of extracting and processing oil into the final product can vary widely from place to place.

This has more impact on the bottom line of oil companies in terms of how much of the price per barrel is net profit...than on the actual direct cost to the consumer.

It's part of the reason why Saudi Arabia is such an oil-rich nation. Lot's of oil, realitively close to the surface...and it's in a desert, as opposed to a swamp or a mountain range.

Personally, I'm going to solve the problem with my NS nation in the same way.

Attack some poor sodding country and take land.

....actually, I'm going to colonize a new area, but :p

Crude Oil varies in quality depending on where it is extracted from, and thus varies in the amount of money needed to process and refine it, thus affecting final price.

Some oil is easier to obtain as well, either by ease of extraction due to the terrain, or by proximity to the surface. This also affects price.

So while the final price of refined oil may be the same on the world market at the end, the price of extracting and processing oil into the final product can vary widely from place to place.

This has more impact on the bottom line of oil companies in terms of how much of the price per barrel is net profit...than on the actual direct cost to the consumer.

It's part of the reason why Saudi Arabia is such an oil-rich nation. Lot's of oil, realitively close to the surface...and it's in a desert, as opposed to a swamp or a mountain range.

Yes...that all makes perfect sense...and is thus the perfect argument for simply letting the Saudi's drill their oil, which is easy to get and there's tons of it. Rather than trying to get oil from some tiny well in the north end of Nowhere, USA; where it will cost more to produce, be far less sustainable, and will cost the same to consumers as any other kind of oil!

The only argument I can see FOR this drive to drill our own oil is the same kind of protectionistic logic that gave us the S. Korean steel industry, the Japanese Rice farmers, and everywhere else where nationalistic pride has created cartels of entrenched intrests.

Its stuff right out of Econ 101; if you prop up a dead-end industry its a poor investment, and you're bound to get burned. These intrests drain more and more money out of the government, have poor business practices because they are fundementally less efficient than others in the market, and get bailed out more and more until they collapse. Then every screams and yells and wonder why it all happens.

I'm still looking for the explination that helps me understand why the US should go AGAINST its economic interests to support...its economic interests. I'm trying to keep an open mind, but it seems fairly obvious to me that this is protectionism in its most basic and flawed sense.

I'm still looking for the explination that helps me understand why the US should go AGAINST its economic interests to support...its economic interests. I'm trying to keep an open mind, but it seems fairly obvious to me that this is protectionism in its most basic and flawed sense.
The answer is simple: Fear
Fear of being cut off from a constant oil supply the US needs so much. The mightiest nation on this planet will collapse within short time if the stream of oil runs out. The economy has already taken a blow from the current oil prices, now think double that price or even rationed oil.

Yes...that all makes perfect sense...and is thus the perfect argument for simply letting the Saudi's drill their oil, which is easy to get and there's tons of it. Rather than trying to get oil from some tiny well in the north end of Nowhere, USA; where it will cost more to produce, be far less sustainable, and will cost the same to consumers as any other kind of oil!

The only argument I can see FOR this drive to drill our own oil is the same kind of protectionistic logic that gave us the S. Korean steel industry, the Japanese Rice farmers, and everywhere else where nationalistic pride has created cartels of entrenched intrests.

Its stuff right out of Econ 101; if you prop up a dead-end industry its a poor investment, and you're bound to get burned. These intrests drain more and more money out of the government, have poor business practices because they are fundementally less efficient than others in the market, and get bailed out more and more until they collapse. Then every screams and yells and wonder why it all happens.

I'm still looking for the explination that helps me understand why the US should go AGAINST its economic interests to support...its economic interests. I'm trying to keep an open mind, but it seems fairly obvious to me that this is protectionism in its most basic and flawed sense.

The two biggest factors that frustrate U.S. government the most are:

A) The price is not under their control and

B) The embargo in the 1970s showed how much short-term damage could be done to the U.S. infrastructure if OPEC just decided not to sell to us anymore for political reasons.

The economy of the U.S. is not a true free market. It is under the careful control of economists and other vermin and has been artificially inflated for better than 50 years. If such careful control was lost at this point, the collapse would be devastating. The problem is that a factor like oil price has a large impact on our economy. ANd the economists, vermin and their buddies the politicians can't control that. Can't even predict it too well. So that makes them very uncomfortable and fearful that a sudden change in price could pop their economic bubble. Then there is the physical effect that suddenly being cut off from a sizeable chunk of the world's oil would cause. If OPEC decided not to sell to us, the short-term effect would be much the same. Economic insanity. Infrastructure collapse. Fuel rationing. Etc.

As somebody else said, not being in control makes certain people very nervous.

Personally, I hope they get MORE nervous. Those kind of concerns go a long way toward forwarding alternate forms of energy production and I'm all for that.

Niccolo Medici: What you say is perfectly true. But if you want to understand politics by reading economics you should not read econ 101, you should read public choice theory, or some merchantilists from the 18-th century. The latter is the latest economic theory that politicians seem to understand. It sounds better to make money than to spend money because money is wealth, right?

Since the US has a trade deficit they must somehow seem to be increaseing their production, right? (The trade deficits is because some Asians lend you money for nothing to buy their stuff, for similar reasons.) Economics is nothing, rhetorics is everything. States go to war as a form of rhetorics if they have a big enough army to know they don't lose.

The answer is simple: Fear
Fear of being cut off from a constant oil supply the US needs so much. The mightiest nation on this planet will collapse within short time if the stream of oil runs out. The economy has already taken a blow from the current oil prices, now think double that price or even rationed oil.

Steadily reducing supplies would do it. Oil production may very well peak within the next 5-10 years.

And when it does... say goodbye to the "mighty" US.

It won't be much better here in Australia, but we at least have enough coal and other resources to supply ourselves for a few hundred years.

We're also not very overpopulated.

I have no problem with oil being imported from other countries to the US, in general. However, there is some legitimate concern about how the rulers of the exporting countries are only made more powerful buy such trade because usually, they control it. Beyond that, the notion that the economic security of the US should be treated as a matter of physical security is flawed. It is an excuse for the US government to involve itself in the oil buisness, to provide naval and ground security for International profit-seeking interests, and to compel foreign governments to favor US interests by accepting US dollars in exchange for oil.

I remember that during the operation Desert Storm, the belief that the war was being waged for oil was widespread. And I don't remember too many people having a problem with this. It seems that many Americans have bought into the often repeated notion that our energy supply is a matter of 'national security', thereby warranting the use of military force to secure it. I don't buy that at all.

The idea that we should be less reliant on foreign oil has some legitimacy, but it doesn't mean that we shouldn't use it at all just to spite the exporters. What it does mean is that we should plan for the future knowing that a consistant reliable supply of oil cannot be guaranteed. This is not just advice for government and coporate types, but for everyone. If you have reason to suspect that the price of gasonline will exceed $5.00/gal, it might not be wise to become a 30-mile commuter or to go into debt to buy a depreciating gas-guzzling asset like a Lincoln Navigator.

The idea that we should only use domestic oil is silly, and should show the absurdity of protectionism. Another idea is that we shouldn't use domestic oil at all, while we can still consume what lies beneath the feet of foreigners. That idea actually makes some sense, but it shouldn't be a matter for our government to decide.

Oil production may very well peak within the next 5-10 years.

And when it does... say goodbye to the "mighty" US.
Not to worry. There are plenty of good (better than oil at least) alternatives. They are still a bit more expensive than oil, but when oil gets scarce and expensive (when oil firms understand that they are not producing oil by looking it up and distributing it) they'll take over smoothly. If you want to restrict oil use before the market does it, the good arguments are global warming and sour rain.

Not to worry. There are plenty of good (better than oil at least) alternatives.
At the current projected rate, we have uranium for less than 100 years, but coal for 5000 years.
Helloooooo black smoke!!!


PS: Nuclear fusion is a reality... in Sim City.

People don't realize how much our civilization depends on cheap energy and especially on oil. Even something as simple as growing our food uses a tremendous ammount of energy. Producing fertilizers and pesticides, running tractors and farm machinery, packaging the food, and shipping it to where the people are consumes a huge ammount of petrolium. If oil gets too expensive food becomes more scarce.

The only solution I can see is to build thermal depolymerization plants and convert all of our orgnic waste into energy. With petrolium prices reaching $60/gallon it becomes much more feasible to do so.