realitybase - Journal

To suggest, as the Western Governors' Association does in its energy policy recommendations to the Obama-Biden Transition Project, that it makes a difference whether we import oil from "friendly trading partners" or from others is a common misconception that could lead to policy blunders. For example, importing oil from nations X, Y, and Z instead of from A, B, and C would not ameliorate our real energy security problem, and US military occupation of oil producing regions is counterproductive.

Any supply disruptions, such as occurred twice in the 1970s, do not cause the customary buyers of the interrupted supply to be without oil while buyers from uninterrupted supplies are unaffected. Instead, worldwide prices shoot up and tankers are re-directed to different refineries around the world until the reduced worldwide supplies are meeting the highest value needs everywhere. The recent excursion of the benchmark petroleum price to $147 was a worldwide phenomenon, and prices of domestically produced oil increased no less than OPEC prices.

The US now uses 20-21 million barrels per day of petroleum. At $70 per barrel, that is about 3.5% of GDP. When the price doubled to $140 this year, it became 7% of GDP, depressed economic activity in the US, Europe, and Asia, and caused large permanent transfers of wealth to exporting nations. If we were consuming only half as much oil, the impact of the price spike would have been only half as large and would probably have been tolerable.

The only effective solution to our real energy insecurity problem is to make our economy generally more energy efficient and specifically to consume less petroleum from all sources. Increasing efficiency of petroleum use will also ameliorate, if not eliminate, our chronic negative balance of trade, reduce our contribution to global climate change, and boost growth industries employing middle class and working class Americans at good wages.

BTW, ordinary citizens can review and comment here on all(?) written materials submitted by interest groups to the Obama transition team. And there is a video of a guy who says all the comments and submitted materials get considered. Hmmm.

Update on Wednesday, January 7, 2009 at 09:07AM by

Skeptic

The premise of this post is that US refiners are not limited to a sole source of crude oil by dependance upon a a single international pipeline connection. That's true with one exception. US refiners in the Rocky Mountain region could not easily replace crude oil that they receive by pipelines from Canada. Pipeline route map is here. There is much contention, based on environmental issues, about 1.2 million barrels per day of oil coming in from Alberta tar sands, which could potentially double if crude oil prices were higher. See NYT article. I don't think many folks think Canadian oil is "insecure" or subject to sudden interruption.

On the other hand, other nations with landlocked refineries may be dependent on crude oil coming from a single pipeline from a politically volatile region such as Russia or Central Asia. I haven't checked. And natural gas is a different matter, as Europe is being reminded this week. Europe gets 40% of its imported fuel as natural gas from Russia via a pipeline through Ukraine, and Russia has curtailed shipments because of a pricing dispute with Ukraine. In recent decades natural gas has begun to move across oceans in refrigerated LNG (liquified natural gas) tankers. If there were lots of LNG loading and unloading terminals (which there aren't) and excess or independently-own shipping capacity (which there probably isn't), a curtailment of one source of LNG could be replaced from another source. But so far, it's probably best to regard natural gas as moving exclusively through pipelines and "virtual pipelines" involving LNG tankers.

Update on Saturday, January 10, 2009 at 03:26PM by

Skeptic

Europe has an energy policy too, and a conception of "energy security." I haven't looked into it at all deeply, as I should, but here's a link to pursue later. Based on the excerpts, it appears Europe does not aspire to be free of imported energy, but to have good political relations with energy suppliers. I didn't find any language about their views as to the relative importance of cost and risk of curtailment.