Give them Pell grants!
posted at 12:47 pm on July 13, 2008 by Ed Morrissey
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The New Hampshire Union-Leader has a novel approach to solving the energy crisis: send Democrats to economics classes. In an editorial yesterday, the U-L flunks Congressional Democrats for their work so far on addressing a supply shortage by blaming those reacting to it. Instead of demonizing “speculators” who can only foresee more shortages as America refuses to produce its own resources, perhaps Congress should unshackle domestic production instead:
MAYBE THE quickest way to lower oil and gas prices would be this: Immediately enroll every Democratic member of Congress in an entry-level economics class.
The lack of even a basic grasp of economic concepts has led Democrats to oppose sensible policies that would begin to lower oil and gas prices. Instead, they push hair-brained ideas that make no sense.
That should be hare-brained, but let’s not split hares. Er, hairs. On speculators and their effect on oil prices, the U-L has it exactly correct:
Any step Congress takes to produce a large increase in future supply — opening the outer continental shelf to drilling, for example — will reduce current prices. If there will be a lot more oil 10 years from now, a barrel of oil today loses some of its investment value, and its price falls.
As Harvard economics professor Martin Feldstein wrote in The Wall Street Journal on July 1, “Increasing the expected future supply of oil would also reduce today’s price. That fall in the current price would induce an immediate rise in oil consumption that would be matched by an increase in supply from the OPEC producers and others with some current excess capacity or available inventories.”
This is pretty basic stuff. And yet Democrats are oblivious. They adamantly oppose more domestic drilling, claiming that it won’t affect prices for decades. Clearly, they have yet to grasp the basic concepts of supply and demand.
Democrats clearly don’t understand the mechanisms of pricing. Their rhetoric on speculators demonstrates this, as it misses the point. Speculators matter only in shortage economies, as the future value of any commodity becomes more relevant in inverse proportion to its availability. Even apart from that, speculators want to make money just as in any other commodity trading. If they foresaw a glut of oil, they’d bet short on it just as quickly as they’re going long on oil now.
All of this is Econ 101, as the U-L notes. That may be a bit below King Banaian’s focus as chair of economics at St. Cloud State University, but I’m pretty certain that King would be gracious enough to schedule a lecture series for Congressional Democrats who want to learn how markets work rather than continually work from ignorance to the detriment of the nation. (via Let Freedom Ring)
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Here! Here!!
202-225-0100–Speaker Pelosi’s phone number.
becki51758 on July 13, 2008 at 12:54 PM
The dream of every Masschusetts conservative it to escape to New Hampshire some day. That dream has been dying recently as NH turned purple with all the MA moonbats beating us to the exodus punch. With this, it seems, the dream is still alive.
TheBigOldDog on July 13, 2008 at 12:55 PM
They DO understand; however, they don’t care. If the facts don’t fit their talking points, discard the facts.
second digit on July 13, 2008 at 12:56 PM
The Democrats are just pandering to the masses to curry favor. Find a scapegoat and continue to harp on it rather than coming up with a real solution.
TooTall on July 13, 2008 at 12:57 PM
What’s funny is that this is happening to CO as well. Californians move there because CA is all screwed up; then the same people support the same laws that screwed up CA. It’s like a virus.
lorien1973 on July 13, 2008 at 12:58 PM
as long as it’s not taught by Paul Krugman.
whitetop on July 13, 2008 at 1:08 PM
As I prepare to put two very nice oil wells on pump tomorrow morning, lining both my and my partners’ pockets by a few mill or so, all I have to say is – thanks Democrats!!!
And to all the other schmucks who also failed to allow drilling in ANWR and in the Baltimore Canyon for the past 28 years, (and one of you knows who you are, you slimy Maverick MSM ass-kisser) and the fools who voted them into office, a VERY heartfelt gracias.
TexasJew on July 13, 2008 at 1:12 PM
Yea, but that doesn’t mean that they actually know anything about economics and are just choosing to pander. They actually do believe in more government (or at least more government power).
eeyore on July 13, 2008 at 1:14 PM
Democrat Economics 101: Flood the MSM with attacks on the economy, free enterprise and big business. Eventually the stupid listeners believe the BS because there will be no sustained rebuttal from the Republicans, what few remain conservative.
Wade on July 13, 2008 at 1:16 PM
It is a mistake to think Democrats don’t know economics. It isn’t they don’t know as so much what they think of economics is warped and false. If anything, the economics class should at a minimum eliminate the false notions on how economics works. It would be a bonus if economic knowledge could be impressed upon Democrats. As I once in learned in a philosophy class, the great philosopher Socrates taught that while it is best to learn true knowledge, it is better to know nothing than to know false knowledge. This axiom certainly applies to Democrats.
Weebork on July 13, 2008 at 1:17 PM
Here’s the economic argument against drilling (from the POV of a non-economist) – I think you have to ask how much opening up drilling would really increase the global supply of oil. To be honest, the answer is probably “not much.”
Car companies are improving fuel efficiency, cities are investing in mass transit, alternative fuels technologies progress more and more with every price hike; even oil companies are beginning to jostle to corner the next generation’s new fuel market. The market will solve the gas price problem with or without despoiling just a little more wilderness.
Can someone quantify the expected price gains from opening up drilling? If we’re talking like 25 cents a gallon, I think that would be my threshold that justifies the
environmental impact.
RightOFLeft on July 13, 2008 at 1:17 PM
I think he was referring to that Maurice Hinchey guy, with that stupid pompadour.
Or maybe Carl Levin’s comb-over…
benrand on July 13, 2008 at 1:21 PM
Can someone quantify the expected price gains from opening up drilling?
RightOFLeft on July 13, 2008 at 1:17 PM
What an idiotic statement.
Maybe you should sign up for the same course as the Democrats.
If you think that shipping 60-70 billion dollars overseas per year (just the ANWR take) has not affected the dollar and the associated price of oil you need to rethink your polar bear/caribou fetish.
I could go on and on, but it probably would just be like pissing down a rathole.
TexasJew on July 13, 2008 at 1:25 PM
Positive, forward-looking steps like drilling for our own oil will also boost the sagging US Dollar and that in turn could lower oil prices even further.
The answer to most of our problems is a weak US Dollar and a perceived-to-be weak United States – constructive, positive actions will help correct both of these IMO.
rockbend on July 13, 2008 at 1:26 PM
I think the Democrats understand perfectly that what they are doing will increase gas prices. That is what they want. Good economic news is bad for them in the election. They are betting that the public will blame Bush instead of them and they have the MSM to help make that happen.
snaggletoothie on July 13, 2008 at 1:26 PM
TexasJew at 1:12 PM-
Yaaahoooo!
Congrats on the good fortune.
DRILL HERE DRILL NOW PAY LE$$
profitsbeard on July 13, 2008 at 1:29 PM
They DO understand, Ed. What they take from it though is this does not square with current Socialist doctrine. Supply and demand does not allow for social engineering or political control.
BillH on July 13, 2008 at 1:32 PM
Can you quantify the environmental impact?
Patrick S on July 13, 2008 at 1:35 PM
Sigh…
Your very first paragraph shows you don’t understand.
We have VAST resources in this country. If you count oil Shale, and coal, we have more in KNOWN reserves (let alone the unkwown off our coast).
Coal CAN be converted to gas… Germany did it in WWII, and with todays technology I’m sure we could do it better…
Shale reserves are HUGE… Oil off the coastline is unkwown because they won’t let companies explore… but it the rest of the Gulf of Mexico, and coasts, are any example of what we could expect???
We COULD be oil independent within 20 years IMO.
Problem is that both coal, and oil, don’t fit the Global warmists agenda of fairydust energy (mythical perfect energy sources which have no problems)… and so we don’t drill…
The idea that we can’t drill our way out of an oil shortage is just flat a lie. We COULD, its just a question of whether our politians will allow us to or not.
Romeo13 on July 13, 2008 at 1:36 PM
Thank you for that non-contribution to the discussion. You could’ve just said, “no, I have no idea how much opening up drilling will affect prices.”
RightOFLeft on July 13, 2008 at 1:45 PM
The CAUSE of our problems is a weak US Dollar and a perceived-to-be weak United States – constructive, positive actions will help correct both of these IMO.
rockbend on July 13, 2008 at 1:46 PM
It’s a given that Democrat politicians are monumentally stupid people, but that’s not the issue.
The problem is that they are corrupt to the core as well.
The lunatics who fund Democrats (e.g. George Soros, currency speculator BTW) WANT the American economy to collapse.
The real stupidity lies in VOTING for Democrats in the first place.
When the Democrat Party becomes irrelevant, then the American economy will truly soar and only then will we be completely secure.
NoDonkey on July 13, 2008 at 1:46 PM
RightOFLeft on July 13, 2008 at 1:45 PM
I asked my eight year old daughter and the answer is “a lot”.
TexasJew on July 13, 2008 at 1:49 PM
That’s a fair question. We lose a tiny bit of our pristine wilderness. To some this isn’t a big deal, and I can understand that position. How much wilderness should we preserve? I don’t know. I’m beginning to think we should give any of it away unless a real improvement in quality of life can be demonstrated.
I’m open to persuasion, and the starting point for me is, do we have enough oil reserves to make more than a ripple in the global supply?
RightOFLeft on July 13, 2008 at 1:51 PM
do we have enough oil reserves to make more than a ripple in the global supply?
RightOFLeft on July 13, 2008 at 1:51 PM
Yes.
TexasJew on July 13, 2008 at 1:52 PM
Another thing to consider – we’re going to feel pretty stupid if we’re ever in a major conflict and we ended up selling half our oil reserves to China and India, and using the rest ourselves to save 2 cents a gallon on gasoline.
RightOFLeft on July 13, 2008 at 1:59 PM
since you can predict the future, would you tell me what the price of a common share of stock in Fannie Mae or Freddie Mac will be at tomorrow’s opening? Throw in the closing price for an added bonus.
rockhauler on July 13, 2008 at 2:02 PM
Facts don`t matter to them. They`ll tethered to Green Peace, Sierra Club and all the rest. It`s about staying in power and they can`t risk alienating them.
And some of them are just plain stupid. It`s a waste of time to teach them. If we have to vote for pro-nuke and drilling dems (in solid dem districts), we might have to for the good of the country.
ThePrez on July 13, 2008 at 2:02 PM
Mr Ed, if we are going to send Democrats back to school for economics can we also require attendance at an ethics class?
rockhauler on July 13, 2008 at 2:03 PM
Another thing to consider – we’re going to feel pretty stupid if we’re ever in a major conflict and we ended up selling half our oil reserves to China and India, and using the rest ourselves to save 2 cents a gallon on gasoline.
RightOFLeft on July 13, 2008 at 1:59 PM
That is a jaw-dropping statement.
Congratulations – your posts are perhaps the most technically illiterate “insights” about the entire energy issue that I have ever read on HotAir.
Keep up the good work.
TexasJew on July 13, 2008 at 2:05 PM
From the U.S. geological survey. An estimated 7.7 billion barrels.
Here’s an (incomplete) list of oil fields for comparison
http://en.wikipedia.org/wiki/List_of_oil_fields#cite_note-7
RightOFLeft on July 13, 2008 at 2:09 PM
The ‘Rat view of Economics is that The State should control all means of Production (meaning everything that is produced), holding it in trust “for The Litttle Guys”. Then, ‘Rat-designated ‘experts’ (like former Enron adviser Krugman) will determine how much of what should be produced to satisfy the State-defined needs of The Masses.
Of course, it didn’t work for the Soviets, it hasn’t worked for France and it won’t work here. Never forget, the ‘Rats know that they are smarter than we are…
GeneSmith on July 13, 2008 at 2:13 PM
No, but I’m sure there are economists who could give you reasonable predictions about the long-term effects a small increase in the supply of housing on mortgage companies. That’s a little better analogy for the analysis I’m looking for.
I don’t know why this is such a contentious question. If we’re talking economics, let’s talk numbers.
RightOFLeft on July 13, 2008 at 2:16 PM
TexasJew on July 13, 2008 at 2:05 PM
So tell me how I’m wrong. One of the great things about this site is that there are so many knowledgeable posters that will answer my sincere (and, yes, sometimes frivolous) questions. Your insults really add nothing. Not that I’m against insults, but put a little effort into it. Jeez.
RightOFLeft on July 13, 2008 at 2:22 PM
RightOFLeft on July 13, 2008 at 2:09 PM
Those USGS numbers are way off. We petroleum geologists call the USGS the “uselss GS”
ANWR and associated onshore and offshore Alaskan fields probably top 15-20 billion barrels recoverable right now. The basins there are huge and just the North Slope has already produced 15 billion barrels of oil.
The federal Rockies are many billions (including the Bakken and other Williston Basin fields. North Dakota and eastern Montana is vastly underdrilled, as is most of Utah)
Offshore California has vast fields that cannot be tapped, and the eastern Gulf and Atlantic coasts have thick basins as well that can be easily explored by modern 3-D seismic.
I don’t have to get into coal or oil shale and those huge numbers either to see that the untapped and, mainly now-untappable (due to Congress) oil fields have huge reserves.
TexasJew on July 13, 2008 at 2:22 PM
I found an article on Yahoo News yesterday that said that LAST year the state of Florida’s fuel use is at a 35 year low. And that was when it was three dollars a gallon. So if we can assume that most people in the U.S. are trying to save doesn’t that prove to the Democrats that we can’t conserve ourselves out of high prices? If there are no new supplies coming on line and the U.S. uses less oil then that leaves the opportunity for China and India to buy more. I am not against new forms of fuel but they have the same stated draw back that the Dems use for not drilling, ten years to be viable. Ok everybody stop, noboby do anything! Here is the link to the article.
http://www.heraldtribune.com/article/20080711/NEWS/807110611&tc=yahoo
Cindy Munford on July 13, 2008 at 2:25 PM
Please go look at Oil Shale, and learn about the Green River Basin in Colorado.
Land there is NOT USED for a dang thing. Its all high prarie with scrub brush… take a drive down I70, pass Green River… and check it out… There are no endangered species out there… there is no human population… just miles and miles of scrub brush.
Dutch Shell says they have in in situ process which makes shale from there profitable at $30 a barrel.
Old process’s for shale I would not have agreed with, as it entailed strip mining… new process heats the shale in place, extracts it in a gaseous form…
2.1-10 TRILLION barrels of oil out there depending on whose estimate you want to listen to… with little to NO environmental imact, on land thats not used for anything.
But enviros don’t like it, so Congress won’t let the leases go (land is so worthless, that its all BLM land, can’t farm it or hardly even use it for grazing).
Romeo13 on July 13, 2008 at 2:26 PM
ROFL (2:16)
Since you want to talk numbers,
is this what you are searching for?
Hmmm.. I suppose I could rephrase that and appease the grammer police, but on second thought I’m gonna leave it like that.
rockhauler on July 13, 2008 at 2:29 PM
Wrightofleft, there is a lot more than why your stupid question is contentious. $2.25. That answers your idiotic question. Economics predicts trends, not numbers. Weenies like you want to hijack a topic need to go elsewhere. Fact is, you cannot subjugate a wealthy people, ergo reduce the wealth or tranfer it to those who have not earned it and you accomplish the weakening of free people. RoL (rightofleft) I fought and killed people in the Nam I didn’t know or dislike. I intensely dislike people like you who would impoverish and enslave me. Pelosi and Reid had better start representing the people not dictating to them or they will find themselves in an awkward position.
Zelsdorf Ragshaft on July 13, 2008 at 2:30 PM
GeneSmith on July 13, 2008 at 2:13 PM
Do I have to produce (work) to receive from the government or is that reserved to “special” classes of citizens? Are we talking “Brave New World”, “1984″ or “Rollerball”? And in this new “Democratic” society, who defends it, Barry O’s new citizen “KGB”?
I really would like to just sit in a rocking chair all day and do nothing, but if I did my family would starve.
Claimsratt on July 13, 2008 at 2:31 PM
Well, that was interesting. Ignorant (not stupid)questions and insulting answers finally turn into a small educational opportunity. If both of you would come away from your hardened positions and just talk, you could come to this nice resolution earlier. Texas Jew, you are obviously a very smart guy, with a ton of knowledge in the petroleum industry. Right of left, you seem a sincere person who wants to understand. Good on both of you.
Buford Gooch on July 13, 2008 at 2:31 PM
Not that I’m against insults, but put a little effort into it. Jeez.
RightOFLeft on July 13, 2008 at 2:16 PM
But I WAS trying to be as offensive as possible!
It’s just part of my professional training..
btw – have you noticed how excited the Dems are about stopping the 70,000 BOPD from going into the Petroleum Reserve – a pretty important place to store oil these days, since Iran is now rattling their sword- while continuing to stop the 3 MILLION BOPD exploration on now-untouchable Federal land?
So.. they beleive that 70,000 BOPD will have a wonderful effect on the price of oil and balance of trade, while the sight of us gleefully finally opening the gates for 3+ million (or much more) will not.
And they call the Republicans the “Stupid Party”!
TexasJew on July 13, 2008 at 2:34 PM
Hear, Hear! :)
Claypigeon on July 13, 2008 at 2:36 PM
TexasJew on July 13, 2008 at 2:34 PM
I grew up in Central Louisiana and can remember trying to skip rocks in oil sluge pits. The last time I was down around Oil City, LA, I noticed lots and lots of capped wells. How many producing wells are still capped?
Claimsratt on July 13, 2008 at 2:37 PM
Claimsratt, do you think American oil companies prefer to buy foreign oil at $140 a barrel as opposed to uncapping wells capable of producing oil? Dude, you need to apply for that pell grant Ed wrote about. The very nature of the question is one Forrest Gump would have no problem with. They don’t cap producing wells. If they were capped, the would not be producing, would they? Stupid is and stupid does.
Zelsdorf Ragshaft on July 13, 2008 at 2:48 PM
That’d be nice.
So USGS should’ve gone with their high-end estimate. It’s still not a lot of oil compared to the global supply. If Romeo13’s source is accurate, 2-10 trillion barrels sounds like it would get the job done. I just can’t help thinking that by the time we’ve recovered enough oil to make a difference, we’ll have already transitioned to a post-peak oil economy, i.e. alternative fuels.
I guess you could say I’m unreasonably attached to wilderness – even the drab, bushy variety – but I won’t miss it if it means families don’t have to suffer from unbearable prices for gas, food, heating, etc. Republicans have a winner on this issue if they can demonstrate that we have the oil reserves, and can get to them fast enough, to make a difference. Pretty much any election you want a Republican to win, be ready to make this argument and it’s a done deal.
RightOFLeft on July 13, 2008 at 2:49 PM
More Numbers….
still have the commodity market data…
commerce department data…..
industry data…..
if you need numbers……
rockhauler on July 13, 2008 at 2:57 PM
How many producing wells are still capped?
Claimsratt on July 13, 2008 at 2:37 PM
Oh yes – like most Texas guys, I’ve dropped a few bucks at Louisiana Downs -a present to the State of Lousiana by the Baptist Church in Texas (like Sunland Park out here is to New Mexico)!
The Travis Peak formation is hot as hell there in Caddo Parish, La. now, and those big gas wells in the Cotton Valley as well.
Those plugged wells you mentioned are probably still plugged, unless they are not really plugged, but just not pumping – an important distinction. If you “shoot off” the casing, its very difficult to reenter the well.
Sometimes the well is just handed back to the landowner as a water well or abandoned outright, and those are the ones that I am in the process of examining down here in West and Southeast Texas.
I can then reenter, rework and hopefully either revive the old producing zones or open up or redrill to other, untapped zones in the well. The economics are very good for new oil production, as you can imagine. It’s a lot cheaper than a new drill, and you can get the workover rigs for that, rather than hunting down a drilling rig these days..
I personally stay away from gas, since gas is, to me, a big pain in the ass. Lots of people think that I’m crazy to do so, but I prefer the greasy stuff. Oil can always be hauled by truck, but with gas, you’re at the mercy of the pipeline jerks.
TexasJew on July 13, 2008 at 3:00 PM
The topic is the economic impact of oil-drilling. Economics predicts trends, ok, that’s a good answer. Is the trend a sustained decrease in gas prices, or a transient, small drop based on speculation? Without significant oil reserves in the U.S. it’s going to be the latter.
Are you threatening me? Get a grip.
RightOFLeft on July 13, 2008 at 3:01 PM
By all means. This is all interesting reading.
RightOFLeft on July 13, 2008 at 3:02 PM
Here is an old article that does indeed state that U.S. capped wells due to low prices. The article states that new technology would also allow more product from these existing wells.
http://www.wnd.com/news/article.asp?ARTICLE_ID=47618
Cindy Munford on July 13, 2008 at 3:06 PM
2-10 trillion barrels sounds like it would get the job done.
RightOFLeft on July 13, 2008 at 2:49 PM
Since we only use a little under 8 billion barrels a year, total, that seems a bit pessimistic.
We’re going to import energy. That’s a given. Even Saudi Arabia imports gasoline. Besides, most of our oil imports come from North America – Canada and Mexico – not exactly known for blowing up our skyscrapers
The question is, are we willing to get our production back up to 50-60% (or more) of our consumption, or just let it slide below 30%? At that point we will be mostly importing from Iran and other fabulous places.
Coal is going to be our savior here, as it has been for our electrical generation since Three Mile Island, but that will take some time. Oil shale is not as promising, in my opinion. It takes too much energy to produce and leaves a real mess as waste – even more than coal.
Alternative fuels are a pipe dream, and usually cost more diesel-equivalent than they even produce. The real figures are horrible – a scandal and a scam.
Remember, oil lift costs are a fraction of producing any alternative fuel – even the best of them all (by far) – tar sand oil.
Oil is a naturally refined product. I can put my very light 45 API Gravity King Sand oil in Runnels County directly out of the pumping oil well right into a diesel truck, and it will drive away. Try that with a siliceous lump of oil shale!
Altenative fuels, bad as they are, are nowhere near as bad as solar or wind. Those are real money pits and tax scams. And besides – what they have to do with transportation fuels is exactly ZERO.
TexasJew on July 13, 2008 at 3:17 PM
RightOfLeft:
1) How long do you think it takes to COMPLETELY CONVERT a nation of over 300 million to different fuel sources, assuming any of the existing alternatives don’t turn out to be more expensive or otherwise worse in the long run than oil? It is VASTLY more likely that 2-3 alternatives will be used in parallel for decades or even centuries at varying ratios.
2) Google “petroleum products.” Learn a little about what oil’s used for. Hint: it’s not just fuel. We’re not going to STOP drilling for oil just because Magic Happy Clean Burning Water becomes available, unless MHCBW can be made into plastic as well. And the other thousand things…
3) The longer it takes to get started, the longer it will take to get done. If you assume that some magic alternative will take over and never get started drilling, I can pretty much guarantee that decision will bite you in the backside – unless you’re a Democrat, in which case the MSM will give you a pass.
4) What is it with the “peak oil” thing anyway? It’s like all the misunderstandings of economics rolled up into one. Scarcity drives up prices, prices drive up investment. If there is a truly limited supply, there will be a gradual decline as alternatives take over.
All the drama comes from the politics, not the supply or the markets.
Merovign on July 13, 2008 at 3:18 PM
TexasJew,
Without having to go over too much detail, would you be so kind as to explain why oil shale is so messy, as you put it, compared to other oil? Also, if that’s the kind of oil we’ll get out of the Rockies, is it worth investing in, even though there is so much estimated to be there, because of its messiness?
Weebork on July 13, 2008 at 3:22 PM
Claypigeon on July 13, 2008 at 2:36 PM
In my excitement I couldn’t spell. Give me a Pell Grant!! :)
becki51758 on July 13, 2008 at 3:24 PM
RoL, I don’t think of you as a threat, as of yet. I have a grip. I frustrate very easily when dealing with people who’s agenda is to disrupt intelligent conversation with utter stupidity. Your comment about asking for a number in relation to the economics of oil and oil production is just that, utter stupidity. The threat was to those who endanger my freedom and liberty. If you are no threat, no big deal. If you are, bon chance.
Zelsdorf Ragshaft on July 13, 2008 at 3:39 PM
How is any of thus helping Michelle Obama’s kids?
drjohn on July 13, 2008 at 3:39 PM
Actually it is helping Michelle Obama’s kids. By preserving our way of life for the next generation, they too will have a chance to grow up and bite the hand that fed them.
Zelsdorf Ragshaft on July 13, 2008 at 3:41 PM
Without having to go over too much detail, would you be so kind as to explain why oil shale is so messy, as you put it, compared to other oil? Also, if that’s the kind of oil we’ll get out of the Rockies, is it worth investing in, even though there is so much estimated to be there, because of its messiness?
Weebork on July 13, 2008 at 3:22 PM
Tar Sands and oil reservoirs contain bitumen – a more highly mature form of oil, while oil shales are composed of less mature kerogen. In other words, the kerogen in oil shale needs to be “cooked” – an expensive procedure, and the additional material can contain nasties like silicates, carbonates and trace minerals. That is what coal petrologists call “macerals” and forms a lot of the environmentally undesirable refuse. In addition, oil shale extration is enormously water-intensive and would sap the water-poor Rockies of all of its available water and then some.
Back in the Carter era they started dealing with the shale oil as part of the Synfuels project and it was a huge disaster. Reagan finally killed it, as I recall. It was a 2 billion dollar smoking hole. To make matters worse, shale oil was the worst of all of its components. Shale oil produced about 1/5 as much oil per ton as did simple coal – and we ARE the Saudi Arabia of coal, as you know.
TexasJew on July 13, 2008 at 3:42 PM
More reading?
US consumption, supply
seems to indicate supply is rebounding, consumption is declining. With high price one might expect consumption to decline. Big jump in ethanol production for 2008.
jet fuel is flat. one would expect a decline in jet fuel given recent announced cut backs in airline capacity.
commodity traders are focused on inventory levels, when common sense would indicate aversion to holding large quantities of high priced inventory.
The only real number of interest is price. It will tell you everything you need to know; shortage of supply, high demand, magnified by the effect of debased currency used to paper over the out of balance supply/demand equation.
rockhauler on July 13, 2008 at 3:48 PM
TexasJew on July 13, 2008 at 3:17 PM
We have a lot of work to do on alternative fuels. It may turn out to be ethanol from agricultural waste, hydrogen cells, or it could just be a matter of improving fuel efficiency with hybrid technology. Considering the economic incentives to develop alternative fuel technology, I’m not as pessimistic about the prospects of making it work. **Shell is sponsoring a blog right now looking at alternative energy with a focus on fuels, if anyone is interested** Maybe not in our lifetimes, but eventually the U.S. won’t have a choice but to find alternatives to oil.
For now, we can work the problem of high gas prices from the supply side and the demand side, it’s just a matter of which offers the best hope of improvement at the lowest cost. According to the EIA link Rockhauler provided, we have about 120 billion barrels of undiscovered, recoverable oil in the U.S.
Saudi Arabia has more than half of that amount just in one oil field. I’m still looking through the EIA site for an analysis of the effects on global supply of opening up drilling, but in a back-of-the-envelope way it doesn’t look promising (even if the USGS is underreporting by half). From what I’ve read, we’d get a good price improvement just from building more refineries, without drilling a single, additional well.
Like I’ve said, I can live with drilling if that’s what it takes to bring down transportation costs. I just think we shouldn’t open our wilderness to industrial use without serious analysis that shows it to be necessary and productive. We’re obviously not going to resolve that in a blog comments section, but thanks for taking the time to explain where you stand and give some insight into the problem from an industry insider perspective.
RightOFLeft on July 13, 2008 at 3:52 PM
Excellent posts.
I heard that not only are we finding more oil deposits, but much larger ones in deeper parts of the Earth, even below old dinosaur deposits. Do you have any insight into this?
Seven Percent Solution on July 13, 2008 at 3:55 PM
Two (apparently) for profit companies that will sell you all the data you could want.
http://www.gasearch.com and CERA reports online
To suggest that one can not find data to support a conclusion is ludicrous. People make a career out of analyzing data, hence all the testimony before congressional committees.
rockhauler on July 13, 2008 at 4:03 PM
We have a limited supply of oil on our planet, and an ever-increasing demand for same. So far we’ve exploited the most accessible sources, but at some point – long before we’ve actually used up our oil reserves – the cost of extracting new oil is going rise out of proportion to the demand for oil. Peak oil is a real problem, the only question is when it’s going to happen; and there are some indications that we’re on our way to the top of the bell curve.
RightOFLeft on July 13, 2008 at 4:10 PM
If you think I suggested that, then you’ve misread my argument. If the data is there, and it supports the conclusion that we should open up drilling (offshore, ANWR, etc…), then the RNC should have that in an ad running every 20 minutes on a loop until November. Every blog post should have the data underneath a big, flashing sign that says, “We Told You So.” I’m not saying the data isn’t there, I just think it shouldn’t be taken for granted that it is.
I’m still reading the very interesting info from the EIA site that you’ve linked several times. Have yet to find an analysis of the economic impact of expanded drilling, but there’s enough there to give some food for thought regardless, so thanks for posting.
RightOFLeft on July 13, 2008 at 4:18 PM
perception is what makes a market. two people look at the same data and drawn two different conclusions. one side says this and that and the other side says ‘I will take the other side of that trade(bet)’.
rockhauler on July 13, 2008 at 4:54 PM
TexasJew,
Thank you for the explanation on shale oil, it was well done. It answered quite a lot. Your posts are well thought out and well reasoned.
This just occurred to me, what are your thoughts about the non-organic based oil hypothesis? That is, oil does not come from the million year process of dead plants and dinosaurs, but rather is a process created naturally inside of the planet. I am inclined to believe oil is, perhaps, non-organic generally just because of the such large quantities we have, thus far, found. I am not convinced yet, either. It is an interesting hypothesis.
Weebork on July 13, 2008 at 4:54 PM
Recently, in one of his articles, Walter Williams made the same point as Feldstein.
Given that Oil is at its all time price peak and will probably remain high by historical standards, it is probable that oil leases will also be much more valuable. I suggest that oil lease fees and royalties which would normally go into the treasury be used to reduce the federal excise tax on petroleum products. The tax might be reduced enough to become negative. This is not a particular attractive proposal to me except that it probably would be understandable even to Democrats and therefore to the lamest voter. It might be a good selling point.
burt on July 13, 2008 at 5:08 PM
You won’t find one, because it doesn’t exist. There is no linear equation that quantifies ‘x’ millions of barrels of day of increased production results in ‘y’ cents per gallon decrease in price.
Its a ‘calculus’ and an incremental increase in one variable on one side, affects all the variables on the other side in different ways. (and there are a lot of variables)
Price declines only when the seller discovers that the price must be reduced in order to move the inventory. Or the seller has to convert inventory into cash to cover immediate costs, or something else.
The argument the two sides are having results because one side prohibits the other side from even making a reasonable attempt at altering the conditions. The anti-drilling crowd want to prohibit drilling at any cost. Attempting to engage the anti-drilling crowd on economic grounds losses the argument because the anti-drilling crowd is against drilling.
rockhauler on July 13, 2008 at 5:29 PM
Have yet to find an analysis of the economic impact of expanded drilling, . . .
RightOFLeft on July 13, 2008 at 4:18 PM
I have also failed to find an exact analysis of the economic impact of failing to plant next year’s wheat crop.
I do have an exact number for the impact on the caribou population if we drill ANWR.
It’s zero.
STFU and drill – end of story.
No drill – we bleed more money offshore, lose jobs and our dollar is further weakened. And the price of oil goes up even more.
It’s depressing that the citizens of this country is now so pathetically stupid and misinformed that we have to have a discussion as to the importance of something as critical as energy.
How unbelievably puerile.
TexasJew on July 13, 2008 at 6:22 PM
I don’t believe for a second that many, if not most, Democrats understand basic supply and demand. The problem is that they want oil prices high and so they throw out all these phony schemes to lower prices because many, if not most, of the Democrat’s base doesn’t understand economics and are more than willing to believe high prices are the fault of some bogeyman be it OPEC, Big Oil, or speculators. By playing this game they can keep oil prices high as part of their scheme to advance socialism and expand their power.
DerKrieger on July 13, 2008 at 6:37 PM
Hey folks.
All of my children took advantage of “Pell Grants”.
Try as I might…. I couldn’t earn enough to put them all through college at the same time.
Hey folks every woman and man of them… have in kind , repaid the gov-mint for its’ initial generosity…in the form of the Pell Grant[s].
Money better spent in the US of A… than in Iraq!
You say!
J_Gocht on July 13, 2008 at 6:39 PM
Better yet, why not take all the royalty revenue and use it to fund R&D into any alternative the Dems want. The royalties can be used as payoff to get them to agree to expand drilling. Small price to pay and we have to do the research anyway. How hard can it be to convince them that current revenue should be earmarked to pay for the “great switch” to alternatives they seem to want to badly. At least then they won’t need to raise taxes.
DerKrieger on July 13, 2008 at 6:41 PM
Everyone see today’s story where the Governator said he’d sign on to be Obama’s Energy Czar? He may as well switch parties and make it official. Too bad we can’t confine this eco-madness to the Left coast.
DerKrieger on July 13, 2008 at 6:43 PM
And of course the parallel argument applies to illegal aliens crashing the border, bringing with them the very things you’d have thought they’d have left behind in favor of the melting pot and American Dream.
maverick muse on July 13, 2008 at 7:30 PM
It’s worth pointing out that none of Feldstein’s musings here about oil price and supply are the logical conclusion of what’s taught in undergrad econ and almost all graduate classes. Unless, I’m terribly mistaken and I almost never am wrong about this type of basic modeling, basic economic theory does not give enough info to deduce OPEC’s supply strategy over the long run–assuming OPEC as a collective is able to follow such a strategy. In fact, why aren’t the OPEC producers with excess capacity cheating now while the price is high?
Anyway, it seems to me that the Democrats wish to reduce energy consumption–though they aren’t being articulate on this point. So even if the Democrats understood economics better (and they certainly do not understand economics), I don’t see how it would change what they are doing.
thuja on July 13, 2008 at 8:40 PM
This has got nothing to do with congress’s knowledge of economics. Many dems want to force communism on this country and this is the easiest way.
Johan Klaus on July 13, 2008 at 8:47 PM
The economic impact of drilling is more jobs, more oil, more manufacturing {Drill pipe, fishing tools, bits, drilling mud, rigs, siesmic equipment, ect.} and a better trade balance.
Johan Klaus on July 13, 2008 at 9:04 PM
The oil industry is the main reason that Texas is not affected by recessions as much as the rest of the country.
Johan Klaus on July 13, 2008 at 9:07 PM
The Union-Leader says:
One should say – instead – that any step Congress takes to produce a large increase in future supply will cause a downward pressure on current prices – it will lower the prices from what they would otherwise have become. The result may be a decrease from current actual prices, or a reduced increase in prices, etc., depending on various factors, such as the strength and expected durability of Congress’s actions, the response of foreign oil & natural gas producers, etc.
ForNow on July 13, 2008 at 9:08 PM
The Democrats haven’t done anything because they have not figured out a way to nationalize oil production. My gut feeing on domestic oil production is this: Congress will go along with domestic drilling as long as they can levy a Carbon Tax on every barrel that is pumped.
I pray that I am wrong.
c3ichief on July 13, 2008 at 9:29 PM
This just occurred to me, what are your thoughts about the non-organic based oil hypothesis? That is, oil does not come from the million year process of dead plants and dinosaurs, but rather is a process created naturally inside of the planet. I am inclined to believe oil is, perhaps, non-organic generally just because of the such large quantities we have, thus far, found. I am not convinced yet, either. It is an interesting hypothesis.
Weebork on July 13, 2008 at 4:54 PM
Gold’s abiotic oil theory is probably mostly bs, although it may result in a small component of the overall hydrocarbon spectrum, especially down in the methane/butane gaseous fractions.
If you analyze crude oil as to its constituent components, you very often find a couple of spikes in two of the breakdown products of Chlorophyll – the 18-carbon phytane and the closely related 17-carbon pristane – two alkanes (straight-chain hydrocarbons).
There is no way that this phenomenon could be a random event.
Moreover, green algae are probably the main original biological source of oil – and guess what makes gfeen algae green?
As an aside – all the oil from every dinosaurs in earth’s history probably wouldn’t fill a single tanker of oil and woody plants generally form the coalbeds and not the oilfields!
TexasJew on July 13, 2008 at 10:08 PM
TexasJew (10:08) are you familiar with the bacteria that converts garbage to petroleum? Is this a workable solution? Any time soon?
Times Online June 14th.
Also, I would be interested in your reaction to the patented process (freepatents online) where solid waste is converted, at high temperature, into coke, and hydrocarbons.
I would assume that input energy costs would be very high, unless the process could utilize waste heat from some other process (nuclear power generation perhaps?), or in the future where a space based, or a lunar based process that would have access to highly concentrated solar energy.
I hesitate to post this at the end of a fading thread, but I would be interested in your expert opinion.
rockhauler on July 13, 2008 at 10:48 PM
rockhauler on July 13, 2008 at 10:48 PM
I’m aware of that, and such things occur naturally, as was seen in the Exxon Valdez oil spilll, but the product produced is very small, and the expenses quite large.
What I think is more feasible is the marine algal approach, which has the advantage of using the huge mass of marine biotic material and the large amount of algal biota.
We know how great algae are at making oil to start with – it would be fitting tohat we find a way to speed up that process!
Swithcgrass and the entire cellulose approach, I feel, is crap. If it’s mass you need – go to the ocean!
TexasJew on July 13, 2008 at 11:31 PM
Chapter 12, for gosh darned sake!
Buying this for every member of Congress would be… less expensive than anything Congress has done, ever.
viking999 on July 13, 2008 at 11:44 PM
I think that’s supposed to be “hare-brained,” as in “having a brain the size of a hare’s brain.”
Just sayin’.
Kralizec on July 13, 2008 at 11:51 PM
Oh, I see that Ed explained that. It seems I’m on a hare-trigger.
Kralizec on July 13, 2008 at 11:52 PM
TexasJew (11:31)
Thanks for the comment. Sounds like you’d be saying something like feed the solid waste to the algae, and then convert the algae to hydrocarbons (or fertilizer?).
I wouldn’t expect it to be a substitute for drilling for oil since the quantity of waste we produce wouldn’t produce much hydrocarbon.
I have a passion for SciFi and just wanted to get the chemistry correct.
Thanks again, I’m done. ‘night.
rockhauler on July 13, 2008 at 11:59 PM
The Democrats are not ignorant of basic economics.
They are malevolent towards America’s strength and dominance in the world, and are willing to play stupid in order to advance their goal: Worldwide socialism.
Feigned ignorance is either stupidity or malice. Anyone who has been elected to national office is almost certainly not that stupid, leaving malice as the only reason to oppose policies backed up by the most basic economic principles.
BKennedy on July 14, 2008 at 12:20 AM
Here’s some economics that Dem pols understand: an awful lot of union pension funds are invested in oil. See “Teachers’ Pet: Big Oil” by Jeffrey Lord, The American Spectator, June 17, 2008, http://www.spectator.org/dsp_article.asp?art_id=13381.
ForNow on July 14, 2008 at 12:44 AM
And you can bet that their Messiah Ex Chicago Machina understands those economics too.
ForNow on July 14, 2008 at 12:49 AM
Personally I like the “hair brained” image. I am imagining politicians with cat type hair-balls for brains. It fits gloriously well.
{^_-}
herself on July 14, 2008 at 2:13 AM
I doubt that the Democrats would change their positions, even if each and everyone of them had a doctorate in economics.
The leadership does what the base wants. The base is the group that needs educating. And that will never happen as long as the teacher’s union controls education in this country.
MarkTheGreat on July 14, 2008 at 7:17 AM
Ed, if offered, I would be happy to teach these legislators. And, I’ll point out, my first job was delivering the Union Leader to north Manchester homes (back when they had an evening city edition.)
kbanaian on July 14, 2008 at 11:46 AM
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