Bob Zubrin is still selling flex-fueled cars (at least conceptually), which might be a good idea, but I wish that he weren't doing so with over-the-top rhetoric and economic ignorance. Here's the very first graf:
Venezuelan dictator Hugo Chavez recently joined Iranian president Mahmoud Amadinejad in threatening to raise oil prices to $200 per barrel. The threat should be taken quite seriously. With no practical transportation fuel alternative to petroleum available to the world market, the OPEC oil cartel has already been successful in raising prices an order of magnitude since 1999, with a 50 percent increase effected in 2007 alone.
I disagree that this threat should be taken seriously. The notion that oil can ever get to a sustainable $200/barrel, in inflation and currency-adjusted terms, is ludicrous, regardless of the clearly malign intent of Hugo and Mahmoud. They are not capable of achieving this. No one is.
First of all, they don't control the world's oil markets. The Saudis (and increasingly, the Iraqis) will have a major say as well. But even if you could get an agreement within OPEC to do so (a ludicrous notion in itself, because the individual members tend to look after their own interests), it still would never happen. First, many states would cheat. But more importantly, the current price is unsustainable at near-term (over the next decade or two) projected demand levels because there are many new sources that are available at production costs much lower than current prices (e.g., tar sands and shale in the western US and Canada). The only reason that they haven't brought down the price yet is that they're only starting to come on line.
And if the price did somehow get to that value (as the Saudis understand, even if economically ignorant boobs like Ahmadinejad and Chavez don't) it would cause a recession that would depress world wide demand. Also, unless you can drive the price of oil to zero, it's not going to starve the oil dictators of their oil revenues. The only way to do that is to take away their oil (as we did with Saddam). I'm not necessarily proposing that we do so--just pointing out the only realistic way to accomplish it.
On top of this, much of the price rise that Bob Zubrin decries is due to the weak dollar, and has nothing to do with either supply or demand of oil.
Maybe such overblown rhetoric and economic nonsense will sell the concept for him; it's certainly worked to good effect for the global warm-mongers--but I'd be more persuaded if he'd be more realistic. There are a lot of good arguments for ending the burning of oil for transportation as soon as we can, and I wish that he'd stick to them, instead of doing an impression of Gary North.
I agree with you about $200 a barrel, for the time being anyway.
But Rand, your skills of prediction about oil prices are pretty weak, you were making the same sustainability argument back at $50 a barrel and $75 a barrel. There are several problems, even at high prices, the demand is likely to stay much stronger than it has historically because of the growth in a number of huge developing economies.
Sure, $100 a barrel will put a handbrake on Chinese and Indian growth but it won't stop, there are billions there who want cars and need to fly places and need plastics.
There's no real issue with supply at the moment which is why the price is remaining high even when Saudi keeps uping the output. The Canadian reserves, new North Sea and South Atlantic reserves will keep us in oil, but I suspect the days of really cheap energy will be gone until the growth rates in China and India naturally start to decrease. That'll probably be a decade or so.
If you factor in inflation and the dollar, we're probably about $75/barrel now. And as I said, it takes some time to bring new supplies on line. We're on the verge of getting some investment in space stuff from people who are benefiting from the fact that this is starting to happen. They're benefiting more, of course, because the quantities are not (yet) sufficient to bring down the price.
Also, D, you might like to look up "fungible" in your F&W. In essence, it means if there are multiple sources for any particular commodity, removing access for one or two just re-shuffles the buy-sell arrangements, to no net effect other than some paperwork and redirected shipments. Oil and MP3 players, e.g.
As for some spacey near-term blue-sky energy stuff, go look at www.focusfusion.com . No-shit small scale cheap fusion electrical generators, waste products being a smallish amount of heat and some helium.
Also, D, you might like to look up "fungible" in your F&W. In essence, it means if there are multiple sources for any particular commodity, removing access for one or two just re-shuffles the buy-sell arrangements, to no net effect other than some paperwork and redirected shipments. Oil and MP3 players, e.g.
As for some spacey near-term blue-sky energy stuff, go look at www.focusfusion.com . No-shit small scale cheap fusion electrical generators, waste products being a smallish amount of heat and some helium.
Also, D, you might like to look up "fungible" in your F&W. In essence, it means if there are multiple sources for any particular commodity, removing access for one or two just re-shuffles the buy-sell arrangements, to no net effect other than some paperwork and redirected shipments. Oil and MP3 players, e.g.
As for some spacey near-term blue-sky energy stuff, go look at www.focusfusion.com . No-shit small scale cheap fusion electrical generators, waste products being a smallish amount of heat and some helium.
Apologies for the multiples; this is a new commenting regime for me. Pls delete the two extras if possible.
Cars: take a browse thru the teslamotors.com site. Then check out 10X more Lithium battery storage from Stanford.
I think we have already slid into a recession.
There is one fact that you left out of your analysis on oil. That is the fact that oil is priced in dollars on international markets. If the dollar's value continues its fall relative to the Euro, pound, Canadian and Australian dollar and other currencies then the price of oil will certainly go up regardless of whether prices rise or fall in this country. If oil starts being priced in some other currency then that will further hasten the dollar's slide as companies and nations sell their dollar reserves in favor of the currency oil is priced at.
That is the fact that oil is priced in dollars on international markets.
What part of "in inflation and currency-adjusted terms" did you not understand?
You are mistaken about the currency adjustment part.
Currency adjustments for dollar denominated assets do not favor US consumers if the dollar is weaker over time. Those adjustments favor consumers who own the stronger priced currency. As an example, pretend that oil, still priced in dollars, rose to two hundred dollars a barrel; while at the same time the dollar fell by, say, 50 per cent to the Euro. Americans would pay 200 dollars per barrel, period. Whoever buys in Euros would be paying about the same as before in currency adjusted terms.
There are some who even look at it the other way around and say that if the dollar fell by half to other currencies then that dereciation would force oil to double in price. I am not sure if I agree with that vantage point, but I think it does merit some consideration.
Inflation adjustments are nice when you are looking for a rationalization that things aren't really all that expensive compared to yesteryear. But, regardless of how things compare to before, that doesn't change the fact that prices are rising, in an absolute sense, right now.
I'm not at all surprised when Zubrin comes out with a boner like this one. After all, he's the guy who thought that by force of will along he could virtually instantly change the social zeitgeist so that everyone would want to start a Mars colony.
And shouted at you when you pointed out the obvious nuttiness of this...oops, he was shouting even when he was presenting it. Really ingratiating.
BTW, Re the cost of oil and its impact: I've become something of a fan of '24' in its late night reruns. They're currently going through the season where 'President Logan' justifies his murderous plans for assuring supplies of oil from Russia by saying, "What do you think will happen to this country when the price of oil reaches $100/barrel?"...with the clear implication of crazyness in the streets if that happened.
Well, guess what, the price has hit that level and where are the riots???!!! I guess when you're writing an (enjoyable!) live-action cartoon you may end up underestimating the resilience of the American people and the political system, ha ha.
In reality what we have to worry about is not rebellions due to oil prices but electing people who may be one or both of 'Jimmy Carter II' and sophomoric socialist agenda. In other words, killing our own country incrementally (or 'insensibly' i.e. not noticing it, as the Brits might put it).
Brian,
I am aware of that hence my view that there isn't really a problem with supply. The issue we have is with demand and speculation. The root causes for those aren't going to really go away any time soon for similar reasons to the current insanity around the Gold Price. Heh. At least it's making the South African Rand worth something.
Rand didn't mention Recession, but while we're on the subject the sub-prime mess and liquidity problems in the capital markets are more of an issue for the US (and UK) economies than the oil price. Simply put, consumers, buoyed by insane property speculation have been able to run unsustainable levels of personal debt which was good for the US and UK in 2000, but it going to be a nightmare now people can't refinance on properties decreasing in value. I just hope the deflation is slow and steady.
As I've said here and elsewhere, I don't really think we have an energy crisis. There's more oil in the ground than we need for the immediate future, but I'm not convinced it's a good idea to get it out. Between Nuclear and other electric options (like super-capacitors and hydrogen) we should have no energy problems moving forward even without esoteric new technologies. The problem is 2 decades of cheap energy pushed these solutions out. Hopefully that's changed now. Lets save the oil for important things like aviation fuel.
I think Zubrin overstates his case a few times in the book, and this is a typical example, but his main point still makes a lot of sense to me. The particular point on Chavez and Amadinejad's threat and whether or not they can pull it off is kind of irrelevant. Whether or not they can do it, do you want them in the driver's seat, awash in cash?
Actually I get the impression (from Zubrin's book) that he doesn't think Iran and Venezuela control the prices, but rather that the Saudis control it because they have so much oil, and can pump it at the lowest cost. Thus they can discipline the other OPEC countries and keep them more or less in line, and the rest of OPEC more or less accepts that since it works in their interest in the long run.
I've seen a lot of arguments against his 1-step
"plan", but they don't seem to even address his point. I'm thinking, for example, of the comments on the Rocky Mountain News article Rand linked to. Zubrin's Mars focus is irrelevant. The current limitations of corn ethanol in the U.S. are also irrelevant:
current - he wants us to set up a situation where serious R&D incentives are present in the market (because cars would be able to use the fuel), so we develop more efficient alcohol fuel processes and businesses in the future
corn - his book goes through numerous other potential sources, and compares and contrasts them. Corn is just 1, and not particularly special.
ethanol - he's doesn't just want cars to support ethanol, he wants them to support ethanol, gas, and methanol, and then let the market decide (with some protection against OPEC). I'd say he advocates methanol more than ethanol, because of the ease of using coal, any biomass like rotting fruit, various types of industrial waste, etc. i.e. he wants to take care of energy independence right away, and over the long haul this would also give the tools to address pollution without sinking the economy.
in the U.S. - He advocates dropping the ethanol import tariff, so essentially he's talking about a world market. He thinks you could get a lot of international agriculture going this way (e.g. turn narcotics-related farms to fuel, reverse desertification).
The above was just a lot of parroting from Zubrin's book (since the folks on that site don't seem to have read it).
You can see a summary of his arguments in the C-SPAN2 video library (google search Zubrin C-SPAN2 video). I'm sure you'll agree that Rand's title Hyperbole is totally on-target. That shouldn't be too surprising, since that's Zubrin's style. Getting past the hyperbole, though, what about the central point?
Agree entirely, Rand. High prices are self-remedying because they create incentives for development of alternative supplies and of substitutes. There has never been an energy crisis.