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Pickens Plan; Getting Us Off Foreign Oil

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Re: Pickens Plan; Getting Us Off Foreign Oil

Postby Neato Torpedo » Thu Sep 18, 2008 11:31 am

RugbyD wrote:
bleach168 wrote:
RugbyD wrote:getting this back on track, the concept of energy independence is one of, if not THE worst economic and geopolitical ideas ever. Discuss.


I know where you're going with this. And I know you feel the free markets will solve the problem.

But when Peak Oil hits, everything is just going to stop and we will literally be living in the stone age. The transition to a new fuel source may take over 20 years according to the Hirsch report. Eventually, we're going to have to make the switch. It's just a question of whether it is going to be gradual or abrupt.

The solution for a gradual transition couldn't be simpler. Just raise taxes on oil and gasoline and keep raising them over time to make sure the price continues to go up. Then allow the free market to come up with whatever alternative is deemed best.

i'm not sure you're thinking along the same line as me re: energy independence. provide more detail if you don't mind.

the free market works best when it is distorted the least. raising taxes is distortive, especially when it is done in punitive, behavior-influencing or social engineering fashion.

I find the notion that everything will just grind to a halt pretty ridiculous and alarmist. Oil is a finite resource, but between new dicsoveries, varying well lives, and better extraction technology for traditional and non-traditional methods, I have no doubt that the transition to different energy sources will not be majorly disruptive.

Current estimates have world oil reserves effectively running out by 2040, so extraction technology better get more advanced FAST. A noticeable discomfort regarding oil running out will reverberate throughout the world in the early 2020s, and a full scale panic will erupt in the 2030s, giving extraction technology only a few years to develop. Never mind that it's only going to buy us a few more years, a couple decades at the most optimistic. So what's the point in investing so much money into oil extraction methods when it's going to be basically useless in 40-50 years? Especially since we'll still have to work on alternative energy sources concurrently. Oil is soon going to be considered to be the Windows 95 of fuel resources: cumbersome, outdated, and full of problems.
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Re: Pickens Plan; Getting Us Off Foreign Oil

Postby RugbyD » Thu Sep 18, 2008 12:15 pm

Neato Torpedo wrote:
RugbyD wrote:
bleach168 wrote:
I know where you're going with this. And I know you feel the free markets will solve the problem.

But when Peak Oil hits, everything is just going to stop and we will literally be living in the stone age. The transition to a new fuel source may take over 20 years according to the Hirsch report. Eventually, we're going to have to make the switch. It's just a question of whether it is going to be gradual or abrupt.

The solution for a gradual transition couldn't be simpler. Just raise taxes on oil and gasoline and keep raising them over time to make sure the price continues to go up. Then allow the free market to come up with whatever alternative is deemed best.

i'm not sure you're thinking along the same line as me re: energy independence. provide more detail if you don't mind.

the free market works best when it is distorted the least. raising taxes is distortive, especially when it is done in punitive, behavior-influencing or social engineering fashion.

I find the notion that everything will just grind to a halt pretty ridiculous and alarmist. Oil is a finite resource, but between new dicsoveries, varying well lives, and better extraction technology for traditional and non-traditional methods, I have no doubt that the transition to different energy sources will not be majorly disruptive.

Current estimates have world oil reserves effectively running out by 2040, so extraction technology better get more advanced FAST. A noticeable discomfort regarding oil running out will reverberate throughout the world in the early 2020s, and a full scale panic will erupt in the 2030s, giving extraction technology only a few years to develop. Never mind that it's only going to buy us a few more years, a couple decades at the most optimistic. So what's the point in investing so much money into oil extraction methods when it's going to be basically useless in 40-50 years? Especially since we'll still have to work on alternative energy sources concurrently. Oil is soon going to be considered to be the Windows 95 of fuel resources: cumbersome, outdated, and full of problems.

My problem with current estimates regarding oil is they they have been consistently wrong over the history of the industry precisely b/c of technological developments that "current estimates" are naturally unable to incorporate. I would imagine that the hit rate on any prediction 30 yrs into the future is dismal, at best.
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Re: Pickens Plan; Getting Us Off Foreign Oil

Postby Neato Torpedo » Thu Sep 18, 2008 12:29 pm

Yeah but these estimates don't even take the meteoric expansion of oil usage by India, China, etc. So I think it's a wash between not incorporating increasing amounts of oil reserves and not incorporating the rapid industrialization of these countries. Either way, oil is still finite and this will be a point of contention until we do switch over to another fuel resource.
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Re: Pickens Plan; Getting Us Off Foreign Oil

Postby bleach168 » Thu Sep 18, 2008 7:07 pm

RugbyD wrote:i'm not sure you're thinking along the same line as me re: energy independence. provide more detail if you don't mind.


Energy independence is bad economically: At this point in time, oil is a unique product. No other form of energy is as useful or as cheap. Forcing the production of alternative fuel sources in America is a misallocation of resources because it is so expensive, i.e. corn ethanol. Our resources would be better spent on industries where we're most productive, like electronic devices, dot coms and action movies. Then it would be less expensive for us to just trade our Ipods for foreign oil.

Energy independence is bad geopolitically: Trade increases interdependency. Interdependency makes war less likely.

But, I'm not calling for energy independence. It's unrealistic to believe this can be done in 10 years. What I want to see is the U.S. less dependent on oil since I see Peak oil having catastrophic consequences. New discoveries and new technologies will not be able to overcome the decline of oil. The video I posted earlier explains that better than I could.
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Re: Pickens Plan; Getting Us Off Foreign Oil

Postby RugbyD » Thu Sep 18, 2008 8:24 pm

bleach168 wrote:
RugbyD wrote:i'm not sure you're thinking along the same line as me re: energy independence. provide more detail if you don't mind.


Energy independence is bad economically: At this point in time, oil is a unique product. No other form of energy is as useful or as cheap. Forcing the production of alternative fuel sources in America is a misallocation of resources because it is so expensive, i.e. corn ethanol. Our resources would be better spent on industries where we're most productive, like electronic devices, dot coms and action movies. Then it would be less expensive for us to just trade our Ipods for foreign oil.

Energy independence is bad geopolitically: Trade increases interdependency. Interdependency makes war less likely.

But, I'm not calling for energy independence. It's unrealistic to believe this can be done in 10 years. What I want to see is the U.S. less dependent on oil since I see Peak oil having catastrophic consequences. New discoveries and new technologies will not be able to overcome the decline of oil. The video I posted earlier explains that better than I could.

Ok, we're same page on the geopolitical aspect. Trade = the great peacemaker.

Regarding economics, my view is that energy independence as it is talked about now is really a worse form of energy dependence than we have now. All it does is make us dependent on energy we can find within our own borders, which then spills over into the geopolitical part. What we should be aiming for is energy diversification, both in source and trade. We should not be spending a dime on corn ethanol when we can import it from Brazil. We should be drilling at home to diversify away from the middle east, but we wouldn't want to do so in a way that cuts them off. We wouldn't be able to extract enough to do that anyways. Energy policy is no different than investment philosophy. Broad diversification is the best way to ensure long term growth, enhance flexibility, and reduce volatility.
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Re: Pickens Plan; Getting Us Off Foreign Oil

Postby Matthias » Sat Sep 20, 2008 1:18 pm

RugbyD wrote:the free market works best when it is distorted the least. raising taxes is distortive, especially when it is done in punitive, behavior-influencing or social engineering fashion.

If this is a theoretical way of saying that raising taxes on gas is bad, I don't think it could be more incorrect.

Proper economic models take account of externalities so that harmful behavior isn't priced too low. It's indisputable that harvesting and using fossil fuels has a negative effect on the environment and by extension the social good. Not levying a tax, or even levying too low of a tax, on this distorts the free market and results in a level of consumption that is greater than would be socially optimal.

The proper way to price this tax would be precisely by social engineering. How much harm is each unit of this good doing? How much lower than that optimum price is it now? The difference should be a tax.

Econ 101, my man.
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Re: Pickens Plan; Getting Us Off Foreign Oil

Postby Matthias » Sat Sep 20, 2008 1:22 pm

RugbyD wrote:My problem with current estimates regarding oil is they they have been consistently wrong over the history of the industry precisely b/c of technological developments that "current estimates" are naturally unable to incorporate. I would imagine that the hit rate on any prediction 30 yrs into the future is dismal, at best.

Oil companies also have to occasionally restate reserves downward, as well. So just the fact that they say, "We now have X billion barrels of proven reserves because of X, Y, and Z" doesn't necessarily make it so and by extension current estimates necessarily wrong.
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Re: Pickens Plan; Getting Us Off Foreign Oil

Postby Matthias » Sat Sep 20, 2008 1:24 pm

RugbyD wrote:I recommend reading the full article on both of these.

http://www.washingtonmonthly.com/archiv ... 014238.php

THE PICKENS PLAN....So T. Boone Pickens has an energy plan he wants to sell us. The basic idea is simple: Build a bunch of windmills in Texas to generate electricity, and then use the electricity to power electric cars. Voila! Energy independence!

No, wait. That's not it at all. What Pickens actually wants to do is use the windmills to replace the electricity from existing power plants that run on natural gas. Then we can use the natural gas to run our cars.

Hmmm. That's a bit of a kludge, isn't it? Why do it that way? Is it really easier to build a massive infrastructure for fueling NG cars than it is to build an infrastructure for electric cars? And who's going to force all those gas-fired power plants to shut down anyway?

Well, as near as I can tell, here's the story. Pickens wants to build his electricity transmission facilities on a strip of land 250 feet wide and 250 miles long that starts at his farm in Roberts County, Texas, and terminates in Dallas. Why that particular strip? Because Pickens has been buying up massive water rights from the Ogallala Aquifer and he wants to pipe that water to Dallas at huge profit...

I've read this in the past: we now know why T. Boone is so up and rarin' to go, don't we? The only commodity that is going to be as in demand as oil 20 years from now is water, and he's going to drink everyone else's milkshake.
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Re: Pickens Plan; Getting Us Off Foreign Oil

Postby Matthias » Sat Sep 20, 2008 3:13 pm

RugbyD wrote:Regarding economics, my view is that energy independence as it is talked about now is really a worse form of energy dependence than we have now. All it does is make us dependent on energy we can find within our own borders, which then spills over into the geopolitical part. What we should be aiming for is energy diversification, both in source and trade. We should not be spending a dime on corn ethanol when we can import it from Brazil. We should be drilling at home to diversify away from the middle east, but we wouldn't want to do so in a way that cuts them off. We wouldn't be able to extract enough to do that anyways. Energy policy is no different than investment philosophy. Broad diversification is the best way to ensure long term growth, enhance flexibility, and reduce volatility.

True dat. Also lost in all the hubbub is that in all the cries that we need to "Drill Baby Drill" for energy independence, our oil exports this year are up. But you're right, unless we plan on turning into a no-trade nation, energy independence is irrelevant. At the end of the day, it comes down to the global demand is X and the global supply is Y. As long as X is high relative to Y, it doesn't matter where the energy is produced or from where it's sourced, you still have the same end result. To come up with new and more efficient production, however, increases Y relative to X and thus will ease the price of all energy, from whereever it's produced. So the goal should be energy creation, not energy self-sufficiency.
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Re: Pickens Plan; Getting Us Off Foreign Oil

Postby RugbyD » Sun Sep 21, 2008 9:36 pm

Matthias wrote:
RugbyD wrote:the free market works best when it is distorted the least. raising taxes is distortive, especially when it is done in punitive, behavior-influencing or social engineering fashion.

If this is a theoretical way of saying that raising taxes on gas is bad, I don't think it could be more incorrect.

Proper economic models take account of externalities so that harmful behavior isn't priced too low. It's indisputable that harvesting and using fossil fuels has a negative effect on the environment and by extension the social good. Not levying a tax, or even levying too low of a tax, on this distorts the free market and results in a level of consumption that is greater than would be socially optimal.

The proper way to price this tax would be precisely by social engineering. How much harm is each unit of this good doing? How much lower than that optimum price is it now? The difference should be a tax.

Econ 101, my man.

The negative externalities are neither measurable nor material (debatable on #2, i know) in a non-traceable aggregate sense, so there is no way to determine proper pricing even if there was one. To the extent that environmental harm is specifically traceable and measurable in a micro sense, like runoff into a water supply, private property litigation can rectify financial comp, which would then be passed on to users via higher prices.

I'm ok with gas taxes as a means of funding roads as a kind of user fee though. Taxes to influence behavior are never justifiable from a (my) philosophical standpoint.
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