Monday, November 29, 2010

On our addiction to foreign oil

I was flipping channels a couple of days ago and heard someone blathering about ending our dependence on foreign oil.  I don't remember who it was, but it might as well have been John McCain....



Or Jimmy Carter....



Or anyone else who is trying to scare voters into supporting oil company subsidies or throwing money to Green Energy scams.  (Yes, oil company subsidies and Green Energy scams.  The players all wear different uniforms, but they're playing in the same game.)



These guys always speak of our "addiction to foreign oil", but never say a word about our addiction to foreign computers, wine, cheese, electrical components, iPhones, televisions, fabrics, jeans, suits, or that inexpensive mouse you're using to make my words move up and down on that foreign screen in front of you.  They try to give the impression that the lines of latitude and longitude of factories and warehouses should be your most important shopping criteria.   

They never acknowledge that those of us living in Fort Worth, Texas, have a higher quality of life because we trade our goods and services (the things we're best at doing) with people who live in Waco, Texas (for the things that they're best at doing). 

Texans often trade with people from Oklahoma, Arkansas, and Louisiana.  Some of the people in Arkansas have funny accents.  Some of the Oklahomans look like Indians.  And despite Texas being an overwhelmingly Protestant state, we can hold our noses and swap our stuff with the Catholic natives of south Lousiana. 

I'm considering trading with Memphis Tennessee for BarBQue, since Texas BarBQue sucks.  The Texas stuff is made from cows, not pigs. 
Should that be anyone's decision other than mine? 

We trade with Canada.  We swap lots of our stuff for their timber. 
We trade with Mexico.  We swap lots of our stuff for their clothing and auto parts. 

Yes, we rely on people from those other strange cities, states and nations.  But guess what?  They rely on us for our goods and services, and they also rely on us as.....customers.


If Fort Worthians and Texans and Americans were to stop purchasing things made by those other cities, states, and nations, it would harm us and it would harm them.
The only groups to profit from the shutdown would be the government enforcers and guards at the arbitrary borders of our cages.  (And, of course, the businesses that would then have a monopoly in the goods and services that were prohibited from crossing our city, state, or national borders.)


If other countries ever stop swapping their stuff for our stuff, they're in a world of hurt.  Imagine what it does to a retailer to lose 20% of its customers.  The retailer has to lay off employees. 

Does anyone believe that any of the oil producing nations of the world can now afford to withhold oil from the United States?  They are all addicted to foreign dollars. 


They have to sell the stuff to somebody.  They can no more stop selling oil to us than Target, Wal-Mart, and Kroger can arbitrarily stop selling groceries to people whose names begin with a vowel.  It would kill them. 

I repeat....We aren't addicted to foreign oil.  The oil producing nations are addicted to foreign dollars.  Think of it that way for fifteen minutes, and you'll start laughing the next time a politician tries to play the race card (or the geography card). 

The Dilbert cartoon came from here.  The videos came from YouTube.  The source of the gasoline that got me to Starbucks this morning doesn't really matter. 

6 comments:

CenTexTim said...

I agree with most of what you say, but I do have a few questions/comments.

We (the U.S.) aren't addicted to foreign oil. We're addicted to oil - period. And foreign oil-producing states aren't addicted to dollars. They're addicted to any sort of foreign currency - yuan, euros, pounds, pesos, take your pick. That's the basis for international trade between oil consumers and oil producers.

To use your barbecue example, if the U.S. could wave a magic wand and replace foreign oil (TN BBQ) with a domestic source (TX BBQ), how would that hurt the U.S. (TX)? Granted, TN would suffer, but TX would be flying high (BTW - I much prefer charred cow to charred pig).

I'm not advocating any sort of government controls or incentives, but if we simply removed the constraints on domestic production and then let the free market take its course wouldn't the fact that the exchange of funds between consumers and suppliers would largely remain internal as opposed to external benefit this country (reducing the trade deficit, creating jobs, increasing tax revenue, etc.)?

IMO it's not a question of shutting down or stopping the trade for foreign oil, it's a matter of providing for our energy needs from one or more domestic sources, be they oil, solar, wind, or whatever - within a free market context.

Or am I missing something?

Nick Rowe said...

: to devote or surrender (oneself) to something habitually or obsessively

We're not "addicted" to oil, Tim. We use oil. It provides an enormous amount of utility from consumption. An addiction is an uncontrollable desire to have or use something. By definition, it's an unhealthy desire.

We're no more addicted to oil than we are clothing, food, water, or shelter.

Just because we need something, doesn't mean we're addicted to it.

Just because we frequently use something for its enjoyment, doesn't mean we're addicted to it.

Before we moved our cars with oil, we rode horses which fed on grass. Were we addicted to grass?

Before we lit our homes with electricity, we lit them with whale oil, candles, or wood. Were we "addicted" to those things too?

We can certainly individually conserve resources, but the act of conservation implies changing preferences.

If we are forced to conserve resources, it implies an unambiguous loss of utility. Only when the conservation is necessary for maximizing social welfare is it justified. If there are negative externalities associated with oil consumption, I'm pretty sure the current taxes are more than sufficient to offset the inefficiency.

We will never run out of oil. Long before we run out, the price of oil will rise. When it rises, the relative price of alternatives declines. That means alternatives will become cost-effective (whereas they currently are not). So we will normally, naturally, and quickly substitute our oil consumption for other fuel sources.

Technology advances far faster than our ability to deplete resources. Probably one of the few exceptions to that is seafood.

The Whited Sepulchre said...

Tim,
How about if we let whoever wants to invest in the project build us some nuclear power plants? (In addition to your Drill, Baby, Drill proposal?)
The solar/wind thing will never be a sensible option. The OPEC nations (and others) will never let the price of oil get so high that the Green Stuff makes sense.

TarrantLibertyGuy said...

Reminds me of the stories of the prominent old Fort Worthian, Amon Carter, who would bring a sack lunch if he were forced to go to Dallas. He had to make sure that the Dallas economy didn't prosper by the amount of one lunch.

CenTexTim said...

Wow, it's pile on Tim day... :-)

Okay, perhaps "addiction" wasn't the best choice of words. But I was just trying to carry the theme of the original post forward. So let's substitute "dependence".

The point I was trying to make is that IMO the U.S. would be better off if we met more of our energy needs with domestic sources of all types - including nukes - as opposed to foreign ones.

And I wasn't advocating forced conservation, just suggesting that there may be other energy sources we can use in conjunction with fossil fuels when it makes economic sense to do so (e.g., hydroelectric plants).

It's not about 'punishing' the Dallas (foreign) economy, but rather benefiting the Ft. Worth (U.S.) economy.

Nick Rowe said...

Sorry for the tone, Tim. I certainly wasn't trying to beat you down.

I agree we should fully exploit all our domestic energy sources, or rather allow private business to do so. Especially nuclear. But if foreign energy is cheaper than domestic energy, then we're naturally going to buy that.

We actually export oil from Alaska to Asia. Not all oil is created equal. Current prices, trade routes, and refineries are based on an evolved process of supply and demand. Deviating from that, particularly for political reasons only, is costly.

Alternative energy has its problems. Wind kills birds. Dams create salty rivers, flood wetlands, and block spawning fish. Nuclear produces waste. I think if we had cost-effective alternatives, industry would be using it by now - save for regulation.

"Dependence" is a bit harsh too. Sure we depend on it. Cut it off cold turkey and watch how much we squirm. The alternative is to live like Bedouins. Production requires resources and energy is an important resource. But cut out steel and aluminum and car production grinds to a halt. Cut out wood and we have no new houses. We "need" whatever we really want. Scarcity is a fact of life.