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Trouble in the Pipeline: Capitalism and the Oil Crisis

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Really now, how much more can we stand?

Ever since the Middle East became engulfed in revolution a few months ago, the price of oil has skyrocketed. Coming along with it on its nightmarish journey to the top are the costs of goods ranging from fruits to headphones as their transportation fees have become infinitely more expensive. The burden this places on merchants is then passed along to their costumers in the from of higher price tags. Of course, these costumers are already spending exorbitant amounts merely to fuel their respective automobiles in order to reach the store itself, leaving them hit with not one, but two gruesome sucker punches in quick succession.

Which, needless to say, brings us back to our original question; how much more can we stand? When will the cost of oil reach the point that our nation’s economy becomes crippled as Americans can no longer afford to simply live their lives?

Before this can be answered, it must be asked why oil is currently at such inflated levels. Many will instantly point to the turmoil in the Middle East which I mentioned earlier, but I do not believe this to be the reason at all. One need look no further for evidence to support my opinion than British Petroleum’s now-infamous rig spill last spring and summer. Despite the entire oil industry taking a severe hit because of this, gasoline prices actually went down throughout the latter half of 2010; a time in which any student of economics would have expected them to soar. Indeed, it was not until the strife in Egypt and Libya, particularly Libya, broke out that a frenzy was declared of such proportions that the cost of oil was essentially left with nowhere to go but up.

Obviously, this is a cleverly devised shell — pun fully intended — game which is being perpetrated by the world’s major oil companies. The price of oil is rising and almost definitely shall continue to simply because it can; no more complex explanation is needed. However, the brunt of this unfolding madness can nonetheless be averted. How? Simple; by the implementation of capitalism, humankind’s great equalizer. At this very moment, there are massive reserves of virtually untapped shale oil within the escarpments of Colorado, Wyoming, and Utah. These can be mined and their contents used for gasoline production in a relatively short period of time, greatly reducing our dependancy on foreign oil and making gasoline far more affordable, particularly in the long run. If various entrepreneurs and energy moguls were given serious incentives to explore all that shale oil has to offer, it is unquestionable that America would benefit immeasurably.

Unfortunately, the hardline environmental lobby, which, at is very core, serves with dazzling efficiency as a Fifth Column for those who oppose any genuine economic productivity for our nation, would surely oppose such a wonderful idea. Perhaps, if enough potential voters were to make the viable alternative of shale oil a large enough issue in next year’s congressional and presidential elections, we might make some true progress in entering a new era of not only relative energy independence, but new employment opportunities associated with that right here in the United States. Being the political realist that I am, I must say that such a thing, at least in the present, seems to be nothing short of extremely plausible.

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About Joseph F. Cotto

  • Glenn Contrarian

    Joseph –

    So what’s the other side of the story? What are the environmental concerns?

    Here, I’ll show you:

    Most exploitation of oil shale involves mining followed by shipping elsewhere, after which one can burn the shale directly to generate electricity, or undertake further processing. The most common methods of surface mining involve open pit mining and strip mining. These procedures remove most of the overlying material to expose the deposits of oil shale, and become practical when the deposits occur near the surface. Underground mining of oil shale, which removes less of the overlying material, employs the room-and-pillar method.

    So how much of Colorado, Wyoming, and Utah are you willing to sacrifice to open-pit and strip mining?

    Mining oil shale involves a number of environmental impacts, more pronounced in surface mining than in underground mining. They include acid drainage induced by the sudden rapid exposure and subsequent oxidation of formerly buried materials, the introduction of metals into surface-water and groundwater, increased erosion, sulfur-gas emissions, and air pollution caused by the production of particulates during processing, transport, and support activities. In 2002, about 97% of air pollution, 86% of total waste and 23% of water pollution in Estonia came from the power industry, which uses oil shale as the main resource for its power production.

    AND:

    In 2002, the oil shale-fired power industry used 91% of the water consumed in Estonia. Depending on technology, above-ground retorting uses between one and five barrels of water per barrel of produced shale-oil.

    So which is more important to you? Oil? Or water?

    But despite all this, why does Big Oil – which owns enough of Congress to get billions in taxpayer subsidies EVERY YEAR despite the fact that Exxon paid ZERO income taxes last year – why does Big Oil not seriously lobby to get at all that shale oil?

    A 1972 publication in the journal Pétrole Informations (ISSN 0755-561X) compared shale-based oil production unfavorably with the coal liquefaction. The article portrayed coal liquefaction as less expensive, generating more oil, and creating fewer environmental impacts than extraction from oil shale. It cited a conversion ration of 650 litres (170 U.S. gal; 140 imp gal) of oil per one ton of coal, as against 150 litres (40 U.S. gal; 33 imp gal) of shale oil per one ton of oil shale.

  • http://blogcritics.org/writers/joseph-cotto/ Joseph Cotto

    Glenn,

    I understand the environmental concerns here. Quite frankly, however, considering our troubles with foreign oil, they are far outweighed by economic reality. As for your question about exactly how much of the land in the states I listed should be mined, the answer is as much as possible.

  • zingzing

    if not even the oil companies can be bothered… i’m afraid it’s not going to fly….

  • Glenn Contrarian

    Joseph –

    When it comes to ‘economic reality’, that’s why I included the last part that showed that oil shale generates less than a quarter of the oil that coal liquification does.

  • Boeke

    These comments illustrate why the public is so confused about oil prices and oil policy. When someone says he doesn’t understand price movements, yet he advocates policy changes, the reader must exercise caution.

    The basic fact is that oil is fungible: a barrel of oil from one place is functionally and financially equivalent to another barrel from a different place.

    So why should we, the US taxpayer, spend a lot of money facilitating oil shale when we can get that barrel of oil easily and cheaply somewhere else?

    Ah, you say, to reduce foreign dependency! But what we are really doing is exploiting other countries by buying their cheap oil for daily consumption while reserving our oil for a crisis. The money we spend on foreign oil is many times compensated by the increasing value of the oil we hold in reserve for an oil-scarce future. What a deal!

    Since oil is fungible, it is as if every barrel pumped anywhere were to go into a giant vat, and then users would bid or buy for the oil they need from that vat. Undifferentiated; it doesn’t matter where the oil came from. Doesn’t matter where it goes or who uses it. It’s the ideal Free Market solution. And little wonder: the oil system was setup by the premier proponent of Free Markets in this world, the USA, over the last 70 years. We built the system when we had such power we could build ANY system, and the felicity of the system is evidenced by it’s durability, even when attacked by OPEC in 1973 (a commercial war that OPEC lost) and by the systems adoption by everyone important.

    I’m always surprised when advocates of “Free Markets” misunderstand the oil system, which is such a good example, and then seek to overthrow it, or, worse, misunderstand and advocate adverse policies!

    Why adverse? Because we mine oil at $120/barrel, say (due to higher extraction cost), and put it into a vat where it only gets $100. Sounds like a bad deal to me.

    Our attempts to change market price by increasing market supply are doomed. Every barrel we put in the big vat has an insignificant effect on our own gas price. While we bear the full cost of the increased extraction cost we only get about 1/5 of the price decrement benefit because we only use 1/5 of the worlds oil. Our generosity in extracting expensive oil will be 4/5 benefit to other countries.