Bill Hobbs mentions a plan to have our country driving hydrogen-powered cars by 2020. Fine and good. He then goes on to say:

If she's right, and if it works, the nation would be free of dependence on imported oil by the year 2020. Think of how that would change our foriegn policy toward the Middle East. No need to coddle the Saudis!
However, this does not reflect economic reality. We are not "dependent" on foreign oil now -- we can, however, buy oil from the middle-east and ship it to America more cheaply than we can drill and process our own domestic oil. Why? Labor costs and the burden of environmental laws.

I'm not saying this is a bad thing (I'd rather the Saudis despoil their desert wastes than pollute our own country), but that's how it is. The White House claims that two-thirds of the oil we use goes towards transportation, but that doesn't exclusively include cars and trucks. Even if we could reduce our oil consumption by 50%, what effect would that have on our use of foreign oil?

The oil market is global, and the cost of consumption is based on the cost of production plus the cost of transportation. Once that total cost per barrel is known, it doesn't matter where the oil comes from when purchasing decisions are made. If we cut consumption by 50%, what will happen is that we will stop buying the most expensive half of the oil that we buy now, and the most expensive oil we use is produced domestically. I can't find a source online for this at the moment, but I'll keep looking.

Cutting total oil consumption would have an effect opposite to what most people expect -- on a percentage basis we would use more foreign oil than we do now because the absolute amount of domestically-produced oil that we would consume would go down. The only way to lower our use of foreign oil would be to lower the cost of domestic production and then let market forces handle the rest.



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