Tuesday, August 08, 2006

Import tax for Oil

Almost every news item that isn't discussing the war seems to be
discussing the price of oil and how we're all going to be sweating in the
dark soon. The real solution will require major changes in how energy
is generated and used and how we live. But don't go installing the $30k
solar electric system this week. Before we can develop real solutions
we need to ensure the high price of energy for the forseable future.

Most people are hoping for the price of oil to fall back to $12/barrel
again where it was just a few years ago, but that is part of the problem.
One of the reasons that the world isn't producing enough oil is most projects
take several years to develop from prospect to drilling to producing oil,
and every 3 years or so the price of oil goes from $50/bbl to $12/bbl. This
tends to make oil companies risk averse, if you drill a prospect that has
lifting costs of $22/bbl, and then the price of oil goes to $12, you are as they
say in spanish, jodido.

Even after 2 years of pretty good oil pricing, we're not near the drilling activity
that is possible (which would require building more rigs). Anyone that has
been in the industry more than 5 years knows that as soon as you make a big
down payment on a new corvette, the industry will go to shit, and you face being out
of a job. Even with $75 oil, I feel that it will just take a year with no hurricanes
shutting down production and a slightly calmer middle east to bring prices back
to $35/bbl, and we can all go back to suv'ing.

What we need is long term fairly high prices to wean us off of oil.
My simple proposal is that while the price of oil is high we institute an import
tax on oil to keep the price of oil in the US at $50/bbl. Then domestic oil
companies can use a price of $50/bbl as their planning price for oil and
domestic production can increase. This will have a side effect of making
the economic price of alternative energies higher, since I've already learned
from bitter personal experience that solar enery
depends on the price of oil just as much as SUV sales (inversely).

With high oil prices in ten years every family will probably have one electric
car, construction of nuclear plants will have resumed and people will begin to install
solar electric panels on every house. When oil is consistently $50/bbl over 10
years we'll start to see hybrid SUV's that includes a big-ass battery pack
and a KW of PV panels on the roof or a connection to the home PV system.

I can dream, but I know that what will probably happen is the economy will slow down,
we'll stop buying so much chinese crap and the need for oil will decrease...letting
the price of oil go back to $12, ending the US oil industry for another 5 years.

2 Comments:

Anonymous Anonymous said...

Enjoyed a lot! »

10:16 PM  
Anonymous Anonymous said...

Cool blog, interesting information... Keep it UP »

4:33 PM  

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