Gas is going up to $4 a gallon now, ahhhhhh

[SMCengineer]

Not always that simple, the most subsidized energy sources are oil, coal and gas. Oil beeing in a leauge of its own. Yet I dont think anyone claims there is not enought demand or not enough profit potential with those energy sources.

I see what your saying and somewhat agree with you, but for the most part it is as simple as that. I once read that if you see a contradiction you should check your premises cause one is probably wrong. For example, look at the production of domestic oil. Contrary to what you might believe, the profit is much less than that of foreign oil. I think 1 barrel of oil is used to extract 7 barrels domestically, whereas 1 barrel will produce 10 barrels in foreign oil (you may know the exact figure I'm just quoting off the top of my head). Think of what that means for your profits and what would happen to a company if it was forced continue operating without government help. Now, I'm fully aware that OPEC has a monopoly on foreign oil and that's our only check against them, but we shouldn't have let it get to point.

Then of course there are "hidden subsidized" from the detrimental health impacts of fossil fuels that is not figured in anywhere. The cost of loss of life expectancy and loss of working hours from coal alone is quite large indeed. Factor that in and coal and oil suddenly becomes 2-3 times as expensive.

External costs for electricity production in the EU (in EUR-cent per kWh**)
.

Are you referring to C. Boyden Gray's study of implicit subsidies? I've only heard of implicit subsidies once and it was a weak arguement to say the least.

Subsidies are shit, but aslong as oil get so much sudsidies the alternatives has to get it aswell to compete. There are other factors that seriously screw up the free market, one of the biggest beeing the insane ammounts of regulations put on nuclear power. There is no level playing field. In a ideal world all subsidies would be gone, the external costs factored in and the regulations normalised so all energy sources obey the same kind of rules. If that where to happen coal and oil would be history and the free market would ensure the cleanest energy sources would win since they would also be the cheapest due to low external costs.

Unfortunaly politicians are stupid as shit and thats why idiotic things like ethanol gets drowned in cash even though its obvious it will never be even a partial replacement to oil.

I fully agree with you. Here's an article that pretty much sums it up.

http://www.cato.org/pub_display.php?pub_id=6418

Market Forces Only Cure for Oil Prices
by Robert L. Bradley Jr.


This article appeared on Foxnews.com on May 26, 2006.

Little has changed in the 75 years since Spanish philosopher José Ortega y Gasset wrote, "In disturbances caused by scarcity of food, the mob goes in search of bread, and the means it employs is generally to wreck the bakeries."

Revised for the crisis du jour, that sentence would read, "Whenever the price of oil jumps, the first thing the people's congressmen do is demonize and punish Big Oil."

Because worldwide demand for oil is rising, and a quarter of the world's oil is being produced by saber-rattling socialist/nationalistic governments, the price of crude has more than doubled from its historic average.

Fortunately, with higher prices comes increased economic incentive to find, produce, refine and market oil, all of which brings prices down. The cure for high prices is high prices -- if market forces are allowed to turn today's problem into tomorrow's solution.

Of course, Congress doesn't see it that way. Instead, trying to reverse cause and effect, lawmakers assert that high prices are the problem, not uncertain supply in the face of increasing demand.

One "solution," therefore, is to impose back-door price controls via laws against "price gouging." But trying to address increased oil scarcity by forcing prices down is like trying to cure a fever by adjusting the thermometer. It eliminates the feedback that prices provide to consumers and suppliers.

With artificially low prices for gasoline, consumers use more of the limited supply than they otherwise would, while suppliers (including gasoline importers) do not receive the economic signal to bring in a greater supply. Soon, the artificially cheap commodity runs short. People begin wasting time in gasoline lines, and burning fuel while they wait.

Another popular "solution" is to impose a "windfall" profits tax. But why, in times of acute scarcity, should money be taken from those who can alleviate the abnormal scarcity and given to politicians?

Congress is not going to drill wells but redistribute tax dollars. Increasing taxes only gives a congressman the appearance of "doing something about this crisis" during an election year. With any luck, by the time the crisis has passed and his "something" has clearly made the problem worse, he will have been safely re-elected.

Today's petroleum problem is not a shortage of energy resources but a surplus of government. Oil is not the problem, government control of oil is. America is not "addicted" to oil; too many oil-rich countries are addicted to socialism and nationalism, by which problem-solving entrepreneurship is hampered or criminalized.

The solution is not to stop using petroleum -- a physically impossible, economically ruinous response. The solution is to start the educational and political reform needed to promote capitalist institutions in the impoverished, resource-rich areas of the world.

A capitalistic transformation would assign private property titles to the subsoil. Such a privatization will promote greater supply and efficiency, and will demote politicians who are the enemies of oil consumers the world over. Ordinary citizens, having become royalty owners, will be the ones to obtain wealth as oil and gas is found and produced.

And these individuals -- let there be many thousands of them -- will rise from poverty to become part of the investor class, and even philanthropists to their fellow man. Witness the work of oil- and gas-endowed foundations in the United States, for example.

Effecting this transformation will take a lot of hard work. Counting Iraq, a country with a history of repression, three-quarters of the world's proven oil reserves are controlled by countries that the Heritage Foundation rates as "repressed" (Nigeria, Venezuela, Libya, Iran, Iraq) or "mostly unfree" (e.g., Russia, China, Qatar, Algeria, Brazil, and Kazakhstan).

In all of these lands, the spectre of Karl Marx must be replaced with the spirit of Ludwig von Mises, F.A. Hayek, and Hernando De Soto. The Hugo Chavezes of the world must be replaced with leaders who know that socialism is a dry hole, while capitalism empowers citizens, promotes savings, increases investment, and produces wealth that redounds to the masses.

The United States has a government energy problem too. Witness our folly in mandating quotas for inferior energies and blocking access to (government owned) hydrocarbon-rich areas offshore and in Alaska.

Yet there is a silver lining to this folly, for it means that our government can lead the world through example, ending energy subsidies across the board and privatizing public resource holdings.

To blaze a path away from oil statism, our government's leaders must let our own oil industry invest the capital it has earned and thereby increase infrastructure. And they must tell the world why they are doing so: because they have learned that the solution to a bread shortage lies in building more bakeries, not in wrecking them.

[Kärnfysikern]

I see what your saying and somewhat agree with you, but for the most part it is as simple as that. I once read that if you see a contradiction you should check your premises cause one is probably wrong. For example, look at the production of domestic oil. Contrary to what you might believe, the profit is much less than that of foreign oil. I think 1 barrel of oil is used to extract 7 barrels domestically, whereas 1 barrel will produce 10 barrels in foreign oil (you may know the exact figure I'm just quoting off the top of my head). Think of what that means for your profits and what would happen to a company if it was forced continue operating without government help. Now, I'm fully aware that OPEC has a monopoly on foreign oil and that's our only check against them, but we shouldn't have let it get to point.

I agree with that, but Im truly wondering how much subsidies are somewhat motivated by competition with opec etc and how much is just from slipping some money to politicians.

Are you referring to C. Boyden Gray's study of implicit subsidies? I've only heard of implicit subsidies once and it was a weak arguement to say the least.

I have never heard of Boyden so I would have to check, do you know in what journals he usually publish? What is listed in the table is the results of one of the largest life cycle assesments ever done on energy production, it is a large cooperation betwen different research instititues in europe. They have looked at pollution, accidents and other detrimental effects from producing energy of different sources and then calculated the loss of life expectancy, loss of working hours, property damage ect caused by pollution and accidents. Its all normalised to a cost per produced kilowatt hour of energy for each major energy source.

Now its hard to estimate the true costs Il agree with that, trying to figure out exactly how much prolonged sicness and premature death costs society depends on alot of assumption more or less reasonable.

There is no doubt however that the use of oil and coal causes imense damages to the health. World wide a estimated 500 000 - 1 000 000 premature deaths can be attributed to coal, 50 000 to 100 000 in the states alone.

According to ExternE's methods the external costs on society from energy produced by oil and coal are far larger than the internal costs of producing that energy. So in a way the oil and coal companies are subsidises since they dont have to take responsibility for the damaging effects. Internalising those external costs by fees would be one easy and justifiable way to encourage clean energy sources like nuclear and renewables. This is of course a slippery slope, but those causing the pollution that kills and makes people sic need to take responsibility for it somehow, its a clear intrusion on personal freedom. If someone causes me to be sic they have to be hold accountable. Ron Paul has talked about letting the legal system take care of this and environmental connected health problems will be gone. The main problem with that is that you can never link one particular death or sicness to one particular polluter since the effects are stochastic.

I fully agree with you. Here's an article that pretty much sums it up.

http://www.cato.org/pub_display.php?pub_id=6418

I agree alot in the article but I disagree that oil supply isnt the problem.
The CATO article would make perfect sense if oil was like any other comodity whos price level solely determines the available supply since higher prices means lower grades become economically possible to extract. But oil in lower grades is all but useless no matter what the costs since oil is a energy source.

When we approach the point where it takes one barrel of oil worth of energy to pump out one barrel of oil then the oil becomes pointless. When it comes to other comodities its not a problem because you dont need say copper to mine more copper. But you need energy to extract more energy. You could do like they are planing on doing with the alberta oil sands and use nuclear energy to extract the oil. But then that oil in effect becomes a energy carrier rather than a energy source. This is a problem considering that 40% of the worlds energy comes from oil, that is a hefty chunk of energy production that has to be replaced quickly while easy to extract oil supplised dwindle. Goverment intervention is probably needed in this case even though I generaly dislike that.

CATO is right that politicians artificially keeping oil prices down is idiocity, mostly because it stands in the way of stimulating development of efficient replacements to oil. I think the goverments has to go the other way and artificially increase the price of oil to really stimulate the development of alternatives. The best and most justified way of doing this would be to add the external costs of oil as a fee on all petroleum products sold. If we wait until the production of oil starts to drop it will be to late and the exponential increase in oil prices will cripple the world economy making it much harder to develop alternatives.

Check out some of the publications of the Uppsala university Hydrocarbon Depletion Study Group http://www.tsl.uu.se/uhdsg/welcome.html