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The Honolulu Advertiser
Posted on: Monday, November 27, 2006

Oil is addictive but it's not running out

By Douglas Madden

The need to cut the use of fossil fuels arises more from political and environmental factors than from any looming global shortage.

AP LIBRARY PHOTO | Oct. 9, 2006

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Fossil-fuel dependence leaves U.S. vulnerable politically, ecologically

Roger Davis' "preventive measures" to solve our oil dependence ("Scraping Bottom of the Oil Barrel," Nov. 19) are excellent, and very likely supportable by the public if they are given the consideration they deserve. The "tax on fossil fuels" idea is similar to one advanced by Steve Yetiv ("Lower Taxes? America Needs Just the Opposite," Sept. 17) in which higher taxes on gasoline would be offset by lower taxes on other goods. As Yetiv said, "studies show that gas taxes work better than anything else."

That said, I must disagree about our "scraping (the) bottom of the oil barrel" either soon or in the foreseeable future and that we are in danger of being "left out in the dark when the world runs out" or headed for a "planetary fire." In fact, oil prices, which naturally reflect the availability of existing and anticipated resources, have quite steadily decreased relative to wages since our evolution to a petroleum economy.

Technology has made extraction, transportation and refining much more efficient, and we have steadily improved efficiency in use. Appliances that typically rely ultimately on oil or coal are much more efficient than in the past, cars are getting much better mileage, etc. The raw value of crude oil is in the neighborhood of only a couple of dollars a barrel. There is no shortage of oil resources and none should be expected contrary to popular belief.

Those who claim that oil resources are being rapidly depleted or that we are in danger of running out of any natural resource in our lifetime or our children's lifetime invariably base their claims on known reserves and current technology, neither of which has ever stayed still long enough to give credence to any of the claims. In the case of almost any material resource, discovery of new reserves has outstripped consumption, and technology has led to more efficient use and when prices have gone up high enough and long enough to alternatives that are better and less expensive.

Plentiful resources and low prices, as in the case of oil, simply are not incentives for greater exploration, intensive research and development of alternatives. Why should we expect the major oil companies to do anything to diminish demand for their products? They are currently making profits far in excess of those in any other industry in the world at any time in history. They raise prices long enough to set new profit records, then reduce prices before we start looking too seriously at conservation and alternatives.

As soon as prices go down, we forget our concerns, get back into our monster trucks and SUVs, and don't think much about things until the next short-term crisis. Oil companies know their market better than we know ourselves. They recently told us that to a great extent the expanding economies of India and China were at the root of higher prices, somehow expecting us to believe that economies ever expand almost overnight like that. Now that gas prices have more recently fallen, why aren't we hearing about those supposedly collapsing economies?

The scary warnings that Davis gives resemble those from the "Peak Oil" school that is in vogue but is challenged by the facts. Still, we are too used to low prices. And we are too dependent on oil from an unstable and largely anti-American part of the world, on our own overgrown oil companies, on shipping that is subject to disruption from labor disputes and on fossil fuels that contribute to global warming. I hope the measures Davis proposes really are seriously considered but not for all the reasons he gives.

Douglas Madden is a Honolulu resident. He wrote this commentary for The Advertiser.