I was thinking on the planter the other day about all the changes the ethanol boom is going to cause for farmers and everybody else in the US. One of the big motivations behind renewable fuels is the idea of energy independence. I think it is safe to read that as independence from nasty ol' Arab oil.
The idea here is somehow we have gotten ourselves in a subservient position to cultures we loathe and our goal is to once again be able to scorn Mideast oil producers with American impunity. Regardless of the merit of this goal, my musing centered on how we seem to be going about it.
The idea, if I get it right, is we will produce all this ethanol which will then replace gasoline in the marketplace and hence oil from sandy places. So far, so good.
But here is where I need help. If we churn out billions of gallons of ethanol which does truly reduce the demand for gasoline, HOW DO WE REPLACE ONLY ARAB OIL?
Here is what I have doped out (the operative word being "dope"):
First, most of our oil is indeed imported: 60% [BTW - this is really good oil info site]
However, most of the sources are NOT Arabs:
Top Suppliers of U.S. Crude Oil 2004
|Country of Origin|| |
|Trinidad and Tobago||49|
|China, People’s Republic of||14|
|Congo (Kinshasa) *||14|
|United Arab Emirates||5|
| ||Persian Gulf **||2,400|
Includes crude oil imported for storage in the Strategic Petroleum Reserve.
In fact, if you label Saudi Arabia, Iraq, and Algeria as "undesirable" sources, that adds up to about 22% of our imports or roughly 13% of our usage. [I don't count Qatar, because they refuse to buy a "u"]
Stay with me.
So how do we replace Arab oil and not Canada oil, eh? For that matter, how do we know we won't replace domestic production? If that happened we could end up even more dependent on foreign oil!!
And there is no guarantee that it won't happen.
As near as I can figure out, the marketplace for oil will continue to favor low-cost producers. Just like low cost farmers can pay higher cash rents, low cost oil producers can endure dropping oil prices better than high-cost producers. Since the US is a relatively high-cost producer and SA is the Walmart of Oil, falling demand for oil and the consequent lower prices will stop pumps everywhere else before the Saudis say "uncle".
Even if oil prices simply remain unchanged, how the heck do we pick out those barrels of oil that came from Saudi Arabia?
My conclusion: you can't muscle out the lowest cost producer. We should know that from our own business experience. Which means that energy independence or at least "Arab" independence is a pipe[line] dream. I'm not the first guy to figure this out either.
In fact, the only good examples of "energy independence" seem to be countries that have focused on controlling consumption, like Denmark.
This doesn't mean ethanol is a bad idea. It just means we can lay off the stupid "sheik and camel" cartoons, maybe.