Thursday, June 19, 2008

Energy policy

On Thursday, President Bush announced a new initiative in energy policy that results from the fact that gas prices at the pump in the US have jumped to over $4 per gallon, due to the price of crude oil reaching $140 per barrel. While these high prices make many alternative non-fossil fuel sources of energy, such as wind, sun and alcohol, more commercially viable, only an increase in oil supply in the US can make a significant dent on these prices.
Pres. Bush announced a four-pronged policy to achieve this goal:
1. Open up the outer continental shelf (OCS) around the US for oil drilling.
2. Open up the Arctic National Wildlife Reserve (ANWR) in Alaska for oil exploration.
3. Develop the shale (oil rich rock) deposits in Colorado, Wyoming and Montana.
4. Facilitate the building of new oil refineries that have been prevented by red-tape for 30 years.
While all of these options have been opposed by environmentalists and the Democratic Congress, now with the gas prices really pinching the economy, the time has come to take firm and drastic action. With the new technologies that have been developed in the past few years the danger of oil leakage and pollution have been greatly reduced and the safe-guarding of the environment while finding and exploiting these proven reserves has been greatly enhanced.
As an environmentalist myself I am concerned about the danger to ecology and wildlife, but as a pragmatist I know that the only way to avoid greater dependence on foreign oil (from Venezuela, Saudi Arabia, Iran and the Gulf) is to increase US production. The measures that Bush proposed seem to represent a reasonable approach to do this. By the way, the only candidate who has a similar policy to improve US oil production is John McCain (although he previously opposed the exploitation of ANWR).
It should be noted that prices in Britain are twice those in the US and in parts of Europe and Israel are three times higher, but if nothing is done to increase oil supply, the market forces of reduced availability will undoubtedly push the prices even higher, and this could have a devastating effect on the US and global economy.
The development of alternative energy sources, such as focussed sunlight, wind turbines, even wave energy, are now economically viable, but none of these can supply more than a few percent of the world's needs within the next few decades. Only the production of gasoline susbstitutes such as alcohol can make a big contribution as vehicle fuels, but the production of corn to make alcohol is also fraught with the problem of transferring food production to fuel production, leading to the scarcity of corn and an increase in the price of basic foods. In Brazil sugar cane is the main source of alcohol that is used to run buses and taxis. Alternative plant sources for alcohol are currently being researched and developed, but this will also take time.
While the short-term prospects do not look good, in the long-term the selection of the most efficient and economical means by the market will eventually bring down energy prices.


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