Energy
Too big to ???

Expert View: Energy Price, Not Source, Is America’s Biggest Problem

Burgess COMMENTARY
Bottom line ... I agree with Yossie Hollander's conclusions, but I am not sure that my argument to draw this conclusion would be the same.

To my mind there is a lack of clarity in all the discussion between the 'cost' of a fuel, and the 'price' of the fuel. In simple, but reasonable, terms, there is a profit margin between cost and price. Furthermore, as product flows through a supply chain, what is price to a seller, becomes cost to a buyer. The multiple profits along the supply chain tend to get ignored when people talk about the 'profitability' of the industry, which is very convenient when trying to justify the 'high cost of fuel at the gas pump'.

Some crude oil has a very low cost. Other sources of crude oil have a higher cost. Broadly speaking, the crude oil price is the same all over the planet. [This is not strictly true, because some crudes are easier to process than others and therefore command a higher price ... but the concept of a global price for each grade of crude is valid].

I have an issue with the money profit accounting in all the extractive industries because the depletion of the planet's resources are left out of the accounting. In my view this results in money profit being overstated without any compensating report of the value destruction. In TrueValueMetrics the value destruction is quantified and both the money profit and the (negative) valuadd are reported.

The energy industries cavalier attitude towards the future bothers me enormously. I want to see routine articulation of where the extractive energy industry will be in a hundred years time. People talk about peak oil and predict that being past peak oil is good for investors because prices must rise and this is good for profits. At the same time being past peak oil means that society is getting closer to being out of fuel ... and that is a situation that should scare the living daylights out of everyone.

I think I would conclude that pipelines are relatively safe ... better than trucks and railcars and marine tankers. The exploitation of Canadian tar sands seems to pose big questions about environment both as to carbon and use of water and damage to the native environment. Also the exploitation of 'fracking' to access natural gas also seems to pose big unanswered questions about potential toxic pollution of important groundwater and aquafers. As far as I can understand, if there is a major incident where groundwater or aquafers are polluted, there is no industrial scale reserve fund to make society whole ... so in the event of a disaster, it will be society that has to bear the cost. I consider this a terrible behavior by the energy industry ... and fundamentally wrong.

I have little respect for the oil industry having seen how they operate in developing countries where nobody is looking ... and how ridiculous the arguments they use to excuse themselves. It disgusts me.
Peter Burgess

Expert View: Energy Price, Not Source, Is America’s Biggest Problem

The problems of the United States energy policy boils down more to the high cost of oil than to its source, Yossie Hollander, the founder of the Our Energy Policy Foundation and co-founder of the Fuel Freedom campaign tells Newsmax.

“The issue is not who we buy it from, it’s price,” he said in an exclusive interview with Newsmax TV.

The country spent $780 billion last year for oil and oil products, he said. “That’s too much. That’s bankrupting us.”

“If we bought it all from Saudi Arabia at $1 a barrel versus $100 a barrel we wouldn’t care if we bought it all from them. So the issue is how do we get cheaper oil to the American public, not where we buy it. And we can get it all from America.”

Therefore the focus of his Fuel Freedom campaign is to reduce the price of oil to $2 per gallon at the pump, which could help give Americans “eventually $2,000 more in your pocket.”

“That’s what we want to do, to revive the American economy,” he said.

Unfortunately, he indicated that few of the solutions being addressed would actually help reduce the country’s dependence on oil.

In particular, “if we went all wind or all solar or all nuclear we will not replace one gallon of oil, only coal.”

Currently, the situation is “like basically [giving] Advil to a cancer patient,” Hollander explained. “We need to actually get replacement that will compete in the market. Expensive oil is not the answer.”

However, he expressed high hopes for hydraulic fracturing — known as “fracking” — so long as the country has an open market where everybody can decide what fuel they want to use.

“Then we’ll have a real competition and cheaper fuel,” Hollander said.

In addition, Hollander dismissed the Obama administration’s reluctance to embrace fracking as futile because “the train has left the station already. Fracking is so big here that it’s going to continue.”

The biggest problem he fears is a global oil shortage projected to hit this decade. This is because the world will not be able to drill its way out of it.

“Demand from China and India is growing so much faster than our ability to drill, and the world’s ability to drill,” Hollander explained, adding that the country has already reached the tipping point, which is “The reason we’re not growing.”

“If we spend $300 billion or less on oil — which is possible —a year, that would be $1,000 net per person.”

However, Hollander suggested the fight over the Keystone XL pipeline was “A classical example where the parties argue about something that doesn’t matter.” Regardless, he explained “the oil will flow, whether it will flow from Louisiana with a pipe or the west coast of Canada, it will flow.”

However, Hollander admitted the Keystone pipeline “does matter if we do more processing of the oil internally [because] there will be some more jobs.”

© 2013 Newsmax. All rights reserved.