Summer is slowing coming to Anchorage. Summer up here is fantastic; the weather is great (mostly 7o's and sunny and only 10 inches of rain per year). Day light is a trip - sunrise is something like 4:30 AM and sunset is probably about 11:30 PM or so at this point. It's an unbelievable opportunity to work up here and worth anyone's time to travel to Alaska for a visit.
Now the sobering news:
Last month, the U.S. decreased oil consumption by 3%. It did not make a difference. I paid $4.45 per gallon to fill up the rental car in Seattle yesterday. Why? The United States is no longer the demand leader for oil - that title now goes to China and India. So, despite changing use patterns, prices continued to rise.
While I am generally a believer in technology and not a doom-sayer, but we cannot control oil prices by changing behaviour in the U.S. anymore. It astonishes me how little the general population understands crude oil and the relationship to gasoline prices. I sat with a woman on the plane today who wanted to know how the Alaska Natural Gas Pipeline would affect "gas" prices. I told her it would not affect gas prices, and that in my opinion, we would not likely see gasoline below $3.80 ever. It was clear from the discussion that she viewed cheap gasoline as an entitlement and felt the government owed her cheap gas. She must have missed Econ 101. Here is a good backgrounder for those that want more information.
That's it. Take care and ride your bike or take public transit if you can.
The sense of entitlement is powerful in this case.
ReplyDeleteYou bet it is. It's part of our cultural heritage, in fact (see the U.S.A. in your Chevrolet, etc.). The good news is that with oil over $100 and refined products ranging between $4 and $5, a lot of other alternative energy sources become more economically competitive. I have never felt that solar power, geothermal, hydrogen fuel cells, etc. will get cheap; the technology itself is expensice, plus the amount of retrofitting you need to do to convert makes this a very expensive proposition in most cases. However, with expensive oil, the return on investment is more competitive, so I see high oil clearing the way for more sustainable and diversified energy sources in the future. That will still take a paradigm shift from the public, but I think it will happen.
ReplyDeleteThanks for your post. Does this also pertain to those that say we should drill in the Gulf to lower prices? It all goes on the market...it's not a nationalist system.
ReplyDeleteNot sure I get the question, but...
ReplyDeleteWith high oil prices, a lot more options become competitive, including extraction of heavy oil from the oil sands of northern Alberta and ultra deep drilling in the Gulf of Mexico. The same economics apply to alternatives as well as conventional fossil fuels. High prices can yield a better return in investment, making an expensive project economic now where it would not have been so 5 years ago.
As for drilling in the Gulf, that's happening now. Drilling off the coast of California, the eastern seaboard and large parts of Alaska is prohibited, so it would take a change of the laws to enable that.
The fact of the matter is that we cannot realistically re-engineer our infrastructure to convert to alternative energy overnight. Wind power is great, but it only happens when the wind blows and the people that need electricity don't generally live in western MN, so that means we still need base generation plants for deliverability and transmission lines to move electricity from the wind turbines to the cities when that source is available. Oil has got to continue to be a part of our energy mix, but in a high oil market, other alternatives will be able to make up ground, so eventually we will end up with a more diversified energy profile in the U.S.