oil — VOICES for REASON

In a State of the Union Address that purported to take energy issues seriously, President Obama took an ominous tone toward an indispensable form of energy: oil. Oil is the lifeblood of our economy, the fuel of our engines, the material of our petroleum products—and it is extremely difficult to substitute for.

And yet President Obama bashed oil as ‘yesterday’s energy,’ claiming that much of it can be replaced by biofuels, solar, and wind, if only Americans would consent to subsidizing them even more (they already get upwards of 100 times the subsidy that oil does).

This claim is completely baseless—and, at a time when oil prices are rising and Obama has already clamped down on drilling, incredibly dangerous. Oil cannot be dismissed as “yesterday’s energy,” for it is the energy of the present and will be crucial for the foreseeable future. In attacking oil, the President is not helping our energy future—he is making it far more bleak.

My recent article, “The 6 Myths About Oil,” attracted a lot of attention on FOXNews.com (over 200 comments and 2000 recommendations). It may surprise you that, given my article’s pro-oil stance and FOX’s right-wing reputation, most of the comments were negative. In any case, I’m glad that a wide spectrum of readers read the piece.

There was one common thread among the comments that I would like to discuss, since it comes up a lot in energy discussions. It was the claim that there are superior alternatives to oil that, given my strong support of oil, I am opposing and helping to suppress.

It should go without saying that I and any other decent person would welcome any superior substitute for oil. But when discussing potential substitutes, the question is: Is there one and how do you prove it? My answer to the latter is: you prove it by actually outcompeting oil–that is, by actually convincing users of gasoline, diesel fuel, plastics, oil-based fertilizer, etc., that, given their needs and budgets, your product is better. Too much energy discussion treats the question of oil substitutes as one to be debated by pundits and then imposed by government. But government-mandated energy schemes are a violation of the rights of producers and consumers and a prescription for a central-planning debacle.

Case in point: one particularly frequent poster was a staunch advocate of methanol (note: not the same thing as ethanol), which is a form of alcohol-based fuel that can be created from coal, natural gas, or plant matter. The commenter claimed it was cheaper than oil (the equivalent of $1.60 a gallon) and that it requires a mere $130 added expense for auto manufacturers–which he declared should be mandatory. But if the case for methanol is so economically open and shut, he wouldn’t need to call for government mandates. Investors would be racing to put billions of dollars into this oil-beater.

The fact that this methanol-booster is demanding a mandate is a dead giveaway that there are real, serious obstacles to methanol becoming a viable substitute. In his comprehensive book Oil 101, industry expert Morgan Downey makes several relevant points on this matter: “Methanol contains only 50% of the energy of an equivalent volume of conventional gasoline. In addition, methanol is poisonous to humans in relatively small volumes.” The book also discusses methanol’s challenges with engine corrosion and myriad safety hazards associated with it.

Note that in dozens of posts, the methanol booster, who was quite intelligent and educated, did not see fit to mention these challenges of methanol–nor did he raise countless other questions that would arise in creating large-scale methanol operations on anywhere near the scale of oil (of which we use one billion gallons a day). I have nothing against methanol per se. What I am against is people ignoring the fact that there are reasons why we use oil instead of other sources of energy, and who demand we submit to their arbitrary schemes to “get off oil.”

Those who believe strongly in the viability of methanol or anything else should go prove their ideas by outcompeting oil for our dollars on the market (without subsidies). If they’re right, they will get rich and we all win. But if they’re wrong, and their brilliant ideas aren’t as brilliant as they thought, we don’t have to go down with their ship.

Image: Wikimedia Commons

Over at FoxNews.com, my colleague Alex Epstein has published an important new essay, “The 6 Myths About Oil.” It begins:

Every American consumes an average of three gallons of oil a day. Republicans and Democrats call this reliance on oil an “addiction”—an irrational, self-destructive habit that must be broken as soon as possible. This year’s BP oil spill disaster is only making the chorus to “end our addiction to oil” louder. But if we examine the most common arguments for this idea, we see that they are myths. Oil is a vital, viable, and desirable part of our energy future.

And here are the myths he challenges in the essay:

• Myth #1: America’s reliance on oil is an “addiction”—an irrational, self-destructive habit.
• Myth #2: There are “green” technologies that are just as good, or better, than oil.
• Myth #3: Because oil is finite, it will inevitably run out.
• Myth #4: Because oil is mostly in other countries, they can cut us off at will and create an economic catastrophe.
• Myth #5: Because oil money funds hostile dictatorships (Iran, Saudi Arabia) by using less oil we can make them poorer and make ourselves more secure.
• Myth #6: Because the burning of oil produces CO2, oil is a deadly pollutant that must be severely capped.

The whole thing.

Today’s MasterResource features the first entry of a four-part Series by me titled “Energy at the Speed of Thought.” MasterResource is a leading free-market energy blog.

Today’s segment is called “The Original Alternative Energy Market.” Part 2 will be released tomorrow. (The article was originally published in 2009.)

Image: Wikimedia Commons

To me, the most interesting part of a recent New York Times feature describing corruption in the relationship between certain oil companies and the Minerals and Management Service is a passing reference to what the Gulf Coast was like before deepwater drilling.

For years, fading interest in the Gulf of Mexico had punished the local economy and left Louisiana to mourn its “Dead Sea.” Now, rising oil prices and new technology were setting off the deep-water version of a gold rush.

We have heard endless stories about how the oil spill has “ruined” the Gulf–the same Gulf the administration is now admitting it is already safe to eat from. But while the dangers of drilling accidents have been overblown, the fundamentally productive, life-giving nature of oil drilling has been largely evaded. We should remember that it was oil drilling that brought the “Dead Sea” to life.

Image: Wikimedia Commons

As an advocate of laissez-faire capitalism and a champion of America’s abundant oil use, it is rare that I get taken to task for being too tame in my defense of oil and in my expose of oil’s anti-industrial opponents.

But a superb letter to the editor in Tuesday’s Wall Street Journal by Paul Gilmour does just that. Responding to my point in my op-ed last week that oil spill hysteria ignores that “large amounts of oil enter the ocean every year through naturally occurring oil seeps,” he writes:

the situation is even more idiotic than the one Mr. Epstein describes.

Most of the oil in the Santa Barbara Channel and on nearby beaches comes from natural leakage of buried reservoirs, not man-made spills. Europeans who visited the area in the 16th century reported the sea was covered by a “sheen of oil, visible for as far as the eye could see,” and that local Indians waterproofed baskets and canoes with tar collected on beaches. It is estimated that, yearly, these seeps release the equivalent of one third of the oil spilled by Exxon Valdez.

Seeps of oil are common in coastal California, having given rise to such place-names as Oil Creek, Oildale, Brea (Spanish “tar”) and Coal Oil Point. By far the best known is the La Brea Tar Pits, located in downtown Los Angeles.

Wouldn’t it be nice if reporters actually told us this stuff, instead of only reporting things that reaffirm to them that oil is an “addiction”?

In today’s Wall Street Journal, I have an op-ed piece entitled “Obama Follows Nixon on Oil Spill.” It explains how Richard Nixon’s anti-oil, anti-development response to the Santa Barbara oil spill of 1969 helped bring about an energy crisis–and how President Obama’s policies are ominously similar. Read it here.

In general, I have found that studying the history of oil is essential for understanding the present world. For example:

• How did so much of the world’s oil end up in the hands of dictators even though it was discovered by citizens of free countries?
• How is the history of oil connected to the history of terrorism?
• What policies led to the greatest amount of production and innovation, and what caused the least?

I cover these and many more questions in my course “The Triumph and Tragedy of the Oil Industry.” Listen to it online or download in MP3 here.

Image: Wikimedia Commons

My colleague Alex Epstein has published a new commentary at Forbes.com, “Three Myths About Oil.” Noting that the average American consumes three gallons of oil a day, Alex observes that nevertheless,

… oil’s detractors call it an addiction, downplaying its enormous benefits as fleeting pleasures that will necessarily bring long-term pain and destruction. An oil-based economy will inevitably collapse, they say, because oil is finite and will run out, because foreign oil causes terrorism, because oil, as a fossil fuel, will bring about climate catastrophe. Let’s examine these myths about oil.

Read the whole thing.

At a time when hostility against the oil industry is at a high, while politicians and editorial-office heroes call for “ending our addiction to oil,” it’s important to reflect on why oil is so valuable—so “addictive,” in the terminology of our time.

A couple months ago, I blogged that “Most of us think of oil simply as the stuff that puts gasoline in our car. But oil, thanks to the ingenuity of the oil industry, does so much more. For one, it’s the building block for thousands of petroleum products—everything from Blu-Ray discs to asphalt to stitches to lipstick. And it provides the safest, most powerful, most convenient fuel, not only for automobiles but for the freighters, jets, trucks, and industrial machinery that power our global economy. Oil makes every aspect of our lives better.”

In that post, I illustrated how oil was vital in making possible something as basic as an affordable, healthy breakfast. The other day, I witnessed firsthand how vital oil is in making possible a safe, effective hospital. Sitting in on a highly advanced surgical procedure, I was struck by the skill of the surgeons, the stunning advances in medical technology (almost all of which involve petroleum components), and—what I want to talk about today—everyone’s commitment to maximize safety by keeping the environment as hygienic as possible by using oil-based products at every turn.

One of the virtues of petroleum products, including plastics, is that they are incredibly resistant to bacteria, moisture, germs. Another is that they can very easily be made impermeable, protecting whatever you want from whatever you don’t want to contaminate it. They can also be made incredibly cheaply, which allows for disposable products that are never used by more than one patient.

All of this was at work in the operating room. Just about all the furniture—the chairs, the cabinets, the drawers, were made of or coated by petroleum to keep them sanitary. The patient was lying on the bed, connected to durable, flexible plastic (oil) tubes that safely delivered food, coming from a sealed plastic (oil) bag that securely stored it. Another oil tube was designed to vacuum excess fluids. There were disposable foam (oil) cradles to prop up the patient’s arms or legs if necessary—made of oil to be disposable. The disposable, sterile gloves were either latex or synthetic—i.e., made of oil. Ditto for the disposable surgical masks and head-coverings. The doctors frequently needed to throw biological material away—which, thankfully they could do sanitarily with plastic (oil) trash-bags that could be taken away leaving no trace of their hazardous contents. Imagine if these products would have been made of wood, cloth, or metal. Can you imagine the corrosion, the bacteria-traps, the health risks? Infection used to be a highly common and deadly product of surgery—and lack of petroleum products was a big reason why.

Thanks both to the medical profession and petroleum products, you can have every expectation of your next trip to the hospital being a safe one.

Source: Wikimedia Commons

As Americans ponder how to react to the BP disaster in the Gulf of Mexico, with many calling for massive restrictions on oil drilling, it’s important to know the story of the Santa Barbara oil spill of 1969–and the disastrous American reaction to it.

Daniel Yergin summarizes the spill and the ensuing outcry in The Prize:

in January 1969, the drilling of an offshore well in the Santa Barbara channel encountered an unexpected geological anomaly, and as a result, an estimated six thousand barrels of oil seeped out of an uncharted fissure and bubbled to the surface. A gooey slick of heavy crude oil flowed unchecked into the coastal waters and washed up on thirty miles of beaches. The public outcry was nationwide and reached right across the political spectrum. The Nixon Administration imposed a moratorium on California offshore development, in effect shutting it down.

The Santa Barbara outcry and ensuing restrictions on drilling started right before the 1970s…which turned out to be one of the most traumatic decades energy-wise in recent history. The decade was notable for scarce energy, the OPEC oil embargo of 1973, gasoline shortages, and the belief that energy would never again become abundant and affordable. But underlying all that were the post-Santa Barbara domestic restrictions on energy development, particularly offshore drilling. American companies had had plans to develop plentiful oil reserves in Alaska and off the coast of California, reserves that would greatly increase our flexibility in a then-volatile international oil market, but an oil spill in Santa Barbara changed all that.

Yergin writes:

However great the need for oil, the leak increased opposition to energy development in other environmentally sensitive areas, including the most promising area in all of North America, the one most likely to stem the decline in American production….Alaska.

Today, we face a similar situation. An offshore oil spill–a very unfortunate, very rare, but still inevitable part of offshore drilling–is empowering the forces who are against offshore drilling, period, even though such drilling is a means to a resource indispensable to our standard of living.

And to learn the story of the 1970s in detail, I refer you to Part 3 of my course on the history of oil, “The Triumph and Tragedy of the Oil Industry,” available here. (The story begins around the 14 minute mark and ends just after the 29 minute mark.)

Image: Wikimedia Commons