Learning from the
Past
In the 1970s the world experienced a major oil shock
triggering a global recession. The U.S. government at the time directed researchers
to consider alternative sources of fuel than liquid petroleum, which the oil shock proved
was too susceptible to the capriciousness of unstable foreign forces.
Two sources which stood out at the time were oil shale and
coal liquefaction. While some issues remain with oil shale, both raw material
sources are available in abundance within U.S. borders. Oil from coal
liquefaction,
sourced entirely within U.S. borders, can provide gasoline for hundreds of years at
current levels of consumption. With current technology such fuel can be brought to
market at about $40/barrel, just 40% the cost of imported crude oil1.
With petroleum from coal available at such a low cost, with
the Iraq and Afghanistan wars tallying up a $1.6 trillion bill and costing lives every
day, with a future of challenges not only from an unstable Middle East but from Iran,
North Korea, China and Russia, why aren't we exploiting this massive, domestic source of
energy?
The answer lies in what happened after the 1970s oil shock.
Buoyed by bottlenecked oil supplies, investors in the 1970s poured money into coal
liquefaction and oil shale. To their dismay, in the early 1980s, the price of crude
dropped, drastically, to far below prices at which oil shale or coal were competitive.
With millions of dollars of investments lost, oil shale and coal were driven out of
the market.
Avoiding Mistakes of the Past
Many mistakes were made in the past and none
need be repeated. But clearly the most egregious mistake that we make on an ongoing
basis is to continue to rely on foreign oil sources which require massive commitments of
US military treasure and blood to stabilize, all at a time when we are pressed from all
other sides by potential foreign threats - threats which grow when the US is perceived as
weak due to its over commitment in the Middle East.
The market for oil of today is not at all like
that of the 1970s or 1980s. Many more consumers are ramping up consumption and many
believe that if "peak oil" has not already been reached, we are close to it - in
other words: while demand for oil increases, there is no reason to believe supplies of
mined crude reserves will increase.
Nevertheless, there is no reason to remain held
hostage to foreign oil. Even if foreign oil were available at $20/barrel, wouldn't
it be worth the extra $20 if (1) we did not need to commit militarily to the Middle East
and (2) that extra $20 was being spent in the U.S?
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