Oil - Three Problems, Three Solutions

Watching today’s politicians offer “solutions” about oil is akin to watching a few clowns aim water guns at a forest fire.   

Here’s the truth: we are trying to solve three problems at once (environmental concern, cost reduction, national security). Perhaps if we eat that elephant one bite at a time, we could get headed in the right direction. 

Here’s the working draft of eRev’s Oil & Energy Plan:

Watching today’s politicians offer “solutions” about oil is akin to watching a few clowns aim water guns at a forest fire.   

Here’s the truth: we are trying to solve three problems at once (environmental concern, cost reduction, national security). Perhaps if we eat that elephant one bite at a time, we could get headed in the right direction. 

Here’s the working draft of eRev’s Oil & Energy Plan:

Step 1.  Form a task force compromised of a top-level oil company executive, an electric company executive, a couple of politicians from non-oil producing areas, a geologist, an automotive guy (I suggest Lee Iacocca), a sensible environmental advocate, an editor from Popular Science, and a ground-up business entrepreneur to figure out where in America increased oil supplies could be extracted safely, profitably, etc.  ANWR in Alaska, the recent large find in North Dakota, shale deposits in the West, offshore areas - instead of political theater, this group could be charged with "getting it done, and done right."  We could change the calculus of world politics today by opening up more options here at home for oil exploration.  I think Americans have gotten the message regarding efficiency, and I think that train will eventually come to the station (electric cars, etc.)  But we could grease the wheels of capitalism with a little American oil in the meantime, freeing ourselves from the "cartel" of OPEC countries.

Task Force Mission #1: reduce  America's dependence on foreign oil by opening up new supply and new refining capabilities in the U.S.

Benefits at this stage

For national security: OPEC would no longer be a matter of significant concern to us.

For cost reduction: The worldwide supply of oil would be higher, so the worldwide price would drop. Also, many new American jobs would be created.

For environmental concerns: Bringing more oil production here would allow us to do things in a safer, cleaner way than is likely to be done by Third World dictatorships.

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Step 2: As I see it, Step 1 is a win-win for everybody except OPEC (you can imagine how much that breaks my heart).  The second "mission" of the task force is to explore free market solutions to the high price of energy.  The task force could evaluate all of the regulations that affect the energy and transportation industries, and make common sense recommendations to streamline, reduce, and modernize regulations.  There are likely laws on the books that don’t need to be there – left over from previous eras; and there may be some regulations that aren’t accomplishing their mission – these could be phased out.

Task Force Mission #2: make it easier to for energy companies to be streamlined, simple and profitable, reducing government intervention or complication wherever possible.

Benefits at this stage

For national security: more energy companies would be interested in building & headquartering in the United States, meaning less dependence on foreign energy deals.

For cost reduction: less regulation helps existing companies offer better products at lower prices, and less regulation encourages new companies and new capital investment, which increases supply (thus lowers the price).

For environmental concerns: higher profit margins will allow energy companies to invest more in new technologies, and burdensome regulations could be traded out for more helpful green energy commitments.

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Step 3.  Since less air pollution is a benefit to everyone, and more diversity of energy supply is a good idea anyway, the task force could evaluate all of the options on the table (rather than just knee-jerk reacting to the latest fad).  They would compile a "Clean Air To Do List" that could be made publicly available to energy and transportation companies. For public relations purposes, companies would be compelled to creatively address the list in order to get the label.  It would be a badge of honor (and probably would result in more customers) for those who are part of the anti-pollution agenda.  “EnergyStar” could be expanded (or renamed) and could include whole companies. Cars, gas pumps, electric bills and the like could sport the logo if they have acted on the To Do List. Within a few years, market pressure would virtually force all companies to take the To Do List seriously, and the job would get done without government mandate.

Every year a Clean Air Award could be issued to the three companies with the most innovative and helpful improvements, the ultimate “publicity” opportunity. Yet another motive for creative innovation.

Task Force Mission #3: reduce air pollution by developing a common sense To Do List for energy and transportation companies.

Benefits at this stage

For national security: we would be encouraging U.S. companies to do the right things, not driving them offshore by forcing them to uphold unprofitable, static standards.

For cost reduction: without specific government mandates, companies would have the incentive to get creative as they fulfill their To Do List. This would result in new technologies and cost effective measures, rather than just higher consumer costs.

For environmental concerns: rather than just capping or trading emissions, this plan would encourage companies to fundamentally change the way they think, and would result in long-term environmental protection and conservation.

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Ultimately, such a Task Force would be laying the groundwork for a safer, cheaper and cleaner tomorrow, all without using the heavy hand of government bureaucracy to accomplish its mission. In the end, I believe such measures would have both short and long-term benefits – we’d be safer (oil money no longer flowing toward terrorism or enemy countries), cheaper (with more supply and more diversified sources of energy), and cleaner (with producers willingly taking steps to out-green one another).

Any thoughts? Any takers?

 

Comments

[Joshua]

Do you really think that big oil wants to see more affordable oil? Do you not think that supply is kept artificially low by more then just OPEC? Do you not think that the frenzy around oil and the panic about the need for more of it does as much benefit to international "American" oil companies as anyone else?

[DanJ]

I don't think "Big Oil" cares what the price is one way or the other - they're looking for profit margin. Higher demand obviously helps them - but high supply to meet that demand does as well. If we opened up more areas for drilling, I can guarantee you there'd be many interested parties. The very fact that the price is high right now is what would drive companies to drill for moe supply.

Supply and demand aren't being messed up by Big Oil, but by Big Government.

You're putting your faith in the wrong things, Joshua.

[DanJ]

Here's a helpful article by economist Thomas Sowell about how "uncomplicated" this whole issue actually is.

http://www.realclearpolitics.com/articles/2008/05/too_complex.html