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Price Drops Sound Great, But....

By   Follow Me on Twitter     Message Richard Turcotte       (Page 1 of 1 pages)     Permalink

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An observation worth noting ... and pondering, from the 2012 report "The New American Oil Boom," issued by the Energy Security Leadership Council (a project of Securing America's Energy Future).

[A]s long as the United States remains a large consumer of oil, no level of domestic fuel production can meaningfully improve energy security.
Rising domestic oil production will not achieve a long-term domestic price advantage in oil.:
In recent months, a number of political commentators have suggested that, as the United States produces more oil domestically, it will achieve sharply lower prices in much the same way that natural gas prices have fallen during the surge in U.S. shale gas production. This simply is not credible.


Wishing economic realities were different is a nice balm, but wishing is just wishing. None of us want to be in a position not too far down the road where we're collectively kicking ourselves for once again postponing the hard work needed today to afford ourselves better opportunities tomorrow. It's a bad habit we're all guilty of indulging, but for problems of this magnitude, it can quickly create hardships well beyond our capacities to imagine, let alone properly address.

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The market for oil is a global one, and as many others much more knowledgeable than me have pointed out ad infinitum, this means our prices for oil are determined on the world's stage. What we produce is all fine and well, but what happens in Country X or production factors in Country Y or Z will impact what we pay. It's not complicated from that standpoint.

So as long as we remain so thoroughly dependent on fossil fuel to power just about everything we do and own and need, we're at the mercy of forces and influences over which we have little or no control. That the dependency exists for a finite resource compounds the challenges we face.

These considerations never make it into the discussion of our booming production or on-the-verge-of-energy-independence comments by those beholden to the fossil fuel industry. Notwithstanding, it's another of those pesky realities which we all ought to consider and address as we move into a future with energy supply challenges not easily understood or appreciated.

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It's also worth noting that the idea of price decreases is terrific right up until the moment that scenario plays itself out in a world where conventional crude oil fields are on the downslope and production increases are due to both more generous definitions of product and the surge in tight oil from hydraulic fracturing technologies. Then it stops being such a good thing.

High prices are what enable the fossil fuel industry to extract the more expensive tight oil from the shale formation in the US. Investors aren't seeing the returns they'd like and are responding accordingly. Price drops are great news for the family budget, but price drops mean less fossil fuel supplies for all of us. That's also a problem, but the public needs to understand how these factors relate to and affect one another.

Knowledge and information are good things to share.

Adapted from a blog post of mine

 

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