Some of what Americans hold dearest,
however, will "die". Cheap gasoline, for one. Right now all over the
country there are news headlines decrying the price of gasoline. Friends ask me
how they can help stop oil speculation: Can they write their congressmen? Can
they start a campaign? Republicans blame President Obama. CNN and network
anchors shake their heads but offer little explanation apart from noting that Iran
has stopped exports to British and French oil companies. Speculation is blamed,
as usual.
But the speculation is based on the perception of higher prices in
future, because of a lack of supply and a surfeit of demand. As Ian Taylor, CEO of oil trading firm
Vitol, said: “The supply side of the market is a mess." Taylor, speaking at IP
Week in London, noted: “Demand, even if not great, continues to grow. So
it's difficult to see much price downside from current levels.”
The supply side is a mess for many reasons,
most of them political. The crude oil dilemma is not the one that should worry
people, though. On balance, there is plenty of crude oil and other refinery
feedstocks. Natural gas and shale gas (from hydraulic fracturing or fracking)
are plentiful, as is the mucky crude squeezed from oil sands (mainly in Canada).
The problem is there is little infrastructure to support the shipping and
refining of these feedstocks.
Enter the NIMBYs. The Not In My Back Yard
syndrome seems counter to what Americans actually want, which is cheap oil.
Most recently the Keystone pipeline, designed to carry oil from Alberta to be
refined in multiple places in the U.S., was delayed because no one wanted it to
run through their backyards. Plants designed to liquefy natural gas, thereby
making it moveable on tankers, are being turned down all over the country.
Fears over terrorist attacks on the plants or the tankers are cited, but the
real reason? NIMBY. The same NIMBY spirit has scuppered wind and solar farms, waste-to-energy
projects, waste-to-fuel plans and hundreds of other ways in which the US could
provide more of its own energy.
One of the biggest problems in the US is
the shortage of refinery capacity. There has not been a new refinery of any
decent size built in the United States since 1977. Why? NIMBY. If anything,
refineries are disappearing. I have written about this before, I know, but it
bears repeating. We have lost 500,000 barrels per day of refining capacity on
the U.S. East Coast in the past year. These provided nearly 3% of daily U.S.
refined products consumed. Most recently the St. Croix Hovensa refinery,
operated by Hess and PDVSA, the Venezuelan state-owned oil company, closed removing
350,000 b/d and about 13% of the East Coast's gasoline. It is true that many of
these closed due to lousy profit margins. But selling them was not a viable
option because any company that bought them would bear unlimited liability for
any environmental problems - past or present - that arose. And refineries can be dangerous
(explosions are not uncommon) and polluting (ditto spills). NIMBY, thanks very much.
But then I won't
complain about the price of gasoline - because I think it is too cheap. Gasoline
has been too cheap in the United States for a very long time. The low cost of
gasoline led to the production of giant SUVs and pickup trucks that can carry a
baby elephant and haul its mother on a trailer (the over-reliance in Detroit on
producing and selling these relics nearly destroyed their industry altogether).
Cheap gasoline gave us roads where there were once railroad tracks; roads which
are now crying out for improvement and expansion to handle even more cars. It led to
vast, soulless suburbs from which you cannot commute or shop without cars.
So I say "good" to higher
gasoline prices. To the government I say build us some railroads and let us put
up waste-to-energy incinerators (cleaner emissions than burning natural gas,
believe it or not); to the car companies I say give us smaller, fuel-efficient
cars. To home builders I say make the cities more liveable and affordable and
let the suburbs die. But the NIMBYs will win, as always. And they will HATE
$5.00 gasoline.
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