Archive for March, 2012

Gas prices go up and down, driven in part by speculation, part by supply and demand (the two are tied together).  Gas is a refined product made from oil, and as such, the price of oil drives the price of gas.  The current administration is steadfastly focused on green energy, and currently, for green energy to be commercially viable as a mainstream source, oil prices need to remain relatively high.  With oil and gas prices high, the need to look towards alternate energy sources becomes viable – but from a market perspective, they will only be viable if the costs are similar.  America has been dabbling in alternative energy for decades upon decades.  Hydro, solar, nuclear, wind, battery.  Where it made sense, economically, each of these methods has been a viable solution to generate electricity in lieu of fossil fuels, coal and oil.  But as vast as America is, we need to consider our energy needs are a complex mix of ALL sources, including fossil fuels.

Back to supply and demand – oil is a global commodity, and thus the demand is global.  Emerging economies such as China and India are driving up demand, so it is important to push more oil on the market to meet this demand and stabilize and even drive down speculative prices.  America has significant untapped oil reserves that can be added to the global supply – oil in ANWR, the Gulf and East Coast shelf will all add to the supply to reduce speculative pricing, even with unrest in the Middle East.  New technologies and recovery methods have helped tap into additional oil unrecoverable just a decade ago.  This oil can be recovered with minimal impact on the environment.  So what’s the hold up?  Good people with different views, concerns, and visions are putting unrealistic expectations on the speed of market acceptance of “green” technologies.  The realities are the US economy’s successful growth is dependent on a range of fuel costs much lower than the $4-$5 gallon level at this time.  High fuel costs are a serious growth killer, as it takes energy to produce everything, AND, it takes fuel to deliver everything – so higher costs drive prices up across the board.  This is much more of an issue with moderate to low-income citizens – much like a regressive tax.  There is too much political fodder going on today – and this needs to stop.  Embrace Keystone (responsibly routed), accelerate permits for drilling (responsibly), Utilize clean coal technologies, and educate on conservation.  Oh, be careful of what numbers are being bantered about 2% of the world’s oil reserves, 25% consumption…hmmm, not so sure on that 2% number (check this out).

We will eventually move away from fossil fuels, eventually, the global economy will rise such that gas prices will rise to a level that makes alternatives much more viable and marketable.  However, today, in the year 2012, America needs to utilize all the resources at its disposal to drive economic growth which in turn will spur the kinds of innovations required to take us in to the next decade and beyond.  Having the government force a change in market behavior is a waste of our hard-earned dollars (ie. Solyndra).  I just don’t think the people in this administration get it (comparing technological advances in cell phone technology to high power mechanical engines is ludicrous – read here).  For now, we need to focus on conservation,  increased supply,  and alternative energy solutions that make sense.

Read Full Post »