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Con: Higher oil prices prod consumers toward green energies of the future

Posted: February 3, 2012 - 2:12am

By MICHAEL E. KRAFT

GREEN BAY, Wis. — Gasoline prices rose sharply in 2008 and again in 2011, largely as a consequence of rising global demand and limited supply.

People’s reactions were mixed. Some called for immediate relief in the form of gas tax rebates or increased oil drilling, both onshore and offshore. Others welcomed higher gas prices because they motivate auto companies to design and market more fuel-efficient vehicles, and consumers to buy them.

Even with gas prices now lower than their peak last year, what should the federal government do?

The oil companies and their supporters want the Obama administration to remove some or all of the remaining restrictions on onshore and offshore oil drilling. Doing so should lead to more domestically produced oil and possibly lower prices, but the connection is not that simple.

Many of the same people also have pressed for a quick decision to allow construction of the Keystone XL pipeline to bring Canadian tar sands oil to refineries in Texas. The administration says such a decision cannot be rushed because studies of the pipeline’s environmental impacts will take longer.

But will increased oil drilling or importation of tar sands oil from Canada help consumers by reducing the price of gasoline? And should keeping gas prices low be the main objective of federal policy? I believe the answer in both cases is no.

Experts at the Department of Energy have stated repeatedly over the last few years that increased domestic oil drilling will have no effect on gas prices in the short term and will reduce gas prices by only a few pennies a gallon by 2030.

This is because ramping up production takes time, and also because the U.S. uses too much oil for increased production to make more than a small dent in what we now import.

Higher levels of production, of course, means increased risks of oil spills, as we learned from the catastrophic BP spill in 2010. In addition, importing more Canadian tar sands oil is unlikely to lower gas prices in part because much of it is likely to be shipped abroad.

The U.S. uses about 20 percent of the world’s oil production and we have 2 percent to 3 percent of its proven oil reserves. So even with a strong push for more drilling offshore, onshore, and in Alaska, the reality is that the United States cannot drill its way to domestic oil abundance and lower gas prices. We will still need to import at least half of the oil we use from other nations, and that means that gas prices will reflect global demand and supply.

Without a lot of fanfare, the administration has done something far more likely to help consumers than removing restrictions on oil drilling.

That is its historic agreement with auto companies in 2009 and again in 2011 to raise fuel efficiency standards to 34.5 miles per gallon by 2016 and to 54.5 miles per gallon by 2025.

We are seeing the results already, with great leaps in fuel economy in the 2012 models, and much more to come as the recent Detroit Auto Show demonstrated. A new Ford Fusion plug-in hybrid, for example, is expected to get the equivalent of 100 miles per gallon.

By sipping gasoline more efficiently, U.S. demand for imported oil should drop, but even so this will not likely have much impact on gasoline prices. Rising global demand for gasoline in India, China, and other rapidly developing nations will easily overwhelm reduced consumption here.

So we may as well get used to higher gasoline prices. We can limit their economic impact, however, by buying more efficient vehicles and driving only as much as necessary. We also can support a necessary transition over time to renewable energy sources to power our vehicles.

• Kraft is a professor of environmental studies at the University of Wisconsin-Green Bay. Readers may write to him at 2420 Nicolet Drive, MAC B310, Green Bay, Wis. 54311; email: kraftm@uwgb.edu.

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Jo MacNamara
697
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Jo MacNamara 02/03/12 - 08:07 am
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Change the headline

"Prices" not "Proces"

Latitude58
14731
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Latitude58 02/03/12 - 08:49 am
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All revenues...

...coming from domestic oil royalties should be rolled back into renewable energy R&D.

islander
1258
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islander 02/03/12 - 09:10 am
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Geothermal

I'm the frugal type. I'll buy something that will provide me a lower operating cost over the long term than what I now have. Geothermal systems have proven to stabilize your operating cost thereby offsetting any increase in energy cost.

As the geothermal technology improves, units like small heat pumps become more practical for home heating. They are not magic nor do they operate for free. However they are stable in their operating cost and not subject to oil price inflation.

Banditrider
638
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Banditrider 02/03/12 - 10:54 am
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Can't go cold turkey

I'm all for lessening our use and dependence on petroleum. However, like a deeply addicted junkie or alcoholic, you cannot go cold turkey. This leads to comatose and death. A gradual rehab program is needed. In the meantime, a dependable domestic source will protect us from shortages and price spikes that can occur from little banana republics like Iran pulling their little tricks. Domestically produced oil and natural gas are available today and can help ween us off foreign oil dependency and ultimately oil altogether.

Persnickety Persimmon
4173
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Persnickety Persimmon 02/03/12 - 12:07 pm
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@Banditrider: I don't think

@Banditrider: I don't think anyone has stated we should go cold turkey. Spend less time refuting your own make-believe arguments and more time dealing with the real issues.

You should also know that domestic oil production barely makes a dent in our overall consumption. And that domestic production doesn't protect us in the slightest from spikes in oil prices, because oil is highly inelastic.

Latitude58
14731
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Latitude58 02/03/12 - 01:34 pm
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Actually, PP

We domestically produce about half of the oil we use.

Persnickety Persimmon
4173
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Persnickety Persimmon 02/03/12 - 01:37 pm
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Err, yes. I misspoke. I

Err, yes. I misspoke. I should have said increased production wouldn't make a dent (unless there are enormous oil fields we don't know about yet).

swimmergirl
4370
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swimmergirl 02/03/12 - 03:11 pm
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banditrider......

how gradual are you talking? We've been trying to get car makers to increase gas mileage for 40 years. We've been talking about oil prices and getting off foreign oil for 30. Just when would be a good time?

milspec makes some good points in the other article. It's unfortunate for alternative energy companies that the general economic climate is not great right now, and that oil is still not expensive enough to make people flock to alternatives. Who knows what that price will be. But I do believe that alternative sources will become more efficient and cheaper over time - - my first computer was 1/4 the $500 computer I have now, and it cost me around $2,000.

Latitude58
14731
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Latitude58 02/03/12 - 06:05 pm
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@islander

"They are not magic nor do they operate for free. However they are stable in their operating cost and not subject to oil price inflation."

Until we use up all of our hydropower powering heat pumps and AELP gets to fire up their diesel generators again. Last time I checked (back during the avalanche, most notably), those generators did NOT run for free, and ARE subject to oil price inflation.

Next!

Calypso
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Calypso 02/04/12 - 12:38 am
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This article is nothing but

This article is nothing but leftist talking points laid out as fact.

This so-called professor, more like a drone of Obama, writes about the agreement with auto companies to increase fuel mileage. I believe it's more factually called a mandate from the government. And how high would you like the price of that new car to be?

Gas prices are determined by much more than supply and demand. Prices can rise on oil futures speculation. And since oil is traded in dollars, the price of gas has stayed high because of the declining dollar. Wars and unrest and natural disasters around the world and time of year matter too.

Are we going to believe that these so-called experts at the Dept. of Energy can predict gas prices in 2030? Not me...

And why would we want to see the demand for imported oil drop drastically unless it's because we are drilling for our own right here in America? We need lots and lots of oil to fuel our economy - just like India and China.

Decreasing oil demand means a sputtering economy at this moment in time in 2012 - and unfortunately, that's what we have.

We have enough proven and untapped oil reserves in this country to last several hundred years and we should be using them until man has perfected the next latest, greatest source of energy.

I'm not buying this professor's conclusion that high gas prices are here to stay so just get used to them. There are lots of things we could be doing to bring the price down.

Vote out this group in charge in Washington for starters.

Calypso
6973
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Calypso 02/04/12 - 12:39 am
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Does everybody else get

Does everybody else get moderated 80% of the time?

AH HA
1710
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AH HA 02/04/12 - 03:10 am
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Go ahead and raise the price

The odds are good that it'll prompt the voters to finally revolt and install a real government.

AH HA
1710
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AH HA 02/04/12 - 03:10 am
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Go ahead and raise the price

The odds are good that it'll prompt the voters to finally revolt and install a real government.

AH HA
1710
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AH HA 02/04/12 - 03:13 am
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Na calypso

He just hates you... (None of us understand why...)

Persnickety Persimmon
4173
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Persnickety Persimmon 02/04/12 - 05:31 pm
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Oh, Calypso

Don't ever change. No, seriously. If you did it might mean your software is evolving on its own and could potentially wreak havoc on computer networks worldwide.

Still, I would like to see where you get the idea the U.S. has enough oil reserves to last several hundred years. I'm pretty sure that's BS.

And higher demand for oil is a good thing? Higher demand is what leads to higher prices. Oil speculation and the strength of the dollar (which has been getting STRONGER, not weaker, as of late) affect oil prices, but the main determinant is supply and demand.

Boy, you conservatives aren't really much for "conservation" these days, are you?

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