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Economists’ View – Fossil Fuels Pose Major Threats to the U.S. Economy

July 6, 2011

Source: CNNMoney

With all the controversy surrounding the scientific community’s proclamation that man’s combustion of fossil fuels is a major contributor to climate change, now comes another view by economists that has nothing to do with oil and global warming.

Almost from the onset, the political motivation to reduce oil consumption had less to do with greenhouse gas emission than it did with energy independence and national security. Two noble goals that are irrefutable.  Similar concerns were raised in my August 2010 discussion, “Forget Politics, Think Economics” – Oil Independency Is Not Only About Climate Change and Global Warming.”

In a July 5, 2011 article “The scariest risks to the economy,” Chris Isidore, CNNMoney, reporting on the results of a “survey of 27 economists asked to choose from a list of possible threats facing the economy- What scares them most?, reported:

• “A European debt default in a country like Greece or a new oil price spike are the biggest risks to the U.S. economy, according to economists.”

• “Another oil price shock, which most likely would come from further political turmoil in the Middle East and North Africa, is their next biggest worry.”

• “….. economists blame the spike in oil earlier this year for the slowdown in economic growth, as it raised costs for businesses and cut into consumer spending. And though oil and gas prices have come off their highs of a couple of months ago, the threat they pose to the economy has not vanished.”

• “Oil prices sustained above $125 a barrel for six months or longer would guarantee another recession in 2012,” said James Smith, chief economist for Parsec Financial Management.”

• “After tumbling on the news that the U.S. was releasing 30 million barrels of oil from the Strategic Petroleum Reserve, oil prices are on the rise again, currently hovering around $95 a barrel.”

Interestingly enough the report did not directly blame “oil imports” as a problem. It does cite the overall price of oil as the threat, whether imported from Canada, Mexico, Saudi Arabia or Russia. Though unrest in the Mid East and Africa is mentioned as a likely cause to for future skyrocketing oil and petroleum prices.

To refute or dispute this conclusion by the economists, the U.S. Energy Information Administration (EIA) arm of the Department of Energy (DOE) reported that as of April 2011, the makeup of U.S. oil imports by country or of origin is:

• 61.1% from Non OPEC countries
• 38.9% from OPEC Countries
• 22.6% from Canada
• 14.7% from all Persian Gulf countries
• 9.6% from Saudi Arabia
• 9.3% from Mexico
• 8.0% from Algeria
• 6.1% from Russia
• 4.5% from Iraq
• 4.4 from Colombia
• 4.0% from Algeria

Notes:
1. OPEC countries includes: Algeria, Angola, Ecuador, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela.
2. Persian Gulf countries: includes Bahrain, Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and United Arab Emirates.

As a final insult to injury, the DOE reported on June 7, 2011:

“Total U.S. consumption of liquid fuels increased by 270 thousand bbl/d (1.4 percent) during the first quarter 2011 over the same period the year before. Consumption growth during the first quarter was led by distillate fuel oil (160 thousand bbl/d) and liquefied petroleum gas (70 thousand bbl/d). Motor gasoline consumption fell by 50 thousand bbl/d. Consumption growth is expected to slow over the forecast. Projected total U.S. liquid fuels consumption increases by an average 150 thousand bbl/d (0.8 percent) in 2011, and by a further 130 thousand bbl/d (0.7 percent), to 19.4 million bbl/d in 2012, which is still well below the record high 20.8 million bbl/d in 2005.”

“Motor gasoline is the fastest growing consumption category in 2012, reflecting growing population, rising employment and income, and a predicted end to the recent steep run up in retail gasoline prices.”

In closing, regardless of the cause(s) of global warming, anthropogenic vs. non-anthropogenic induced climate change, and imported vs. domestic oil, the potential of an economic disaster of unparalleled proportions raised by an group outside the scientific community is just another reason get off fossil fuels. Possibly, the scientists and economists have finally teamed up to scare us into believing self-serving conclusions.

When will Uncle Sam wake up to the facts and do something? Sorry, forget about the 2011 and 2012 elections.

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6 Comments leave one →
  1. July 6, 2011 12:31 PM

    The best way to get off of fossil fuels is to let the markets operate. If we are truly running out of oil, whether at home or abroad, and prices skyrocket, then it will be priced out of competitiveness versus other fossil fuels like coal and alternative energy sources at various stages of efficiency.

    Regardless of if someone agrees with the ethics of how markets operate or not, intellectuals should at least acknowledge how they operate. They should address the marketist arguments, refute them with facts and evidence, or make explicit their ethical qualms with the system without allusion to Kantian transcendentalist ethics like “fairness,” and precisely elaborate on exactly what institutionalizing that ethic means in relation to human affairs in the real world.

    My reading of human history indicates to me that when a ruling body has control over an economy, servitude to the ruling class follows. The temptation to abuse power for personal and political gain becomes too great for the elites over time, and attracts the most unscrupulous of characters. For this reason, I yield no solution to supposed manmade global warming that does not explicitly acknowledge and integrate private property rights.

    That being said, American companies should be allowed to drill, and should not be penalized for increasing our supplies with supposed “windfall profits.” The states make far more money in profits, sometime 20:1 or 30:1 on each gallon of gasoline, than oil companies that put all the effort into resource location, extraction, and delivery to market. Now is that “fair”? I say not.

    I appreciate your blog post, Dr. Stevens.

    Sincerely, RO

  2. July 6, 2011 12:33 PM

    While I was writing I noticed two grammatical errors that I need to fix. “And precisely” should be changed to “or precisely.” “Windfall profits” should be changed to “windfall profits taxes.” Sorry for any confusion, RO

  3. July 6, 2011 2:32 PM

    Paul,

    Please call me Barry. I dont make house calls, lol.

    Thanks for the kind words and value-added comments.

    If you are LinkedIn send me an inviation to barry@tbdamericainc.com

    Have a great day.

    Barry

  4. DiogenesNJ permalink
    July 11, 2011 11:48 AM

    One of the sidebars in your home page talks about geothermal energy. Unfortunately, magma is in short supply in NJ, so I’d like to ask you to consider artificial geothermal. That is, small-scale nuclear energy using a lead-bismuth eutectic (LBE) as the coolant and working fluid:

    http://www.nucleartigers.org

    Are you aware that half of NJ’s electricity is generated by nuclear power, among the top 5 states in the country? If you are reflexively afraid of nuclear, you might want to look at the following link. This is an expanded version of a talk I gave at my kids’ elementary school for Earth Day this year (yes, that would be after Fukushima) entitled “A Rational Environmentalist’s Guide to Nuclear Power”.

    http://www.scribd.com/doc/54904454

    Quite simply, I think nuclear is the only technology with a realistic chance to cut global CO2 emissions by any significant amount in this century. I’d like to hear your thoughts after looking at this document, and see whether I’ve affected your opinion at all. This administration is allergic to nuclear, it seems (at least, it thinks its political base is).

Trackbacks

  1. An Economist View – Fossil Fuels Pose Major Threats to the US Economy : PlanetTalk.net - Learn the truth , no more lies
  2. Petroleum Savings if all Passenger Vehicles in U.S. were Hybrids or EVs! « BarryOnEnergy

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