Prof. Hamilton has a very good introductory post on U.S. oil production and how it is in decline, has been in decline for the past two generations and will likely always be in decline. What I found interesting was the final portion of the post that discusses who benefits from rising U.S. demand while at the same time U.S. production is on the decline. The short answer is oil rich/exporting countries, many of whom have links to terrorism. Also, what would happen if the U.S. could significantly reduce or even stop importing oil; the price would drop radically.
Prof. Hamilton even turns to past, present and hopeful leaders of our country including Richard Nixon, Jimmy Carter, George H.W. Bush, George W. Bush, and Hillary Clinton. They all sing the same tune, more or less, that being less reliable on foreign oil would be a good thing. If so many different high ranking leaders all agree how come nothing is done?
Prof. Hamilton notes that achieving this goal is painful, but that is about as far as he goes. The reason why it is expensive is that right now all other options are at least as costly as continuing to import oil from other parts of the world. The way to think of it, and it is surprisingly simple, is that if it were cheaper to switch to alternative sources of energy we’d have done it already. You can’t have every increasing prices and people passing up substantial savings. That $10 billion a quarter that ExxonMobil is earning, those are the savings that people are passing up by sticking with oil if in fact it would be cheaper to run cars off of used vegetable oil.
This point is often lost on people who advocate switching to alternatives and they argue as if these costs are either don’t exist or they are neglible. Even the argument in for more research is suspect since there is already quite a bit of incentive to find an alternative. All those billions and billions of dollars in profits the oil industry have been taking in, that is the incentive for more research.
