Which OPEC Country Supplies the U.S.?

December 2, 2004

Comments

Policy Pete has a cute graphic following that question. From purely price perspective the answer is: who cares. There is a global market for oil. From the perspective of price, the question is largerly irrelevant. Heck, even from a “who funds terrorist” perspective it is largerly irrelevant. After all, no matter who the oil is purchased from the price those who support terrorism get will not be materially different.

Who we buy oil from isn’t really going to change anything. It is very much like those idiotic one day “boycotts” that were all the rage on the internet a few years ago. You know, you’d get the e-mail saying on a specific day don’t buy gasoline from this or that oil company. That way they’d see their revenue plummet that day, and boy that’d teach them not to raise prices. The fact that you’d be rolling in a day or two later to fill up the tank apparently wouldn’t offset this devastating loss of revenue for a single day (as if the large oil companies are looking at revenues on a dialy basis for the service stations). What silly nonsense.

On a slightly different note I find it amusing how ol’ Pete seems to be moaning about the high prices and the lack of renewable energy sources. Maybe somebody should tell him that the former make the latter look more attractive both in terms of a source of energy and as a research opportunity….Nawww, we wouldn’t have all the schizophrenic posts to read if somebody did that.

6 responses to “Which OPEC Country Supplies the U.S.?”

Kappiy

December 2, 2004 at 4:09 pm

The problem with our energy policy is twofold: 1) oil (and other fossil fuels) are non-renewable and are available in finite quantities. Eventually these supplies will run out. They became our dominant forms of energy during a time when the finiteness of the supply was not questioned. Given this fact, a sensible policy would look at projected supplies and projected demands for energy and look for alternative sources.

This brings us to the second part of the problem: 2) The consumption, production, and distribution of these finite forms of energy are highly subsidized. From the cheap “mineral rights” practically given to mining companies to drill on public lands to our military interest in the middle east, there is a pattern of general revenues subsidizing what is essentially an economically problematic pattern of consumption.

A rational policy would be to slowly reduce subsidies for fossil fuel consumption and invest thin research for alternative, renewable energy sources. There is little to suggest that the current administration is equipped, intellectually, to do that.
Steve

December 2, 2004 at 4:23 pm

I alwasy laugh at the claims that the energy industry is always highly subsidized. Nevermind all the taxes and environmental regulations on the industry. Sure, its simply subsidized and the evidence? Some vague handwaving at “cheap mineral rights”.
kappiy

December 2, 2004 at 7:23 pm

The giveaway of the mineral rights are just the tip of the iceberg. Subsidies operate at numerous levels: energy security (keeping the strategic petroleum reserve stocked; securing shipments through hostile regions–e.g. Persian Gulf; military action to “stabilize” regions of supply (e.g. IRaq, Indinesia, Afghanistan, foreign aid to countries like Uzbekistan, Egypt, Israel, etc…)

Businesses can write off the depreciation of petroleum-based equipment. The waterways in the US remain navigable due to government intervention and fossil fuel shippments make up a significant proportion of water traffic.

Private energy companies can get industrial development bonds that provide tax-exmpt debt. SImilarly, municipal fossil fuel power companies also get tax preferences.

There are offsets in the form of energy taxes, but they don’t necessarily cover the balance. Fuel taxes are a good example. Much of the infrastructure needed to accomodate extensive fossil-fuel based forms of transportation receive state and local subsidies in excess of what is provided back to the states from the federal fuel tax.

There are numerous studies that assess the extent of direct and indirect subsidies. I would point you in the direction of:

Koplow D. 1993. Federal Energy Subsidies: Energy, Environmental and Fiscal Impacts, Summary Report and Technical Appendix.

While a bit dated, it went through a peer reviewed process and, hence, is more reliable than something coming from an advocacy group.

Clearly, in the area of energy security, the costs are probably much more significant now for government support of fossil fuel consumption given the occupation of Iraq.
Attila Girl

December 3, 2004 at 3:28 am

The presumption that we are in Iraq to secure the oil supply always struck me as dubious: after all, we have plenty of money. Why didn’t we just buy oil from Saddam? No muss, no fuss. No political firestorm, no American deaths.

And I’m confused about the inclusion of Israel on that list. I had never understood it to be a major energy supplier. Perhaps I’m mistaken?
Steve

December 3, 2004 at 4:26 am

kappiy,

Have you ever thought of…oh I don’t know…looking to see if the subsidies outweigh the effects of taxes?

And as for “energy security” who is the subsidy for? Energy companies, consumers, other firms, all of the above?

I’m quite underwhelmed.
Kappiy

December 3, 2004 at 12:09 pm

First, to Attila Girl:

It has been US policy for over 60 years to guarantee the security of Saudi Arabia. No one paid much attention to the place until Standard Oil found large oil reserves in the 1930s and by 1945 Roosevelt guaranteed the Saudi monarchy security in return for unimpeded access to oil development and exploration.

Of course, the aftermath of WWII also brought about the realization of the directives held forth in the Palestine Mandate, culminating in the Irgun terrorist group bombing British Administrative headquarters and their decision to cut and run.

This, of course, created a significant security imbalance in the region and the US having to negotiate its support for Israel with its agreements with and economic interests in Saudi Arabia.

Israel is not, as you suggest, an exporter of energy; however, our strong and sustained involvement in the region has been motivated by a desire to reach a level of stability. Lack of stability makes it difficult to do business in the area. Simplistic notions that we are involved in Iraq “to take their oil” should be rejected. What is irrefutible is that there is a belief amongst policymakers that the more the US can influence the political and economic environment in the region, oil exploration, production, and exporting will be smoother.

One would have to be extremely naive to discount the fact that the main reason we want to (in Bush’s words) “bring freedom & democracy” to the Middle East is motivated in large part by the significant deposits of fossil fuels.

Certainly, there is evidence to suggest that Bush’s silly religious messianic superstitions might motivate his desire (see Woodward’s book or David Frum). But on the whole, economic interests–rather than ideological ones–have and will continue to motivate our military policy.

As for Steve’s comments:

Regarding the issue of whether the taxes put on fossil fuels outweigh subsidies: I would suggest that you look at the Koplow study. It is an independent, peer reviewed research report by an economist that concludes that subsidies clearly outweigh the paltry taxes paid for the fossil fuel use and infrastructure needed to sustain it.

With regard to who benefits from the subsidies: yes, consumers, companies, other firms, etc.. all currently benefit. The point I made in my original post, however, is that these benefits are unsustainable in the long run due to the finite supply and that it is unwise to subsidise unsustainable policies.

Just like the Bush Administration’s argument regarding the need to cut Social Security benefits because they are unsustainable in the long run, a serious energy policy would recognize that our current set of conditions also requre reform.