Oil Shale Economics

Thomas Friedman wrote today about the need for the United States to reduce our need for foreign oil, proposing a phased $1 tax on gasoline to help wean us from it. This would certainly reduce consumption, but it would not really reduce our dependence upon foreign oil (only reducing the amount we consume) and would result in significant job losses. There is potentially a better solution.

A few years ago, I saw a study that said that with oil at $100 there is vastly more oil available than there is at $50. The lower price point makes it impossible for companies to consider investing billions of dollars to reach shale oil. However at $100, it could make economic sense.Once the investment is made, the available oil supply would be much larger than it currently is. Of further note is the fact that North America has by far the largest reserve of this type of oil in the world. As a general rule, as the price increases, so does the amount of oil available.

I don't know if the price point is $100 or not at this point, but I do know that the US would be able to be self sufficient should the price go much above that, having reserves so vast as to support not only our own economy for generations, but others as well.

This is evidently one reason why OPEC has worked to keep the price of oil below the critical level. If oil is at $40 or $50, it is only cost effective to drill where there are large pools of oil. As I understand it,we're nearing the tipping point when it will become worthwhile to go after the shale oil. At that point, we could end our dependence upon foreign oil entirely without providing incentives for change (taxation) in our own economy.

The real fear on the left, and this is why taxation is proposed, is that there will be no new incentive, other than increased cost, to use alterative sources of energy and that fossil fuel usage might even increase. Taxation would alter the value of the commodity, potentially keeping its value below the critical tipping point by reducing demand. In other words, taxation will force us to continue to depend upon foreign oil while also forcing us to reduce our consumption.

The markets left alone will result in higher oil prices that will make exploration and usage of the vast reserves of oil in North America more worthwhile, resulting in a dramatically reduced, if not eliminated, reliance upon foreign oil, while also reducing consumption simply because of the increased price. Basically, the markets will alter behavior as much as taxation could do while benefiting the United States far more.

There are clear negative environmental impacts of shale oil exploration and legislation will no doubt need to be implemented to address them, likely raising the costs somewhat. In the long run, finding effective and inexpensive alternative forms of energy is by far the best alternative.

For a simple explanation of oil shale economics, see this basic explanation from Wikipedia.

Purim Katan - The Threat of The Mob

Everywhere in the world today, minorities are under threat. Some of you, no–many of you, would note, “They always are.” Yet, the truth is that such threats are relative and today, I am concerned.

Americans believe that power is derived from the will of the people. We decry despotism. Yet our sense of fairness often drives us to allow the mob to rule even when we know that its rule is unfair. That contradiction results in another, namely a contradiction between the belief that the rights of every person are sacred and the belief that the will of the majority, even to trample upon the rights of the minority, must be followed.

Today we are witnessing upheaval in the Middle East. Mob rule threatens to overturn despotism. Ethically, we must support the mob because power should derive from the will of the people. Yet also ethically, we must oppose the mob’s efforts should they gain power, to create a tyranny of their own. Our conflicted minds think, “Down with the dictator! Beware the victors!”

I wish that I could say that this conflict was limited to foreign lands. It is not. This week, both on the left and the right of the political spectrum, mobs gather to press their voice, to press their power, in states across our Union. They speak and act in righteous indignation at affronts, at unfairness, or in religious fury. I will not for a moment declare all of these groups wrong to do so and, in this place, will not even criticize a one. What I offer here is one man’s sense that times are changing. The majority is feeling empowered to act as a mob. Minorities, both ethnic minorities and those who hold minority views, are under increasing threat.

Thus, when I hear the words of those advocating for the United States to support condemnation of Israel precisely because the majority of nations do and when I can note that this reasoning seems to be starting to resonate, I find myself, as I do today, becoming increasingly concerned. I am concerned not only for Israel. Israel has friends. Israel has strength. Israel may take care of itself. I am concerned that the 1920s, 1930s, and 1940s will be reborn and that Israel’s purpose as a safe haven for the persecuted Jew will be made manifest again. I am concerned that the rights of minorities in America and throughout the world will be under threat because the masses so wish. I am concerned that the rule of law will be increasingly unable to be sustained against the will of the masses.

There is little or no difference between the resolution proposed in the UN Security Council today in condemnation of Israel and many others that have been proposed before. The real difference is in the sense that standing up for the persecuted minority, or even standing apart with a minority, increasingly appears to be seen as unreasonable and even as unrighteous.

Should the United States today vote to support the majority for that sole reason, it will be a shameful day in our nation’s history and a frightening omen for the future.

Today is Purim Katan, “Little Purim”. Today is the 14th of the First Month of Adar. Today, though we are not required to read the Megillah, the Book of Esther, as we will be required next month on Purim, we are reminded of the persecution of minorities everywhere in the world. We are reminded that the tide may swiftly change against us and others. We cannot forget.

If we are vigilant, we may live the blessing from the Book of Esther, “And the Jews had light and Gladness and Joy and Honor.” Kein yehi ratson!

This article is cross-posted at Yourish.com