Make Gas Cheaper

Obama throws Big Oil a bone. I haven't really looked into the details, but of course I'm skeptical that it will even reduce prices. I am also concerned that reducing gas prices will further delay innovation and investment in clean technologies.

Environmental Economics : Pricing

The role of technology is really important in policymaking and regulations. Natural resources are not priced purely based on scarcity. The price is based on the cost of extracting that resource, and the rate that it can be extracted. Although the resource is always just being depleted, the price does not necessarily have to go up. It may take more “effort” to extract the resource as it gets depleted, but the effort is not necessarily translated to having a higher cost because of new technology. One example is the overfishing of tuna. Although tuna populations have dropped substantially, tuna prices have not gone up enough to decrease consumption substantially because of technology that makes it easy for fishermen to find and catch the athletic fish. Yes, it does require more effort to catch the tuna now compared to before, but it is not more expensive.

This effect is also present in the petroleum industry. Most environmentalists were hoping that as oil gets depleted and it becomes more and more technically difficult to extract, it will become so expensive that we'll have to move to clean technology. However, because there have been so many technological developments, we are not rate limited or production cost limited. Deep water oil rigs are serious engineering productions, but the amount of oil in the deep waters is considerable. Then instead of substituting oil with clean energy, we might keep using oil and even more frustratingly, continue to engineer cheaper ways to extract it instead of just giving it up and working entirely on clean energy instead.

The only thing that is really expensive with these rigs is the cost of a major mishap such as the Gulf Oil Spill. As it becomes more and more risky, the engineering may become more and more risky, which will ultimately make it more expensive. Even so, the cost to the environment is often greater than the monetary cost to humans. Nature cannot be paid off.

Raise Fuel Standards

Obama Mandates Raising Fuel Efficiency Standards for Cars

Gulf Oil Still Spilling

So they can't figure out how to stop the oil from spilling so at this point about 5,000 barrels(?) are spilling into the ocean, and it is likely to hit shore sometime tomorrow.

Looks like there are about 42 gallons/barrel so that's 200,000 gallons a day. I wonder if they are saying how many barrels because people don't really know how big is a barrel so 5,000 barrels doesn't seem like a lot.

There will soon be amazing PR images of the damage, but environmentalists and scientists will need to use them well to build a solid case against offshore drilling.

Gulf Oil Spill

Recently, an oil rig in the Gulf of Mexico exploded and collapsed. They have not yet figured out how to clean it up. I also heard that 40% of the seafood consumed in the US comes from the Gulf so this could have major impacts on industry and health in addition to the environment.

NYT article on the leaks.

Hopefully this will make people think twice about offshore drilling.

Independence From Oil

This post on the Breakthrough Generation Blog makes a great case on why independence from foreign oil is really a misnomer. In order for true independence from foreign oil and the foreign oil market, you need complete independence from oil.