The United States is by far the world’s leading oil importer. Thus, when the price of oil goes up, our economy is severely taxed. At the beginning of 2011, many economists were talking about an emerging U.S. economic recovery. Yet by spring, as oil prices climbed above $100 per barrel, it became apparent to all who were paying attention that no escape from recession was in sight.
The economic impact of oil prices on the American economy is shown on the graph below, which compares oil prices (adjusted for inflation to 2010 dollars) to the unemployment rate from 1970 to the present. Every oil-price hike for the past four decades, including those in 1973, 1979, 1991, 2001, and 2008, was followed shortly afterwards by a sharp rise in American unemployment.
The distress to American workers caused by such events is manifest, but the economic damage goes far beyond the impact on the unemployed themselves. A sustained oil price of $100 per barrel will add $500 billion to the U.S. balance-of-trade deficit. This represents a subtraction from our gross domestic product equal to that required to support 5 million jobs at $100,000 per year each. And when Americans are out of work, many cannot pay their mortgages — a factor that undoubtedly contributed to the recent crash of home prices and the resulting recession.
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Looking at the data in the graph, it is clear that cap-and-trade plans, or alternative methods of carbon or fuel taxation, are not the answer. Indeed, by increasing the cost of energy, they will only make the economic situation worse. Rather, what we need is a policy that will force world oil prices down. The way to do this is to flood the world market with liquid fuel from every source available to us.
It is in this light that the extreme malfeasance of the Obama administration in delaying the approval of the Keystone pipeline becomes apparent. While much has been made of the loss of 20,000 jobs building the pipeline, that is the smallest part of the matter. The real issue is that by refusing to approve the pipeline, the Obama administration is acting to block the introduction of 270 million barrels per year of Canadian oil into the world market. In doing so, the administration is acting in accord with the interests of the OPEC oil cartel, which wishes to see supplies limited so that it can maintain high oil prices at the expense of the West. At current prices of $100 per barrel, this will cause a loss to the North American economy of $27 billion per year — an amount sufficient to create 270,000 North American jobs. (Canada draws 65 percent of its imports, which amount to 31 percent of its GDP, from the United States. The two nations effectively share one economy.)
Excellent article, and timely considering what is happening in the Straights of Hormuz. It's to bad no one in the Obama administration seems understand the seriousness of the situation.
The only jobs created by the oil industry are clean- jobs after oil spills and deep-water, blow-outs and pump-handler jobs. The oil from the Keystone pipeline will have no effect on the oil price in America because the refine products from the pipeline will be exported. The refineries in Port Arthur, Texas are in a tax-free zone, so this oil will benefit Shell, Valero, Total and the Koch brothers.
"The only jobs created by the oil industry are clean- jobs after oil spills and deep-water, blow-outs and pump-handler jobs."
Really? I better tell the two neighbors across the street one of whom works in the Prudhoe Bay oil fields and the other works for Alyeska pipeline service company that they don't have jobs.
"the refine (sic) products from the pipeline will be exported."
Exports are bad? Oh and do those products refine themselves?
Ah yes, the Koch Brothers. Tell me, how did the Koch Brothers make their money? what products and services do they provide? How many people do they employ? Now answer the same questions for George Soros.
Unfortunately, the author, in his enthusiasm for methanol, overlooks the major infrastructure issues when transporting any type of alcohol (methanol, ethanol, propanol, etc.).
Crude oil and gasoline or other refined products are hydrophobic and do not corrode pipelines. This is a slight oversimplification but it means that corrosion from the inside is a minor and easily managable issue.
Alcohols, however, are perfectly miscible with water and therefore present major corrosion and storage problems. Corn-derived ethanol is shipped by rail tank cars today for those reasons. Tank cars are a much more expensive means of transport than pipelines, whose only competitors in bulk transport efficiency are the VLCC tankers.
Using ethanol as an addititve at the 10% to 15% level represents about the safe and cost-effective limit of "gasohol" blends without major infrastructure costs.
Let's leave the "pie in the sky" theoretical fixes to our energy problems to the Obama Administration.
Not to mention that methanol has less than half the energy density of gasoline ( 15.6 megaJoule per liter vs. 34.2 MJ/L), so your car would require about twice as many fill-ups to travel the same distance. And methanol burns with a nearly invisible flame, so it is not always obvious when it catches fire.
Yes, some investement but not as much as you'd think. Our natural gas piping runs dry. With all the new gas findings close to the major metro areas we will soon have a lot of spare piping capacty that could relativly easily be converted to transport methanol/alcohol.
"The bipartisan Open Fuel Standards bill (HR 1687), cosponsored by Reps. John Shimkus (R., Ill.) and Eliot Engel (D., N.Y.), contains provisions that would require that the flex-fuel capability of the majority of new cars sold in the U.S. be activated."
Poor choice. Remove restrictions and regulations and let the market decide!!!
Good article, but demand need not be quite so inelastic. We hurt ourselves by building cities that require car use for every trip. We might also get better use out of freight rail.
You've obviously never tried to ship anything by rail!
This is a great idea, though. To prepare for a great increase in rail freight, you only need to do two things. Shoot all the Union pugs, and then the goverment regulators.
Until then, you're just urinating in the wind.
This reminds me of an article I read within the past year. I remember a chart with the breakdown of methanol in it; and the chart showed lowered emissions too. There was one mixture which had an outcome of zero NO output. It was run through again because they thought it was an error, with same result. I wish I could remember the others but they were lower than current levels. It might of been a comparison of ethanol level mixtures and methanols. I think the methanol level was between 50 and 80 for zero NO emissions
Maybe you could contact Boone Pickens, since he wants to make money...err help with energy independence. He already tried to push LNG and invested in nat gas directly, he would get what he wants, money and an ego-boost.
Was kind of hoping this was some article explaining why price goes up by itself, regardless of any outside forces. As well as, why it was only the past decade that prices took off. And finally, why the moves are so gigantic. Oil is the lifeblood, it could be at $200 and still be bought. It is the only commidity that is required for our world as is. Will people accept regression? I think not.
We can still make gasoline from coal. Use the Fischer-Tropsich process like Sasol does in South Africa. They make 100,000 barrels a day at one plant. The Germans used it in WW2 and supplied their airforce completely with the synthetic fuel made from coal. The South Africans perfected it & used it to get around the apartheid sanctions. We've got a lot more coal than they have oil. Convert the power grid to nuclear & convert the coal to gasoline. Energy crisis solved.
Better yet, use the Fischer-Tropisch process with natural gas as the hydrogen source and coal as the CO source. Then you’re converting two fuels that you have in abundance into gasoline, instead of making it from one fuel that you have to import.
Mr. Zubrin, you're undoubtedly an intelligent individual, but so are most NRO readers. It seems as though we have the same "conversation" every month or two. You present an initial "no-brainer" argument for methanol as literally the savior of the world, but then we're told it requires a government mandate to get the ball rolling.
Why not advance the conversation by answering a few of the many questions posed by your readers? Such as:
1. If I was CEO of a car company, and I could manufacture methanol-ready vehicles for an additional 50 cents, it would be done. Why the government mandate?
2. If there is a fuel with a higher degree of inelasticity than gasoline, it is natural gas. Have you completed any economic studies as to the impact on natural gas prices if your ultimate methanol production goals are achieved?
3. Are you personally positioned financially to take advantage of higher natural gas prices?
Instead of writing the same column next month, why not address some of these issues? For me, it would be very interesting.
C.mon..he doesn't write the SAME article..the wrapping is different..but you know that, inside, it's going to be the same old government mandate.
It's always a little amusing to me how many different ways he can lead up to the idea of this "Open Fuels Standard Act". Remember the "everyone's scared to bet with me?"
"If there is a fuel with a higher degree of inelasticity than gasoline, it is natural gas. Have you completed any economic studies as to the impact on natural gas prices if your ultimate methanol production goals are achieved?"
That is a very good question, considering that our entire food production is based on fertilizer produced by the century old Haber process, which has been implemented in the U.S. using natural gas as the fuel. Using natural gas to produce a gasoline replacement might impact fertilizer prices the same way that ethanol production has impacted grain (and meat) prices. The effects could cascade though nearly every segment of agriculture.
Lets convert the power grid to nuclear and convert coal to gasoline using the Fischer-Tropsich process that South Africa uses to make 100,000 barrels a day of the stuff. Crisis solved
The F-T process is used regardless of what the feed stock is, coal, natural gad, wood. Zubrin keeps on banging on about methanol, when it seems to me the ideal product would be diesel. It has a higher energy density, won't freeze as easily and the delivery and dispensing infrastructure already exists.
The main reason there aren't more of these plants around is that they are staggeringly expensive to build, and use about 10% of the feed stock to provide the energy to keep the process going. Forget getting regulatory approval for one of these plants in the US.
