Thursday, August 7, 2008

Energy Independence

I heard Anne Korin on CSPAN radio as she spoke at Young America's Foundation's conference this week. She's an energy security person with the Institute for the Analysis of Global Security.

You can open the Real Media file here. She starts at about halfway through the file. You can also find it in pieces at YouTube. Her talk is about 30 minutes long, but it's pretty worthwhile. She makes several really good points, including:
  • Oil money is financing many terrorists, so we are really paying for both sides of the "war on terror."
  • We can increase use of nuclear, wind, solar, and hydroelectric power and other alternatives, but they won't lessen our dependence on oil. Oil only accounts for about 2% of our electrical energy needs. Our dependence on oil is mostly about transportation.
  • Oil is a fungible commodity. If we don't buy middle eastern oil, others will. All that matters is that we buy from someone and worldwide demand is high. It's like a big swimming pool. Producers put oil in the pool and consumers draw oil from the pool. We only get about 20% of our oil from the Middle East, but that doesn't really matter. We are drawing from the pool, so we are part of the demand side.
  • Every time non-OPEC countries drill more, OPEC drills less. Even if we drill, we know that OPEC will decrease production so the swimming pool keeps the same capacity. We don't have enough oil reserves to remove OPEC's power when it comes to putting oil into the pool.
  • Oil is a strategic commodity. It is currently an irreplaceable resources that underlies transportation and thus the global society. To reduce the strategic quality of oil (and thus the power that OPEC has), we have to create options and really reduce the world's draw on the pool in a big way. Small decreases in demand don't really help since OPEC can just decrease supply to match.
  • We should develop hybrids that use flex fuel. This could allow us to drastically cut our dependence on petroleum for transportation.
Anyway, I thought she made some good points. If I had a chance, there are some things I'd like to discuss with her. For instance:
  • I am skeptical about ethanol in its current form. It costs lots to make it and I am not sure it makes sense with the dominant technology we have in place. When better technology comes along, ethanol can make more sense.
  • I think that alternative power sources (nuclear, wind, solar, etc.) make sense to replace coal and make sense as part of shifting the mix from gasoline to electric power for transportation (what will power our plug-in hybrids?)
I am suspicious about how strongly she is defending ethanol, but I think she made some really interesting arguments. Once you understand the swimming pool concept of supply and demand, you begin to see why China's huge increase in demand is one of the big causes of the increased cost of oil and why US pumping probably won't be part of the solution.

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