Martin, I'll tell you something about Boone Pickens …

You don't tell me anything really, except your preference for some other prophecy. Why imagine that offshore oil drillers covet subsidies any less than anyone else?

"Am I the only one tht began having trouble accessing the Cafe Hayek website last week.

I went two or three days with being told that it could not be opened, then it was fixed and now this morning I am back to the not available screen again."

Any clue as to what is going on?

One person.

Makes a real farce out of that equal representation thing doesn't it?

It doesn't matter that she is doing it out of playing policitcs for future advantage (after election); what matters is that one representative (Nancy Pelosi) has the power under the Constitution Art 1. Sec 5, Para 2. which allowed our congresscritters to create this traversty of representation. She could be the head of a committee instead of Spealer of the House and she still would have the power to block it…..of course she wouldn't have the power to order the lights turned off, the microphones, turned off, and the cameras of C-span shut down if she were the simple head of a committee in opposition to the Speaker, but what matters again is the simple fact that our government can be held hostage to one person. And proof of that is slapping you across your chops right now…..once again.

One person, Ladies and Gents, and most likely it ain't your person. Kinda sucks doesn't it?

"As for nuclear, my understanding is that it would be an alternative to hydrocarbon based fuels for production of electricity – which is a large chunk of demand and why petroleum companies see it as a viable threat. I don't know how much it will do for transportation.
Posted by: Methinks | Aug 5, 2008 4:59:31 PM"

My goodness lady, a small nuke explosion in the rear of your SUV ought to propel you for a long way, that may be threat enough.

You forgot to ask me when I stopped beating my husband!

Let the record stand.

the record!

Martin, I'll tell you something about Boone Pickens (for I too listen to his commercial all day long). It is far less risky to seek government subsidies for wind farms in this political environment than to take the risks necessary to find petroleum. Just something to consider when you talk about good ole' Boone. He is rent seeking.

Like, I said, I don't have time to go into Huberts Peak and why most of your assertions are naive. Just get an energy primer with comparisons of different energy sources and spend some time on the subject.

As for nuclear, my understanding is that it would be an alternative to hydrocarbon based fuels for production of electricity – which is a large chunk of demand and why petroleum companies see it as a viable threat. I don't know how much it will do for transportation.

Yeah? How do you know?

I don't think anyone knows that nuclear energy is the only alternative to petroleum as an automotive fuel. Again, according to Boone Pickens, who has some right to an opinion, a combination of wind generated electricity and natural gas propelled cars is a competitive alternative to gasoline from petroleum at this time, and Pickens puts quite a bit of his own money where his mouth is. Why should I believe that you know better?

Plus, you tend to plug your ears and dig in when anyone challenges your ignorance – as John Dewey did.

Incredible. Above, I write, "If unwarranted political barriers hinder offshore drilling for oil, I want the barriers lifted …" Later, I write, "I nowhere ever express any opposition to offshore drilling, on the contrary."

Two posts later, you respond with "[John]'s arguing that more land should be open to petroleum exploration and development. Why do you have a problem with that?" Well, I don't have a problem with it, as I said. The point involves effects on the price of gasoline and pressure for oil subsidies vs. other subsidies.

Arguing that increased exploration for offshore oil need not lower the price of gasoline is not an argument against exploring for offshore oil, anymore than arguing that more nuclear power plants needn't lower the price of gasoline is an argument against more nuclear power plants. I never make the point that you attribute to me here at all.

But you accuse me of "plugging my ears" and hearing only what I want to hear. The record is very clear. Your accusation is a denial reflex. You describe yourself.

Yeah? How do you know?

That is hilarious. It will take me a whole week to run an energy tutorial to unwind your misconceptions. I don't have time for that. Plus, you tend to plug your ears and dig in when anyone challenges your ignorance – as John Dewey did. So, there's not much point. The funniest part of your post is when you assert that I don't know enough about nuclear energy to make the statement I make. This after a long diatribe rooted in complete ignorance. Thanks for the laugh, Martin.

Point taken, Vidyohs.

Adam's challenge is based on the assumption that alternative fuel can be viewed independently of petroleum.

I don't agree. His challenge is based on the assumption that alternatives interact with petroleum to influence the price of gasoline.

Like it or not, with the exception of Nuclear energy, no alternative to petroleum is as efficient.

Many alternatives are not competitive, but "no alternative is as efficient" is short sighted. Boone Pickens claims that we can replace a substantial portion of the electricity generated from natural gas with windmills and then use the natural gas to run automobiles. I don't know that he's right, but he makes the case.

It's not simply a matter of replacing petroleum with something else, one for one. Substitutions can be more complex. A replaces B, and B replaces C, and C replaces D. That's equivalent to A replacing D. And "A" in this case needn't be an energy source at all. It could be a more fuel efficient automobile or a more practical battery, like a higher capacity supercapacitor.

Thus, all other alternatives depend on extremely high oil prices to even hope to be somewhat competitive.

Well, the $70+/barrel cost of offshore oil is extremely high compared with the $10/barrel cost of Saudi oil. Those are the "real facts" according to John, and no other credible numbers appear in this thread, only wishful thinking and hand waving. I can just as easily prefer Pickens' hand waving. He's no environmentalist Cassandra.

The pressure for subsidies comes when oil prices collapses (petroleum tends to be a boom and bust industry).

Right.

Petroleum companies cut back on operations, people get fired, local economies flag and local politicians seek to "stimulate" them back into action by seeking tax breaks for E&P.

Imports increase, and politicians call for more domestic supply in the name of "national security". Petroleum companies accept subsidies as happily as agribusiness or anyone else.

Since alternative fuels only begin to become marginally "competitive" (but only with subsidies – a contradiction, really) during tremendous oil price spikes …

I don't know that alternatives become competitive only during oil price "spikes". At some point, global oil production peaks (as it did decades ago in the U.S.). the oil price might then rise and subsequently decline as alternatives replace oil as an energy source, but the price decline then doesn't drive out the alternatives, because there isn't enough oil to replace the alternatives.

Even if we lift all restrictions on oil exploration in the U.S., in Alaska, off the cost of Florida and everywhere else, we'll never remotely approach the peak of U.S. production decades ago, and we'll never come close to meeting our own current demand. This point is not controversial.

Like it or not, alternative energy is itself dependent on oil price by virtue of being a substitute.

I like it just fine. Oil is also a substitute for the alternatives. Alternatives to gasoline will appear in the next few decades, because oil production is near a peak.

The minute you shift demand from oil to alternatives, the oil price drops and alternatives become even less attractive, requiring more subsidy.

No subsidy is required to substitute alternatives for oil. I don't advocate any subsidies.

The only way to make alternatives more attractive is by creating artificial scarcity in oil to drive up price – which is partially what's happening.

No artificial scarcity is necessary. Oil is self-limiting, but demand for energy is not. If the Chinese and the Indians remotely approach U.S. energy consumption per capita, oil is already very scarce, and production is already near a peak. It just doesn't take that long for a developing nation on the right economic course to reach U.S. levels of demand. We did it in less than a century, and we were leading the way. Later adopters of our habits can develop in this direction more rapidly.

So, if you're against subsidies, this is a problem.

I'm against subsidies. The substitution of other energy sources for petroleum is inevitable. It's a matter of when, not if. Global oil production shows every sign of following the pattern that Hubbert first predicted half a century ago and then observed two decades later. Even Ron Bailey at Reason magazine accepts the conventional wisdom that global production peaks in the next few decades, if it isn't peaking now. The oil price then rises, and alternatives become more competitive as demand continues to rise. The oil price doesn't rise indefinitely, but we probably don't see $10/barrel again, regardless of the cost of delivering oil from Saudi Arabia, although we could see much cheaper energy again, if one or more of the alternatives scales unexpectedly well.

The only exception (and the only energy source that petroleum companies see as a real challenge to petroleum) is nuclear energy.

I don't think you know enough to reach this conclusion definitively; however, I'm also a booster of nuclear power.

Don cites Brad Heavner asserting that offshore oil will not lower the price of gasoline and then asserting that offshore drilling can increase dependence on fossil fuels compared with other energy sources. Don accuses Brad of an internal contradiction. Adam challenges this accusation, and his challenge is reasonable.

Adam's challenge is based on the assumption that alternative fuel can be viewed independently of petroleum. It cannot. Like it or not, with the exception of Nuclear energy, no alternative to petroleum is as efficient. Thus, all other alternatives depend on extremely high oil prices to even hope to be somewhat competitive.

The pressure for subsidies comes when oil prices collapses (petroleum tends to be a boom and bust industry). Petroleum companies cut back on operations, people get fired, local economies flag and local politicians seek to "stimulate" them back into action by seeking tax breaks for E&P. Since alternative fuels only begin to become marginally "competitive" (but only with subsidies – a contradiction, really) during tremendous oil price spikes, there will be even more pressure for subsidies from that industry when oil price declines because they will be even less competitive. Like it or not, alternative energy is itself dependent on oil price by virtue of being a substitute. The minute you shift demand from oil to alternatives, the oil price drops and alternatives become even less attractive, requiring more subsidy. So, a high oil price is a prerequisite to petroleum E&P in more expensive areas and for alternatives at all times. The only way to make alternatives more attractive is by creating artificial scarcity in oil to drive up price – which is partially what's happening. But, that's effectively another subsidy for alternative energy. So, if you're against subsidies, this is a problem. In the long run, creating artificial scarcity in the U.S. won't work to make inefficient alternative more prevalent because the climbing price of oil will drive other producers to seek more and more risky fields to explore and develop and more countries will turn to nuclear energy, driving down the price of oil. See a pattern there? Unlike natural gas, oil is a global commodity. Like I said, it's boom and bust.

The only exception (and the only energy source that petroleum companies see as a real challenge to petroleum) is nuclear energy. But, we've closed the door to that energy source as well. If you want to decrease dependence on oil, nuclear energy is the only real alternative. IMO, we are spending too much energy trying to stop drilling and subsidizing poor energy substitutes and not enough trying to remove the ban on nuclear energy.

It will, provided demand doesn't continue to grow faster than supply.

Truisms are true. The price of gasoline will also fall if demand grows more slowly than supply without any increase in offshore oil. For example, if the Volt exceeds all expectations and many more nuclear power plants are built and many people start driving their cars on nuclear power, the demand for gasoline could rise more slowly than the supply from existing sources.

The question involves the cost of producing U.S. offshore oil vs. the cost of producing other alternatives to imported oil and the supply of both.

Why do you have a problem with that?

I nowhere ever express any problem with it. I'm addressing the issue that Don raises in this thread. Don cites Brad Heavner asserting that offshore oil will not lower the price of gasoline and then asserting that offshore drilling can increase dependence on fossil fuels compared with other energy sources. Don accuses Brad of an internal contradiction. Adam challenges this accusation, and his challenge is reasonable. Whether the challenge is strictly correct depends on facts like the cost of producing offshore oil, the cost of producing alternatives to gasoline, the pressure to subsidize alternatives to imported oil generally and the pressure to subsidize offshore oil vs. other alternatives specifically.

Dewey responds by disputing my hypothetical cost of delivering offshore oil ($100) to market while simultaneously quoting a source he calls "real facts" citing nearly this price. He then claims that less costly offshore oil exists without citing any similar figures from any other "real facts".

It's entirely possible for Adam's challenge to be correct and for offshore oil to be a plentiful at some price at the same time. I suffer the capacity to grasp this point and not to focus obsessively on the fashionable debate over offshore oil to the exclusion of every other alternative.

I have no idea how people will propel their cars generations from now, but I don't expect U.S. offshore oil to contribute much to the propulsion; however, as I say very specifically above, I have no fundamental problem with offshore drilling. You then respond by asking, again, without any justification, "Why do you have a problem with that?" I can only repeat the same answer to this question that I've given consistently. When did you stop beating your husband?

It will, provided demand doesn't continue to grow faster than supply.

or increase pressures for subsidies, as Adam suggested earlier,

There are always pressure for subsidies (the only ones I've ever seen come in the form of tax breaks). The fact that oil is a boom and bust business is used to lobby for these subsidies. The pressure for subsidies increases when oil price drops sharply and the government wants to encourage drilling. Because shallow water drilling is prohibited in many areas, producers will not drill in more expensive deep water and on land without these tax breaks.

If you refuse to listen to John Dewey's excellent points, you should at least process the quote from Devon energy's van Wie. I'm very familiar with Devon. Management is knowledgeable, risk averse and distinctly lacking in B.S.

thereby increasing dependence on oil vs. increasingly attractive alternatives.

The search for alternatives has been around for decades. There are already alternatives – they just aren't good alternatives. By artificially increasing the scarcity of oil, we are forcing people to use inefficient alternatives. Then, we're subsidizing them and creating the exact problem you say you fear. The subsidy train has left the station, Martin. And it's much larger than the section 29 tax credits for Petroleum E&P companies.

Unless I'm completely mistaken (and John Dewey will correct me if I'm wrong), he's arguing that more land should be open to petroleum exploration and development. Why do you have a problem with that?

Martin is just taking you around the mulberry bush. The more you chase him the longer you go round and round and round.

Are you just as stubborn as you're showing yourself to be, Martin?

No, I'm just consistently quoting your own source. If you don't want it cited authoritatively, I don't know why you quoted it. I nowhere ever express any opposition to offshore drilling, on the contrary. The issue is whether offshore drilling will lower the price of gasoline or increase pressures for subsidies, as Adam suggested earlier, thereby increasing dependence on oil vs. increasingly attractive alternatives.

Here's a little information about the differences in deepwater and shallow water exploration and drilling costs. Asiked about the cost of drilling off the Florida coast, an exploration company executive responded:

"Your drill times and drill costs are … probably a third of what they'd be out in deepwater," said William Van Wie, vice president of exploration at Devon Energy Corp., an Oklahoma City-based producer that is one of the largest leaseholders in the deepwater Gulf of Mexico.

A large shallow-water project might cost $200 million, compared with $3 billion for a big deepwater field, Van Wie said. California, the most promising region for new oil finds, is almost certain not to lift restrictions, he said."

The project costs he refers to include not just the drill costs, but also acquisition of leases, mapping of the sea floor, seismological testing, drilling of test wells, and much more.

Are you aware, Martin, of the type exploration and drilling in the Gulf of Mexico recently? The EIA figures I provided earlier for the cost of offshore drilling are mostly the exploration and drilling costs for the deep and expensive wells far out in the Gulf of Mexico.

Are you just as stubborn as you're showing yourself to be, Martin?

The EIA figures for U.S. offshore finding costs for 2004-2006 are finding costs for extremely hard-to-find crude oil. This is the oil in regions of the Gulf of Mexico which were leftover long after the inexpensive oil in those regions was found and produced. These figures are not relevant at all to the finding and production cost of oil around Florida and off most other coasts. Do you not understand why they are irrelevant? Do you not understand the difference between deep Gulf of Mexico drilling and the drilling which will eventually be allowed 50 miles off the Florida coast?

Thank you for that brilliant analysis. We'll just have to accept that this is all the leftards can muster.

For instance, if you take the Weitzman interpretation that the main reason to worry about global warming is the small chance of catastrophic damage, it is quite possible that a small amount of oil, causing a small amount of pollution, that creates a small increase in the probability of the worst case scenario, could have a large effect on a risk averse objective function, even if it has only a small effect on the expected cost of warming.

Maybe that is how the world works, maybe not. But if you are going to just conjecture that it doesn't work that way, shouldn't evidence be demanded from your readers?