Energy & The Economy with Christopher Marciano: Top Energy Related Myths, Paradoxes, and Fallacies

Today we welcome our newest contributor and his semi-regular posts: Energy & The Economy with Christopher Marciano!

Top Energy Related Myths, Paradoxes, and Fallacies

1. Big Oil controls oil price – Exxon-Mobil, Shell, Chevron-Texaco, BP, and Conoco-Phillips control roughly 10% of the world’s oil. It’s hard to have an oligopoly at those levels.

2. The high price of gas is a conspiracy between Big Oil & speculators – I heard this little gem from Bill O’Reilly. If Big Oil and a fractured group of speculators could just magically run up the price of oil, they would have done it a long time ago. When the price of oil was in the mid-20s back in 2002, do you think that all of a sudden, they came to the realization: “Oh, we can just raise the price of oil arbitrarily! How did we miss that? Think about all the profits we missed out on, especially when oil was at $10/barrel in 1998.”

3. Drilling isn’t effective – Deciding to drill today won’t immediately add supply, but it will decrease the price. Commodities markets are often called futures markets for a reason. The traders are constantly looking at the future supply and demand. If forecasters see a huge increase demand for oil in the future with a stagnant supply, the price will rise today. Of course, if we started drilling in ANWR when it was heavily discussed in 2002, we’d have oil flowing right about….. now.

4. It’s easy to reduce CO2 if the big energy companies just weren’t so cheap – CO2 is natural product of combustion. The basic chemical reaction is fossil fuel + oxygen = water + carbon dioxide. Other pollutants are byproducts of combustion. For example, if sulfur is entrained in the oil and it is burned along with the oil, it will mix with oxygen as well and produce sulfur dioxide, an established pollutant. If the sulfur is removed before combustion, than there will be less pollution. You cannot get rid of the CO2. The only way to significantly reduce CO2 is to stop combusting. So when Barack Obama says he wants to reduce CO2 emissions 80% of 1990 levels by 2050, that means you will be driving 85% less and using 85% less electricity, as one has to factor in population growth.

5. One can support CO2 limiting legislation and lower gas prices at the same time – This is the Newt Gingrich approach. If you believe CO2 is causing global warming which will ruin the Earth, you like high gas prices. High gas prices push down demand for fossil fuels, lowering CO2 emission. Lower prices would encourage usage.

6. Wind and solar haven’t taken off because of Big Oil – While they are not devoid of benefits, wind and solar technology are not the energy saviors. Solar is very expensive and the sun shines only a few hours a day. Wind is expensive and often blows the strongest at night when you need it the least. And, as Texas is finding out, the cost to have wind energy is not just turbine. Electricity produced in windy, unpopulated areas may have to be transmitted a long way to where the demand is. For Texas will be spending $5+ billion to do this to bring the wind energy from West Texas to metro areas in the East.

7. We should sue OPEC for undersupply – Could OPEC counter sue for undersupply? Or possibly OPEC could claim that they would love to drill for more oil, but the drilling areas are located in the migratory path of the spotted sandworm.

8. A cap & trade system is a market based solution! – A cap and trade system is a fancy term for a tax. Politicians can set a low cap (or ration), and then tax you when you breach the cap. The only thing it does is to raise the cost of energy in order to reduce demand.

9. Coal is dirty – Most people have the impression that coal plants today have big black plumes of smoke billowing out from under them. Hardly so. Current pollution control equipment and combustion techniques heavily reduce pollution. The white smoke you see from a coal plant is just water vapor.

10. If only we had joined Kyoto – For all the countries that joined Kyoto, none of them are on their way to accomplishing their goals. That’s because in order to reduce demand for fossil fuels (the only way to reduce CO2), the country would have to increase the price of energy artificially. Most people will continue to pay for energy, but stop buying other things, like sneakers and cameras. This will send the economy into a downward spiral and businesses will move if they can. Since this will cause a politician to get voted out very quickly. So instead the politicians find it easier to ignore the treaty they signed and just blame the United States.