F... gas prices

Originally Posted by steveo395

Drilling offshore in the Atlantic and the Pacific, the Bakken oil field in Montana and North Dakota, the 1.5 trillion barrels of oil shale under Colorado, Utah, and Wyoming. The technology to extract the oil from the shale has improved greatly, so we can get that oil if we really need it.

What do you suggest we do about our huge oil problem? I know that you probably want to find alternative energy sources, but we need a lot more time to develop them. This will buy us that time.

Originally Posted by JoeRedskin

IMHO, I am neither “naïve or utterly stupid” and I believe that, in fact, the only way to fix our problem is to rely on a properly regulated “free market” and that to assert otherwise is to ignore the lessons of history, the realities of market economics involving a finite resource and confuses 1st grade economics with modern free market economics. Also, your assumption requires market collusion by several competitors to “corner the market” and act as one unit. This is, of course, antithetical to even the most basic free market principles and is one of the reasons/needs for government regulation of the market.

First to clarify, under pure market economics with no government regulation, I would agree that oil companies will exploit the current structural need for oil until such time as there is not a penny of profit to be made. Again, IMHO, while an example of otherwise acceptable market economics, this delay is unnecessary and hurtful to both our long term national security and to the environment. Additionally, their ability to do so is the direct result of an artificially created structural benefit.

Big Oil’s ability to exploit the current structural need is a direct result of our society’s decision to spend money (and blood) to create an infrastructure that made their product profitable (For example, the revamping of America’s highway structure in the 1950’s to create the Interstate system). In doing so, we as a society created an infrastructure that, initially anyway, artificially increased demand and created an oil intensive economy. Further, we have limited supply by restricting drilling in many offshore sights and by heavily regulating the product and, thus, limiting the ability of smaller companies to compete with “Big Oil”.

Because we, through our government’s actions, assisted in the creation and support of Big Oil’s market, it is appropriate that we, through government, assist those who wish to compete with that market. In doing so, however, the appropriate response is not to “socialize” big oil or artificially cap its profits. Rather, it is to offer start up protection by providing a similar type of artificial demand that was provided Big Oil. (For example, offer a government contracts to zero-emission vehicles that can perform up to certain standards (i.e. The feds will replace all federal transportation (with certain national security caveats) with a ZEV that can travel at speeds of 75 mph and has a range of 300 miles).

Essentially, government can, and in my opionion should, find ways to create and protect the necessary incentive for alternative energy until such time as alternative energy forms are profitable on a stand alone basis.

Ultimately, however, Big Oil itself would have to switch its product base or go out of business. Big Oil could, through collusion, use the current economic/structural need for oil in a manner to delay the switch to alternative forms of energy for a considerable time. They would be able to do so b/c even though oil is expensive now, it is not prohibitively so and there is enough profit being made to divert some of the profit to lobbying and/or inhibiting ventures “Microsoft Style”. Unlike tech innovations & Microsoft, however, oil is a finite resource. At some point, the market will actually not support the added costs necessary to “crush” the competition and ventures will begin to succeed b/c oil will simply not be able to supply the demand at an efficient cost. I don’t care how many start ups you crush – and even with the built in competitive advantage of the country’s current infrastructure, oil will price itself out of the market. Far sighted oil execs will see this and have income alternatives ready or they will simply go out of business. Essentially, while it might kill the goose that laid the golden egg – I doubt they would do so without another goose lined up.