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Thursday, April 24, 2008

The Ahal Bidness

We have crude, at least some grades of "sweet" crude selling for over $115 for a forty two gallon barrel, and no sign of a downturn any time soon. This is a good thing. High oil prices force conservation and efficiency on end users rather than lip service. High oil prices also make previously unexploitable petroleum resources suddenly feasable. Oil too deep or too bound up in a matrix to extract at twenty five dollars, but attractive at $120. In parts of the Pallouse wheat country in central and southern Washington there are thousands of feet of Eocene basalt overlaying the sort of strata that produce lots of oil in Wyoming and California. Natural gas has been found there, but the wells are too shallow to produce commercial quantities. High oil prices also encourage new technology. So long as we play at market-ish economics only price will sort the wheat from the chaff in new technology.

OPEC (read Saudi Arabia) has squelched alternative fuels by crashing oil prices when new sources are developed. The Saudis can extract the shallow, sweet crude for under two bucks a barrel, so can break the back of any competition whenever they want. Oil shale is the best example. The oil locked up in the shales of Colorado are simply tremendous, but expensive to extract. A pilot operation was launched in the late 70s, and then the sheiks crashed the competitive price to fourteen dollars killing oil shale.

My solution would be to put a moving duty on imported oil that would keep the price over a hundred dollars no matter what OPEC does. An agency somewhat like the Federal Reserve would have to be created to set the duty on imports because the legislative process is far too cumbersome. An import duty would give competitive advantage to domestic producers, and encourage both exploration and innovation without requiring upsetting societal and economic changes.

Because I'm not running for office I can propose this bare faced market manipulation without any fear of repercussions.

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