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The Oil Addiction Fallacy

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http://www.lewrockwell.com/anderson/anderson214.html

The Oil-Addiction Fallacy

by William L. Anderson

Watch any talking head, and when the subject comes to energy, one can expect to hear the mantra, Americans are “addicted” to oil, and especially “foreign oil.” This is repeated as though the repetition is proof that the premise is true.

Thus, American taxpayers are currently being forced to contribute billions of dollars – and will be dunned many billions more in the future – for a number of measures that supposedly will “secure” the United States’s energy use and supplies in the coming years. What’s more, the debate about whether or not these energy programs are even necessary is considered passé. The major question on energy today, unfortunately, is this: How much will government central planning replace relatively free markets in determining America’s energy future?

If I may be bold with words, it seems to me that what we are witnessing is that the future production and supply of fuel in the United States is to be left not to a free market, but to something akin to Mussolini’s corporate state, which gave us the Italian version of “fascism.” While people today have been taught to think of fascism as related to goose-stepping men in military uniforms and dictators with moustaches, it actually represents a form of social organization in which government forces policies upon the business sector in which the state directs production in exchange for guaranteed monopolized markets.

Although I realize that “fascism” is one of those “shock” words that is easily misinterpreted or exaggerated, there is no better term to describe what I see as the energy future of the United States. To explain why I believe this interpretation so strongly, I have prepared a number of questions and answers regarding the production and use of fuel in the United States as a tool by which to point out why the current direction being pushed both by the Bush administration and by Congress not only is wrong, economically speaking, but is just plain destructive.

Oil addiction

Q: Is the United States “addicted” to oil, and especially foreign oil?

A: The term “addicted” obviously is pejorative. Addiction refers to the habitual use of something for which one does not receive a benefit, or at least a long-term benefit. For example, we think of addictions as pertaining to the use of drugs such as cocaine or heroin that might give the user a temporary “high” feeling but that in the long term are injurious to his health. In reference to the use of oil, the picture that the “anti-addiction” advocates want to put forth is that of people who enjoy short-term gains from using gasoline and other petroleum-based products, but whose use in the long run makes them dependent on exports from hostile or unstable countries, such as those in the Middle East.

John Fund has recently pointed out in the Wall Street Journal, that Bush has bought into the term in a big way:

Members of Congress who have recently visited with Mr. Bush in the Oval Office have found him both fixated and fascinated by alternative fuels. “He’s all into switchgrass,” Rep. Ellen Tauscher, a California Democrat, told the San Francisco Chronicle. She said Mr. Bush was “very engaged and wants to move forward” on bold plans to cure America’s “addiction to oil.”

But there is a problem in using the term “addiction” to refer to oil. The term “addiction” denotes a moral choice, as though it were immoral to use oil, but moral to use a fuel developed from a different source. While I will deal with the use of particular fuels that Bush apparently believes to be the “moral” ones, I will first deal with the issue of whether or not it is immoral to use petroleum.

Petroleum is petroleum, and whether it comes from under the ground within the borders of the United States or from elsewhere, it contains the same molecular structure and the same physical properties. There is no intrinsically moral difference between oil extracted from within the United States and oil extracted from another country. The only question that remains is about its use.

People use petroleum as the basis for fuel for their automobiles, heating their houses, powering vehicles used for work, and many other things. The assumption from the “oil is addictive” crowd is that these things are somehow immoral if they are done with the help of oil but moral if done by aid of another fuel.

Now, it is clear that many of the things on which we depend have an oil component, but the development of fossil fuels has also meant that the world as we know it now can sustain more human life, and for a longer time. (In the pre-capitalist, pre–fossil-fuel age, life expectancy was about 30 years. Environmentalists try to tell us those were the Golden Years.) In other words, fossil fuels – and especially oil – have been valuable products for civilization as we know it.

It is true that Americans (as well as nearly everyone else in the world) depend heavily on petroleum-based fuel. Yet people also depend on oxygen and we hear no one saying that we are “addicted to oxygen” or “addicted to water” or “addicted to food.” Petroleum-based fossil fuels have enabled people to enjoy standards of living that were unthinkable in the past. The difference between depending on something and being “addicted” to it is vast.

Policies that Congress pushes toward oil and oil companies further advance the “oil is immoral” mantra. First, Congress has severely restricted the drilling for oil and currently is trying to permanently stop new drilling in Alaska. The Arctic National Wildlife Refuge (or ANWR) has vast reserves under its soil, and the area proposed for drilling is not a pristine habitat for wildlife but rather an arctic desert. (The pictures of wildlife that often accompany the news stories on the subject are taken in areas where drilling would never occur, something that the commentators do not mention.)

Second, the new Democratic Congress is attempting to levy stiff taxes on domestic oil (and natural gas), all in the name of trying to force down energy prices. (Earth to Congress; slapping punitive taxes on anything ultimately raises prices for those goods and services.) The obvious purpose is to discourage domestic production of petroleum, making oil-based fuels more expensive, which is ironic, since one reason that voters turned out the Republicans was that they blamed them for high gasoline prices.

Here is the supreme irony: First we are told that we should not be importing oil from Middle Eastern countries or places such as Venezuela, but then we find that the government is also trying to squash domestic production. Thus, it is not hard to conclude that the “buying oil from unstable countries” line is a red herring.

The reasons for such policies are obvious: Congress wants to end the era of fossil fuels altogether, or at least force consumers to use other fuels that Congress has deemed morally suitable for this country. That’s why Congress continues to push the “addiction” lie, as well as the fossil-fuels-create-global-warming viewpoint. However, we hear about other “choices” for “alternative fuels,” and especially ethanol, which I examine next.

Alternative fuels

Q: Don’t ethanol and other alternative and “renewable” fuels show more promise?

A: During the first government-created “energy crisis” of the 1970s, the U.S. government sank billions of taxpayer dollars into the “synfuels” industry. The Carter administration, which pushed the program, insisted that the United States could become “energy independent” by making fuel from coal, oil shale, tar sands, and, of course, corn.

At the time, the price for a barrel of conventional petroleum was substantially below the price for an equivalent “synthetic” fuel, and that differential increased during the 1980s and 1990s. The Reagan administration let the “synfuels” program die quietly, and while there was a short resurgence in the early days of the Gulf War toward “energy independence,” the benefits of relatively inexpensive petroleum were obvious.

The problems of ethanol are much greater than advocates wish to admit. First, and most important, it literally takes more than one gallon of fossil fuel to make a gallon of ethanol from corn. While political rhetoric can be used to rewrite the tax and spending laws that permit the government subsidy needed to make ethanol, it cannot rewrite the laws of science. Corn-based ethanol, which has driven corn prices to very high levels, is a naked subsidy to a relatively small group of persons who grow corn for a living.

Second, ethanol has serious transportation problems, as it cannot be moved by pipeline, which is by far the least expensive and most economical way to transport fuels for long distances. Instead, it must be transported by truck and rail, and that means that new tank cars must be constructed, and they have to be hauled by existing carriers, which are already limited by other factors, such as the availability of roads, rails, and train schedules. In other words, the amount of ethanol that would be needed to be a viable replacement for fossil-based fuels simply cannot be transported the way gasoline is transported because the alternative transportation capacity does not exist, and would not ever be likely to be on line. (Politicians and other alternative-energy advocates forget that transportation is part of the economic process, too. They cannot simply wish alternatives into being without looking at the costs involved.) John Fund of the Wall Street Journal writes,

As for corn-based ethanol, Jerry Taylor of the Cato Institute calls the current mania to subsidize it “the closest thing to a state religion America has.” Corn farmers have done a good job of disguising the fact that it still takes more than a gallon of fossil fuel – 29 percent more is the best estimate – to make a gallon of ethanol. In addition, various mandates requiring the use of ethanol significantly increased gasoline prices last summer and led to spot shortages because ethanol can’t be carried through pipelines and requires special blending plants. James Glassman, an economist with J.P. Morgan Chase, notes that expensive ethanol was a big factor in the sticker-shock consumers encountered at the pump this summer. “We’d probably have retail gasoline prices between $2.30 and $2.40 a gallon if not for ethanol,” he told the Wall Street Journal last June, when pump prices were topping $3 a gallon.

Third, the corn-based alcohol fuel itself is not as desirable as gasoline or diesel fuel in terms of performance. (Yes, Indy cars run on alcohol, but the owners and drivers of those cars do not worry about things such as gas mileage.) Ethanol gets fewer miles per gallon than do gasoline and diesel fuel, and when one adds the fact that the creation of a gallon of corn-based ethanol requires more than a gallon of petroleum-based fuels to be burned, we have the perverse result in which the more ethanol we create and use, the more we use oil. And this is done in the name of “conservation”?

It is true that ethanol can be made from plants such as switchgrass and other “weeds,” but the fundamental issues do not change. Furthermore, because the current ethanol program really is a subsidy to corn farmers, the idea that corn farmers and their political allies would permit other widespread ethanol programs just does not square with political reality.

Energy independence

Q: Won’t “energy independence” make us more secure?

A: There is something reassuring about the concept of “energy independence,” but the term is much more dishonest than one might think. First, and most important, the United States is part of a world economy, and it is not the case that because one product is produced within the borders of this country the United States is “independent” of what happens elsewhere in the world. Indeed, many people who call for “energy independence” have no problem in calling for U.S. troops to be sent around the world for military operations because they insist that global issues are our issues, too. (My comments are not an endorsement of such policies, but rather an attempt to point out that people who call for energy independence need to be consistent in their thinking.)

Second, one must remember that trade itself is by nature a peaceful activity, spurred on by mutual benefits to all parties involved. It is in Americans’ interest to trade with all nations, including those in the Middle East. Before the Gulf War of 1991, the United States was trading peacefully with Iraq and other nations of the region. The turmoil in Iraq-U.S. relations was more the result of U.S. policies than anything hatched by the late Saddam Hussein, as cruel and dictatorial a person as he was. Furthermore, even if this country could theoretically produce all necessary fuel domestically, the cost to taxpayers and consumers would be extremely high and would greatly lower Americans’ standard of living and increase the rate of poverty here.

Energy “independence” is a foolish term that has no bearing in reality. Such a regime of “independence” would require government to expand its powers of taxation and regulation far beyond where those powers operate today, and Americans would be made substantially poorer for the effort.

There is another way. The United States could return to being a peaceful trading partner with countries of the world, no matter what the ideology of their governments. In the long run, there would be no call for “energy independence,” because trade obviously would be the better and wiser route to take.

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Wow...good stuff there...

Real trade would help, but with the trouble with Korea, the middle east....that won't happen soon...

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:deadhorse:

Obviously, there is a lot of hyperbole and BS on both sides of this argument, but clearly any thinking person can see that we have to find constructive ways of curtailing our energy consumption. Whether the ultimate reality is a combination of taxes, ethanol, windpower, more nuclear, drilling in Alaska, hybrid vehicles, electric vehicles - we must do SOMETHING. Cheap energy, like cheap (free?) healthcare only encourages waste.

One only needs to drive through rush hour in Chicago or L.A. once (then multiply that by 500 for the major cities in North America) to get a true sense of what we, as a species, are doing to this planet.

I wish for the free-wheeling innocence of the '60s, but we know better now.

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Wow...good stuff there...

Real trade would help, but with the trouble with Korea, the middle east....that won't happen soon...

but look how vietnam has changed since we trade with them, compared to how bad we thought communist regimes would be for that country.

Carbiz. gas is still kinda cheap when you measure it against inflation. people's incomes just have not risen at the same pace inflation has been creating a void between the rich and the poor.

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supose why older cars from the 50's and 60's never made it to 100k miles before being traded or sold. granted most jobs were close to home but people just didnt run all over God's green earth like we do today. thats one way to conserve. eat at home, pick up stuff to and from work. does anyone else agree? my sister used to drive to work, come back home for lunch, go back to work and finally come home. 4 trips? understandably she takes it with her now but high gas shouldnt have been why these trends stop.

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an incredible amount of BS in one post.

what in inspiring post! /sarcasm

oh come on, you know when you can't discuss something and dismiss it like that, you either show ignorance or huge amount of bias... which is lots of times, the same, not all the time though.

supose why older cars from the 50's and 60's never made it to 100k miles before being traded or sold. granted most jobs were close to home but people just didnt run all over God's green earth like we do today. thats one way to conserve. eat at home, pick up stuff to and from work. does anyone else agree? my sister used to drive to work, come back home for lunch, go back to work and finally come home. 4 trips? understandably she takes it with her now but high gas shouldnt have been why these trends stop.

I don't know... we certainly travel different, now it's just the destination for most people, not the trip. I 'm so glad I grew up before in car dvd players.

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I wish for the free-wheeling innocence of the '60s, but we know better now.

Why?

What does freedom have to do with oil? Why must we accept less freedom instead of developing alternative fuels?

The answer is not to 'give up.'

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supose why older cars from the 50's and 60's never made it to 100k miles before being traded or sold. granted most jobs were close to home but people just didnt run all over God's green earth like we do today. thats one way to conserve. eat at home, pick up stuff to and from work. does anyone else agree? my sister used to drive to work, come back home for lunch, go back to work and finally come home. 4 trips? understandably she takes it with her now but high gas shouldnt have been why these trends stop.

I think that has a lot to do with our society.

In the 60s, one didn't have to work in the city for a good paying job whereas now, we do. And since no one in their right mind wants to live in the ass crack of existence that is the city (I'm not talking about suburbs) it takes a lot of driving.

I'd rather spend $100 in fuel to drive to and from my job than be miserable all of the time living 15 people per square inch.

Edited by FUTURE_OF_GM
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Wow, the first half of that write up was the guys rant on the deffination behind "addicted" and how the media is using it.

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but look how vietnam has changed since we trade with them, compared to how bad we thought communist regimes would be for that country.

Carbiz. gas is still kinda cheap when you measure it against inflation. people's incomes just have not risen at the same pace inflation has been creating a void between the rich and the poor.

nail on the head in one sentence.

i saw something that siad our guv was gonna veto a minimum wage increase or was opposed to it.

let me see. i don't even know what that wage is (gonna guess below 8 bucks) but then the northwest airlines ceo dude is gonna get an 18 million exit package?

and we can't start paying better wages to the burger flippers?

the problem with this country....all the six figure folks living in nana land forcing their way on everyone else, not having a clue why pedro flipping burgers can't afford to send his kid to private school or why pedro can't afford an A3 (because everyone wants luxury c segment cars now apparently).

there is a wage divide and corresponding culture divide. singles get lucky and score a job pulling 6 figures or attractive woman with a shred of drive and a college degree quickly finds her way to an extremely high paid job marries six figure man or more. they either decide to spawn brats or not, either way you look at 200k households that have no idea how the rest of the world lives. these people are few in number but they seem to think all consumer choices and the way of the world should revolve around their needs and tastes.

meanwhile, 4 dollar gas just priced out single mom making under 50k from being able to drive to work anymore. now she is staying awake at night, trying to figure out where she can come up with the extra dough because gas costs her 100 bucks more a month than last year in addition to food going through the roof as well. not even driving an 02 taurus is an affordable endeavor anymore.

even better, pedro flips burgers and makes 8 bucks an hour. can barely make rent but still has to rush whitey's breakfast into the bag so he gets 90 second service at the drive thru in the morning. Or does Pedro clean toilets at the class a office building that a bunch of overpaid managers and execs work at? Pedro gets to mop overspray off the floor in the mens room to barely get by while jerkwad gets paid so much he has to obsess about whether his next company car will be a lexus or infiniti and which version of NAV its gonna have.

i really don't think that most people should even care anymore about whether they do their jobs well because the wage and culture gap is so great and is insurmountable to start wit. we pay a very few people way too much so they can layoff worker bees and send work overseas so they get management bonuses to go buy japanese cars with.

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Wow, the first half of that write up was the guys rant on the deffination behind "addicted" and how the media is using it.

you remember when there was the "mission completed" speech a few years ago? Colbert did a spot on it about how words evidently could mean whatever people wanted. yes words evolve, but sometimes people use "hot button words" to make readers interested.. it should not be that way, if words don't have real definitions, why do we have dictionaries?

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nail on the head in one sentence.

i saw something that said our gov was gonna veto a minimum wage increase or was opposed to it.

thanks, but a minimum wage is artificial to the market. Low wages should be for menial unskilled work... flipping burgers. this pushes people to get educated / move to better jobs.

A minimum wage increase does not help the middle class, only the poorer/younger of the workforce.

If you want a look at inflation, watch the link in my sig... Fiat Money

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Why?

What does freedom have to do with oil? Why must we accept less freedom instead of developing alternative fuels?

The answer is not to 'give up.'

Well, in a nutshell, there are approximately 100 million more Americans now than there were in the '60s; not to mention about 500 million more Chinese. It took Nature 100 million years to put in the ground what we are using up in 100 years. I desperately hope that technology will save the day, but in the meantime there is a lot each of us can do in our own lives to do 'our part.'

Let's leave something for the future generations, eh?

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:deadhorse:

Obviously, there is a lot of hyperbole and BS on both sides of this argument, but clearly any thinking person can see that we have to find constructive ways of curtailing our energy consumption. Whether the ultimate reality is a combination of taxes, ethanol, windpower, more nuclear, drilling in Alaska, hybrid vehicles, electric vehicles - we must do SOMETHING. Cheap energy, like cheap (free?) healthcare only encourages waste.

One only needs to drive through rush hour in Chicago or L.A. once (then multiply that by 500 for the major cities in North America) to get a true sense of what we, as a species, are doing to this planet.

I wish for the free-wheeling innocence of the '60s, but we know better now.

+1

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Why?

What does freedom have to do with oil? Why must we accept less freedom instead of developing alternative fuels?

The answer is not to 'give up.'

Having lived in Atlanta and Chicago, I can tell you that we need to reduce congestion. We've got twice the population of the sixties and we seem to all travel about 4 times as far.

Chris

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Increasing the min wage pushes inflation (yeah, cuz we need more help increasing inflation...) and increases unemployment. It is not a solution. Regional minimum wage adjustments can be appropriate, but nationally increasing the minimum wage just pushes inflation.

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Increasing the min wage pushes inflation (yeah, cuz we need more help increasing inflation...) and increases unemployment. It is not a solution. Regional minimum wage adjustments can be appropriate, but nationally increasing the minimum wage just pushes inflation.

which would only widen a divide in the middle class more.

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