Wednesday, October 17, 2012

The myth of foreign oil

I've gotten just a bit tired of hearing politicians like Mitt Romney and his ilk arguing that we need to do more drilling off the Gulf Coast, the Pacific Coast and in the Arctic in the name of reducing our dependence on foreign oil.

Guess what? There is no such thing as "foreign oil."

Oil is a fungible commodity. That means oil from Alaska, oil from Venezuela, oil from West Africa and oil from the Middle East is essentially the same and can be exchanged in much the same way as money or gold. Sure, some oil has a higher sulfur content and some oil is more viscous than other oil. But, at its core, oil is oil.

With a global marketplace, the days of the Texas Railroad Commission setting the price of oil are long since gone. These days the price is set by speculators trying to guess what's going to happen in the near-term and long-term futures.

Oil companies will sell their product wherever they can make the highest rate of profit. Exxon, for instance, couldn't care less whether their oil is sold in the U.S., in Europe or in Asia. The same goes for every other oil company.

So it doesn't matter how much oil is taken out of the ground in this country. It's not staying here. It's going into the global pool of oil to be distributed according to market forces throughout the world. It's the reason why trying to prevent Iranian oil from entering the global pool will fail - how are you going to tell the difference between a barrel of oil from Iran and a barrel of oil from Nigeria?

As an example, the Trans-Canada Keystone XL pipeline being built on stolen land in East Texas isn't going to benefit anyone in this country. The idea behind the pipeline was to get the tarsand oil from Alberta down to the Gulf Coast so it could be exported overseas. So,  all of Mr. Romney's rhetoric about President Obama making us more energy dependent by blocking construction of the pipeline through the middle of the country was wholly and completely irrelevant.

If the United States really wants to become energy independent, the only way to do so is to develop energy from sources for which there is no global market. Since no one has figured out how to commoditize sunlight or wind, those are two sources which can reduce the need for petroleum or carbon products to produce electricity.

But since wind and solar generators don't have millions of dollars in cash lying around from their subsidized profit-making operations, Mr. Romney doesn't have the time, nor desire, to pay then any attention.

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