Friday, April 11, 2008

Showing OPEC the Door:

Broadly speaking, the nuclear energy community is in favor of a diverse energy mix. The current mood of the country has tied nuclear power ever closer to its green brethren, and the energy companies that own nuclear energy plants are likewise friends of old man Sol and Aeolus god of the wind. However, oil is driving everyone nuts. Here's Lester Thurow in the Los Angeles Times:

There is a solution to the rising cost of oil, but it is a painful one. Let's say there is a lot of $20-a-barrel oil in the world -- deep-sea oil, Canadian tar sands. But who would look for $20-a-barrel oil if someone else (Saudi Arabia) has lots of $5-a-barrel oil? The answer is: no one.

Basically, American taxpayers have to guarantee potential producers that the price in the future will not fall below $20 a barrel and that they will not lose their investments.

This is easy to do. The U.S. needs to guarantee that it will buy all of its oil at $20 a barrel before buying anything from OPEC. This forces the price of oil down to $20 a barrel, but it eliminates the possibility that it will ever go back to $5 a barrel.

Thurow is a professor of management and economics and dean emeritus at the MIT Sloan School of Management, so he knows whereof he speaks. But "This is easy to do?"

You might call this a stealth action in favor of alternative energy - that hybrid car idea that Jay Zawatsky was pushing the other day certainly gains an allure - but Thurow seems to be on a higher floor of the ivory tower than most. Ground level, the word is nuts.

1 comment:

Bill said...

Interesting article. I was reading not too long ago about massive reserves of oil in the Bakken Formation in North Dakota. Couple that with Dr. Thurow's ideas, and we can drastically reduce our dependency on foreign oil in just a few years. Of course, whoever owns the drilling rights to that land will probably want to charge as much as the market will bear, rather than a fixed price as Thurow suggested, so there's a little bit of wishful thinking involved.

In the longer term, we still need to drastically reduce our oil consumption. At this point, plug-in hybrids and nuclear power seem to be the best option... but we're still several years away from any meaningful adoption of the plug-in hybrid technology.