ENERGY  CRISIS

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NGUYEN  KINH  DOANH

 

     As  of  today  july  22,  2006,  in  the  United States,  we  are  paying  $3.15  per gallon for premium unleaded fuel.  Is it expensive?  Yes and no.

 

     Let’s look at the average price per gallon for premium unleaded fuel in other countries:

 

Netherlands:  $7.24

Norway:  $6.98

Belgium:  $6.71

United Kingdom:  $6.66

Germany:  $6.60

Italy:  $6.56

France:  $6.32

Spain:  $5.18

Japan:  $4.53

India:  $4.27

Australia:  $3.64

Canada:  $3.62

United States:  $3.13

Kuwait:  $1.00

Saudi Arabia:  $0.91

Venezuela:  $0.17

 

     Why is the price of gasoline more than double in Netherlands and only 6% in Venezuela comparing to the United States?   It is very easy to explain if we take a close look at the economy of Netherlands and Venezuela.

 

     Netherlands has a prosperous and open economy, which depends heavily on foreign trade.   In 2005, its GDP per capita is $29,700.   In contrast, Venezuela is highly dependent on the petroleum sector.   It is the blood of the country.   Petroleum accounts for roughly one-third of GDP, around 80% of export earnings, and over half of government operating revenues.  The GDP per capita in 2005 is only $5,900.         

 

     Crisis is a turning point in the course of anything, decisive or crucial time, stage or event.  It is also a time of great danger or trouble, often one which threatens to result in unpleasant consequences.  Shortage is a deficiency in the quantity or amount needed or expected, or the extent of this deficit.

 

     The country has been bombarded with information and misinformation about the energy shortage.  The cynics say it’s a put-up job.  The press says one thing today and something else tomorrow.  The Congress appoints committees to study the problems, and we have consumer advocates and politicians, who are ignorant of the oil and gas industry, proposing panaceas.  How did it happen?  When did it begin?  Who can correct the problems we already have?  Who can solve the energy shortage and return the United States to a base of bountiful energy sources that will assure energy independence?

 

     The nation that developed the oil and gas industry, the United States of America, finds itself running short of oil and gas.  American perseverance and ingenuity from 1859 through 1971 were equal to the task of supplying the U.S. with oil and gas.  In 1859 Colonel Edwin L. Drake brought in the first oil well at Titusville, Pennsylvania.  Thereafter there was Spindletop in 1901, East Texas in 1930, and the North Slope of Alaska in 1968.  Throughout this period of more than 100 years there were frequent predictions that domestic supplies of oil and gas would soon be exhausted.  However, the industry has been able to find and produce new reserves.

     What happened to cause the U.S. to run short of oil and gas?  Many so-called experts have arisen to explain what happened.  In addition many politicians have questioned the reality of shortage.  They have raised charges of contrivance; that is no real shortage at all.  Consumer advocates and some politicians have charged that the whole shortage was simply a fabrication of the major oil companies to achieve goals not attainable otherwise.  

 

     Oil, gas, natural gas, and coal are precious resources that define modern life.  Without them, mass-produced food and clothing, and international travel and cars, become rare or impossible.

 

     There have been several sensational events in the United States since 1973.  Suddenly, unpredictably and no clear previous warning, there was supply interruption of petroleum to the world in 1973.  The result was significant.  Citizens waited long lines at the gas pumps across America.  Politicians promised to fix the problem as soon as possible.

 

     The 1973 oil crisis began in earnest on October 17, 1973, when Arab members of the Organization of Petroleum Exporting Countries (OPEC), during the Yom Kippur War, announced that they no longer ship petroleum to nations that supported Israel in its conflict with Syria and Egypt – that is, to the United States and its allies in Western Europe.

 

     At around the same time, OPEC members agreed to use their leverage over the world price-setting mechanism for oil in order to quadruple world oil prices.  The complete dependence of the industrialized world on oil, much of which was produced by Middle Eastern countries, became painfully clear to the US, Western Europe, and Japan, requiring Western policymakers to respond to international economic constraints that were qualitatively different from those faced by their predecessors.

 

     At the height of the crisis in the US, drivers of vehicles with odd numbered license plates were allowed to purchase gasoline only on odd-numbered days of the month, while drivers with even-numbers were limited to even-numbered days.

 

     The gasoline price, at the end of the “shortage”, jumped from 29 cents/ gallon to over a dollar with corresponding increases in other nations.  Plenty of petroleum was available, but those who provided it had decided they were not being paid enough for the merchandise.  In addition, a nationwide speed limit was imposed at 55 mph.  Twenty years later it was repealed.

 

     The survivors in the eastern half of the United States of America will never forget the Winter of 1977.  Over seventy people froze to death.  Winter storms repeatedly slammed into the Eastern States during January of 1977.  In some of the worst hit cities, snow piled up higher than a two-story building.

 

     During the coldest days and nights of the wintry misery there were fear-stricken moments when it looked like the lights really might go out, furnaces would stop heating, and millions of people would slowly rose to death.

 

     In March 2001, as rolling blackouts swept through parts of California, Energy Secretary Spencer Abraham warned the country that it faces its “most serious shortage” since the 1970s.  In 1996 Governor Pete Wilson signed the 1996 bill that deregulated California’s electricity markets.  The resulting law, AB1890, guaranteed reduced rates for residential consumers through the end of Wilson’s second term as Governor.  Later effects of the law forced California utilities to divest much of their power generating capabilities, often to out of state concerns.

 

     Soaring utility rates were the subject of much debate in California in 2001 as the wholesale prices of electricity have skyrocketed, jumping from an average of $30 per megawatt hour in 2000 to $330 in January of 2001.

 

     It is no great secret that the earth has a certain size and certain weight and its total resources are therefore “finite.”  The great mistake of today’s energy intellectuals is to assume that because they are finite they are going to be depleted – or, more specifically that they are actually being finally depleted right now.  In fact, we still don’t know how much there is!  And that point is crucial to the definition of “finite.”

 

     The word “finite” is contrasted with the word “infinite” in that “infinite” means something is too big to count or to measure.  A small child in a room full of toys will consider his toy population to be “infinite” if he were asked to count them all.  In the very same way, all of our energy resources are infinite – not finite. Only to Our Creator are our energy resources finite.  And those who pretend that they know the finite extent of these resources are only playing God in an egocentric or humanistic way.

 

     The Petroleum “Shortages”

 

     In 1866, seven years after the first producing oil well was drilled in the US, the Federal Revenue Commission was openly concerned about the coming shortages of petroleum.  The Commission suggested a number of synthetic replacements (kerosene from coal, for example) that they hoped would become available when the known reserves of petroleum were depleted.

 

      In 1880, a State committee of Texans, appointed by Governor O. M. Roberts, presented a voluminous report clearly stated  that there were few, if  any, prospects for the widespread occurrence of petroleum, natural gas or any related mineral reserves in the State.

 

     Replied the Governor,  “Gentlemen, I accept your report and discharge the committee.  But I want to say to you that every word in your report is a lie.  I repeat it, a lie!  Do you think God Almighty would create a great country like this and not provide a way of taking care of it?  In the very nature of things your report is a lie.!”

 

     Despite the governor’s prophetic optimism, The US Geological Survey confirmed the State committee findings, emphatically declaring ten years later that no “significant” oil deposits would be found in the State of Texas.

 

     Then on January 10, 1901, near Beaumont, Texas came the “The Spindletop blowout.”  This eruptive  well spewed out 100,000 barrels of oil in the first nine days and thus introduced the heretofore unknown possibility that petroleum could be extracted from underground reservoirs in truly massive quantities.

 

     In 1919, several government engineers and economists were sent to Scotland to study the feasibility  of extracting oil from oil shale.  Their purpose was to lay the ground work for a crash program of oil shale development in the US, a nation known to possess substantial deposits of oil shale.

 

     Why were US oil experts sent to Scotland?  Because the US Geological Survey had officially predicted that year the world supply of oil would be totally exhausted within twenty years.  Only a year later, in 1920, The Secretary of The Navy asked for an immediate nationalization of all oil production in the US  to remedy the coming “energy shortage.”  Fortunately, little attention was paid to his suggestion.

 

     The years just after World War II were filled with ominous oil warning.  Many influential economists called for the continuance of wartime price controls because of the “obvious and impending” oil shortages.  To date, there has not been petroleum shortage.

 

     Many experts have emphasized that nuclear power and solar energy are two important alternative energy resources.  They can be developed to be used economically.

 

     The Rose Parade is traditionally held on New Year’s morning, but a NEVER-ON-SUNDAY rule pushed the 117th parade to Monday January 2nd, 2006.  Amid scattering rain with temperature in the 50s, fans fighting to steady their umbrellas and parade participants marching proudly as if it were warm and sunny.  It seems that we begin the NEW YEAR OF  2006  with full of energy and enthusiasm.

 

 

 

NGUYEN KINH DOANH

JULY 22, 2006

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E-MAIL:  DOANH1@SBCGLOBAL.NET

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