Foreign Oil

I recently got into a little bit of an argument about foreign oil with my dad as we were waiting for lunch. We did not get into it very far because lunch came, and I gotta eat! The basic argument from my dad was that the United States should not import so much oil. We should use the abundant oil in our own country instead. We should be drilling ANWAR. If we didn't have to import the oil from war torn areas, then oil would not cost so much.

It's been burning me up that I wasn't ready to argue this, and that lunch came so I didn't get to really dig into this subject. Also, my mom and my kids were at the table so the discussion wasn't really something for everyone. This was something to be done over rum and coke after dinner out on the porch, or the back deck of a boat.

#1 Collectivism speak and the free market
Something I like about Free Talk Live was the awareness of collectivist speech. "We" don't import oil. But who really does? Does the United States really import oil? Last I checked the US has not nationalized it's oil companies. Therefore, it's the companies that import the oil not the country. This is very important to think of it this way (besides being the truth) because when you look at what's important to the companies, they don't care about nationality or nation pride (patriotism). They care about profit and running a business. In fact, they are a corporation which means by law they must care about making money for their share holders (something like that). In this light, we might understand that the oil companies are going to import from where it's cheap to do so. The United States doesn't import oil, the oil companies do. The US buys oil from these companies. There is a middleman that is very often overlooked, but must be taken into account.

#2 Oil Imports
When most people think of foreign oil, they think that we are slaves to whims of the Middle East because the oil comes from this region. That is not actually true. In fact, most of the oil imports come from Canada and Mexico, not the middle east. (REF)

#3 ANWAR is the answer
Actually, -MATH- is the answer. The US demand for oil is 20,000,000 barrels a day. Just for fun, let's assume we can hit the project 780,000 barrels per day projection for ANWAR oil. That' about 4% of CURRENT demand. 4% of the current gas price of $4.00 a gallon, is a savings of $0.16 a gallon. But that does not take into account the time it takes to build the drilling and pipeline infrastucture putting production out to ~2018. The fact that production ramps up, then slides down giving it a nice curve on a chart. The 780,000 barrels a day figure is the peak production, not the begining or end. The oil company that would be in ANWAR would need to recoup it's cost for drilling in such a remote location. They also need to transport that oil, and then refine that oil. That $0.16 a gallon savings gets eaten up pretty quick. Don't forget that projected demand is still going to rise.

#4 Is it the refineries?
Oil companies already said it's not the supply it's lack of refineries. They've been saying this since Katrina. If we get more oil, but can't refine it does the price change? You can't blame the price on lack of refineries and then say that more supply is going to do something about the price.

I read a good piece on ANWAR and how it WOULD reduce the cost of oil even in the near term. When I read it, I actually agree with it. It's from the Mises institute and you can find it here. If I read it correctly, it's saying that what driving up the price of oil is the speculation that we have peaked production and that oil is going to become more scarce. By drilling ANWAR we have more future oil therefore driving down speculation which affects us currently. The only real answer is to simply to learn our lesson and find (and use) an energy source that isn't finite.