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Location: Pantego, Texas, United States

Sunday, July 09, 2006

Here is an interesting article about shale oil. There is an enormous amount of shale oil in the United States. Back in the 1970's some companies lost a lot of money in developing shale oil production facilities when the price of oil fell back to a level that made shale oil uneconomical. I think that could happen again if large scale production of shale oil were to come on line. It seems to me that it might be wise of the government to subsidize shale oil with a subsidy that would kick in to allow shale oil producers to show a profit if the price of oil fell a lot. The US would be wise to do that. Think of the advantage to us if the pice of oil were to fall down to $15 per barrel. If we were producing 2 or 3 million barrels of shale oil per day, the price of oil would fall dramatically. It would be cheap for us if we had to pay the producers an extra $5 per barrel. Think of the advantage to us if the oil producing countries that don't like us, like Venezuala, Iran, Russia, Saudi Arabia, and so forth had less money with which to cause mischief for us.

This is also an argument for why we should drill for oil in Alaska and in coastal waters. Increasing our secure supply of oil by one or two million barrels per day would dramatically reduce the price of oil. Democrats don't seem to believe that increasing the supply by 5% or 10% would significantly reduce the price of oil. They seem to not believe in the most elemental aspects of economics.

The article on shale oil is here: http://www.msnbc.msn.com/id/13737475

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