Six Energy Myths

There's a very interesting article at the always interesting site, Pragmatic Capital, run by Cullen Roche. It talks about some energy myths that are part of the conventional wisdom. Follow this link for more detail. Here are the highlights.

• US crude oil comes from the Middle East/Persian Gulf.

It doesn't; at least not most of it. As I commented on before, Canada is our largest foreign supplier of oil with Mexico at number two.

• The US domestic energy production continues to dwindle.

It was but it's not dwindling now. Production is ramping up and quickly with the oil shale finds in the Bakken (North Dakota) and Marsellus (Ohio, Pennsylvania, New York) fields. I've seen predictions that we'll be the largest producer of oil in the world before 2020.

• If the US produced more of its energy requirements, the price at the pump would be lower.

This is wrong on its face. As a commodity traded in a world-wide market, the price of oil is based on world markets. The recent tussle over the Keystone pipeline is a good example of this irony. Proponents of Keystone often claim that we'll get cheaper oil if we ship it from a direct neighbor like Canada. Perhaps, but shortening the supply line won't make a difference you'll feel at the pump. What will make the difference is encouraging Canada to pump and sell all they can get their hands on. 

• US energy needs are constantly growing.

Also not true: at least not as a percentage of GDP. The linked article has more detail.

• The US is not an energy exporter because it has no excess energy to export.

True at the macro level, but misleading. Starting this year we are a net exporter of refined products like gasoline and jet fuel. We make it more cost efficiently than others so they buy it from us.

• World’s oil production has already peaked and as the reserves dwindle, more wars will be fought over the scarce energy resources.

Absolutely not true but I'll leave it to the article's author to explain it.

 Enjoy the read. And, by the way, Happy New Year 2012!