CEPR - Center for Economic and Policy Research

Multimedia

En Español

Em Português

Other Languages

Home Publications Blogs Beat the Press Thomas Friedman Goes Euphoric on Energy Production

Thomas Friedman Goes Euphoric on Energy Production

Print
Sunday, 26 February 2012 08:38

Correcting Thomas Friedman can keep anyone busy. Today he is excited about the prospect of the United States joining the Organization of Petroleum Exporting Countries. That sounds like a great idea for a country that imports close to 9 million barrels of oil a day.

The basis for his excitement is that the United States is becoming somewhat less dependent on foreign energy imports. The main reason for this is the increased production of natural gas from shale deposits. However it is not clear how long these shale gas deposits will last since it seems that earlier estimates of reserves were seriously overstated. Furthermore, there is almost no plausible story in which increased natural gas supplies and domestic oil production, plus aggressive conservation measures, will cause our demand for imported oil to drop from 9 million barrels a day to zero any time in the foreseeable future.

Of course even if the U.S. miraculously became energy independent it would not free us of concern about events in the Middle East, as Friedman contends, since we are still in a global economy. This means that if war or revolution in the Middle East led to a sharp drop in world oil production it would still have an enormous impact on the U.S. economy.

To see this, imagine that there were severe droughts in Africa and Asia that caused the world price of wheat to quadruple. Guess what would happen to the price of wheat in the United States? That's right, it would also quadruple. The reason is that wheat producers would export their wheat to take advantage of the higher prices available elsewhere in the world, so we would have to match the world price in what we paid for the wheat consumed in the United States.

Since the United States is a net exporter of wheat, the country as a whole would come out ahead in this story. However, since most people do not own wheat farms, they would end up as big losers, paying much more for their bread and other wheat products.

It would be the same story with oil if democratic revolutions temporarily stopped production in Saudi Arabia and the other Persian Gulf monarchies. We would see the price of gas double or triple. Exxon-Mobil and the other oil companies would see corresponding gains in profits, but those of us who don't own lots of stock in these companies would still end up as big losers. In principle the government could tax the windfalls and redistribute them --- okay, we don't have to talk about such silliness. 

Anyhow, it's still fun to see Thomas Friedman get excited. I remember an earlier energy episode back in 2006 when he had Nancy Pelosi send a letter to President Hu in China, just after she won control of the House in the November elections. The letter Friedman drafted for her was about how the U.S. would produce clean technology products and export them to China. 

Comments (10)Add Comment
...
written by jhm, February 26, 2012 9:58
You might want to revisit your source for the reserve of US gas:


"In this space we recently reported that a new assessment of the Marcellus Shale in the northeastern US by the US Geological Survey seemed to indicate that shale gas resources in the US may be a lot smaller than was previously thought. This, however, turned out to be incorrect. Below we give the correct story - and provide an overview of recent shale gas publications, including our own."

Even so, this is different than economically recoverable reserves, a distinction that I wish were made more often.
...
written by sufferingsuccatash, February 26, 2012 10:22
US M/E policy is not just about acquiring oil for domestic use. It is also about controlling the distribution of oil globally, ie. Chinese imports. The US is well aware that limiting oil distribution to China will also limit the expansion of the Chinese economy. That is what the war in Iraq was about, and the intervention in Libya as well since the Chinese had developed oil production in eastern Libya. US military interventions are clearly related to US oil interests in consumption and geopolitical distribution. Friedman may lack that insight, but the Chinese surely haven't. Dangerous stuff going on now in the M/E.
Since there is NO Evidence that Iran Intends to Build a Nuke
written by Paul, February 26, 2012 11:38
According to the CIA,
http://www.nytimes.com/2012/02/25/world/middleeast/us-agencies-see-no-move-by-iran-to-build-a-bomb.html, does it make sense to shut down Iranian oil production of over 4 million barrels per day? Just sayin'
Marcellus Shale Gas was Downgraded from Widely Reported Estimates
written by dean, February 26, 2012 11:48
JHM,

If you read my source, you'll see the dispute is not over the current amount of gas that the EIA estimates for the Marcellus Shale, it is over the reference point. The last official EIA estimate was from 2002. Its 2011 estimate was an increase compared with the 2002 estimate. However, it was far about 80 percent less than the widely reported estimates of private consultants. So the latest numbers do not indicate that we can long power the country with gas from the Marcellus Shale.
Where's Nixon when we need him??
written by jumpinjezebel, February 26, 2012 1:32
Only way to stop export resources produced in the USA to overseas would be to entrap them for first use/demands of the USA and then whatever is left over you can export. Just thinkin'.
gas?
written by Downpuppy, February 26, 2012 4:06
Shale gas has kept us out of a huge natural gas crisis, but the major reason for the 4 million barrel a day decrease in US net oil imports in the last 5 years is reduced consumption. There has been very little substitution of gas as a fuel. Mostly, we're driving less, getting better mpg, and have cut industrial & diesel use. And we will reduce imports more in the future, because there willl be a lot less oil available from the exporters. Odds are that that will involve the same mechanism as the last 5 years - rising prices and a crashing economy.
NPR follies
written by Michael Radosevich, February 26, 2012 5:19
It's surprising Tom isn't on NPR - he's just the sort of vapid muddleheaded person who's perfect for NPR. This weekend NPR's Guy Roz has an extended story on "will blocking the Canadian pipeline cause higher gas prices in the US." As usual with NPR, it's presented as a he said, she said story.

Roz also uses another favorite NPR theme - it's complicated. Why are gas prices so high now? It's complicated.

We'd be better off without NPR. Maybe then we'd be able to have a progressive radio network instead of this timid, tepid, silly NPR.
...
written by bmz, February 26, 2012 5:27
" Its 2011 estimate was an increase compared with the 2002 estimate. However, it was far about 80 percent less than the widely reported estimates of private consultants. So the latest numbers do not indicate that we can long power the country with gas from the Marcellus Shale."

Dean: you are spinning here--the 80% figure is clearly wrong and they admitted it, regardless what the base is. Based on the latest data the EIA estimates that we have 90 years of current gas reserves. The biggest news in that article you cited was that they concluded that the detrimental environmental impact of natural gas was far less than previously estimated. The bottom line is that Friedman has every reason to be euphoric: for the first time in 40 years we have good solid reasons to believe that we can stop importing oil from outside the Americas in the near future.
This is why...
written by LSTB, February 27, 2012 8:16
...I read Dean Baker.

But those of us who don't own lots of stock in these companies would still end up as big losers. In principle the government could tax the windfalls and redistribute them --- okay, we don't have to talk about such silliness.
Why not be much more accurate?
written by Floccina, February 27, 2012 12:46
The basis for his excitement is that the United States is becoming somewhat less dependent on foreign energy imports.


Why not be much more accurate and say:


The basis for his excitement is that the United States is becoming somewhat less dependent on foreign oil imports.

Write comment

(Only one link allowed per comment)

This content has been locked. You can no longer post any comments.

busy
 

CEPR.net
Support this blog, donate
Combined Federal Campaign #79613

About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

Archives