Monday, March 06, 2006

The Oil "Addiction"

Sorry, we are NOT addicted to foreign oil. Buying what you need or want for the lowest price available is not an addiction. Paying more that you have to is what's irrational.

An addiction is when price doesn't matter. You have to have it, no matter what.
If ethanol can be produced for less than OPEC sells oil for, nobody is going to yearn for the good old days of Arab embargos. The problem is that the Saudis can pump crude for $5.00 a barrel and so any competitor to oil can be easily undercut by OPEC. Now suppose Exxon or ADM puts $20 billion into an ethanol distilling and distribution system and people can buy cars that run on it, and it sells for $1.50 a gallon. What do you think the OPEC would do?

"So what?" you ask. "We can put a tariff on imported oil to guarantee that the price per gallon won't go down." Maybe that will work, but if the word gets around that we could be paying $1.00 a gallon, and we're not because of some tax, will we go along?
Maybe. But would you bet $20 billion on it?

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