by Jerome a Paris
Wed Jun 29th, 2005 at 04:10:30 AM EST
Well, it seems that yesterday's reality-based article on peak oil in the WSJ Op-Ed pages (which I commented upon here) has brought a nasty backlash, as there are no less than 5 oil related articles on today's WSJ Op-Ed pages. I have only access to one, but as it is their editorial, it presumably represents the "official line". (come below the fold and be ready for your jaw to drop at the level of wingnuttery)
Meanwhile, China is on mission to quench thirst for petrol
With oil prices over $60 a barrel, the Chinese government could not have picked a better time to begin introducing tough fuel economy standards in cars.
From next week, carmakers in China will be required to meet stricter standards for engines than those in the US. The new engine rules are part of a raft of measures Beijing is preparing for the sector.
Earlier "Countdown Diaries":
Countdown to 100$ oil (3) - industry is beginning to suffer
Countdown to 100$ oil (2) - the views of the elites on peak oil
Countdown to 100$ oil (1)
- - - - - - -
Today's batch of WSJ Op-Ed articles (title and subtitle):
"The Fed's Crude policy"
Should the Fed raise interest rates when oil prices go up and lower rates when oil prices go down?
Another Reason to Love Wal-Mart
They'd save you money at the pump -- if local retailers would let them.
We Need to Talk About Oil
Addressing the energy crunch requires facing up to the problem and taking rational action. by David Ignatius
Frozen in Siberia
The Kremlin is driving down oil production and investment.
Say No to Cnooc's Bid for Unocal
A takeover risks handing Beijing an asset of potentially strategic significance.
$60 Oil What can be done about it? Not much.
Congress repeats that '70s show.
So here goes with that editorial. (If anyone has access to the other articles and can send them to me, I'll update with the relevant comments).
First, the usual supply-side, tax cuts are good, drivel:
Higher oil prices hit the economy much like a tax increase. The financial markets understand this, which is why over the past year the stock market has tended to move up or down inversely with the price of crude. The increase to $60 a barrel from $40 a year ago has cost the U.S. economy about $75 billion. It's a testament to the effectiveness of the 2003 Bush tax cuts that the economy continues to grow briskly despite this anchor of high fuel costs.
But that's pretty much the standard fare of these pages, so one cannot really be surprised. But here are the comments about the current Energy Bill:
And speaking of the 1970s, the most important thing Congress can do is not to use $60 oil as an excuse to repeat the energy policy mistakes of that decade.
This monstrosity [the energy bill] repeats most of the subsidy mistakes of the Carter years--for wind, solar, "biomass," you name it.
It's all the libruls' fault: the silly scaremongering, the addiction to useless subsidies, and of course, the lack of trust in Americans' genius, and, who'd have thunk, the enthusiasm for corporate largesse...
All of this reflects the return of the 1970s mindset that the world is somehow running out of oil. In fact the world's known oil reserves have doubled since 1980, as technology has improved to discover and extract more of it. Oil prices are high now because of a combination of rising new demand around the world (notably China and India) as well as worries about temporary supply disruptions in the Middle East, Nigeria and Venezuela.
They are not high because of fear that reserves are running out. If prices stay high, new oil sources will become economic, including from Canada's abundant tar sands. Despite temporary price spikes, oil, natural gas, coal and electricity are all cheaper today as a share of our national income than 50 and 100 years ago.
Uncle Sam doesn't need to command conservation at $60 a barrel. Americans can figure this out themselves. (...) There's no reason to suspect that government sages or Members of Congress have the foresight to accurately pick the energy winners and losers in advance. (...) Washington shouldn't add insult to injury by making consumers pay twice for higher gas prices by also saddling them with billions of dollars of extra costs for an energy bill laden with corporate welfare.
Well, I suppose kudos to them for criticising "corporate welfare", but as it comes at the end of the anti-70s, don't spoil Reagan's great policies rant, one can be excused to think that they don't blame Bushco for that "welfare"...
So, let's do nothing and let the ever entrepreneurial and inventive Americans figure out the right solutions on their own.
Now turn to China:
At the moment, vehicles consume about a third of China's fuel. Yet as demand for cars doubles to an expected 8m-9m a year by the end of the decade, this will rise to 65 per cent of the oil by 2015, the government says.
The government's fuel efficiency offensive begins next week with the introduction of a first stage of fuel economy standards. The second stage will come in 2008. "They are slightly more stringent than current fuel economy standards in the US," says Amanda Sauer of World Resources Institute in Washington DC.
The Chinese rules have a clear target - the sport utility vehicle (SUV). In the US, vehicle manufacturers are required to meet a standard for the average fuel economy of its entire fleet.
Under the new Chinese rules, however, each vehicle has its own standards, with the toughest for the heaviest vehicles. The government hopes the rules will restrain the growth of the SUV and minivan sectors.
Last month China also announced new standards for emissions - based on the rules used in Europe - which are to be introduced in 2007, and the government is discussing a fuel tax.
The article then describes some of the obstacles to the new measures:
- fuel taxes are inflationary, and this difficult to accomodate with the current anti-inflationary macro-economic policies;
- emission targets will be hard to reach because the quality of fuels in China is still pretty bad (due to existing refining capabilities) and htat has a bigger impact than the quality of the engine's combustion;
- local carmakers will have more trouble than foreign companies to fulfill the requirements, so this may endager China's plans to buils a domestic industrial capacity;
- and of course, in China, actual enforcement of the rules is a big question.
At least this shows that the Chinese authorities are aware of the real problems associated with growing car (and thus oil) use and are trying to address them in an otherwise complex economic context. But China's policies can only curb their rapidly growing demand. The West, as the biggest user of oil, needs to take big steps to reduce its levels of consumption if we want to have a chance to live with stagnant oil production without facing the order-of-magnitude increases in oil prices that will be required for us to reduce sufficiently our consumption under pure "market" mechanisms.
So shame on the WSJ for publishing such dangerous drivel.