Some Thoughts on Oil.

The US is kind of unique, in a very good way

The US is the largest economic and military power in the world and is more-or-less self-sufficient when it comes to petroleum. The next 3, in terms of GDP and oil self-sufficiency, are Russia, Brazil and Canada, ranked 9th 10th and 11th largest economies in the world. Our economy is about 4 times larger than all three of these economies, put together.

What is the benefit of being self-sufficient? Our economy is insulated from increases in the global price of oil. For the US, when the price goes up, this causes a flow of wealth from consumers to producers, who are both located in the US. When the price of oil is low, consumers have extra cash in their pockets, when the price is high, producers have extra cash. Either way, somebody; oil companies or consumers will have cash to spend or save. In places which are dependent on imports, price increases cause an increase in the flow of wealth to outside their country.

So, it’s good to have a balance between consumption and production, but this could be happening at a lower consumption and production level: We could discourage driving, heating homes with oil and flying by taxing these fuels more heavily. We could also decrease production by raising royalties—though most (about 85%) of US production is on private land. So it might be harder to slow production than usage. It would arguably be an economic mistake to purposefully limit oil usage—There is a lot of economic value in oil use: Driving, heating your home and flying all have economic value. If people do less of it, they are forgoing benefits.