Sep 08 2008
Trade, Energy and Addiction to Foreign Oil
Published by Joe Hauet at 8:19 pm under
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WikipediaThe Pickens Plan is an initiative put together by the hedge fund manager of BP capital Management T Boone Pickens. The plan puts forth a model to get America off its addiction to foreign oil and on a path towards sustainable energy sources produced in the US of A. Watch the following video and read through the following information and comment on the questions.
“America is addicted to foreign oil. It’s an addiction that threatens our economy, our environment and our national security. It touches every part of our daily lives and ties our hands as a nation and a people. In 1970, we imported 24% of our oil. Today it’s nearly 70% and growing.
As imports grow and world prices rise, the amount of money we send to foreign nations every year is soaring. At current oil prices, we will send $700 billion dollars out of the country this year alone — that’s four times the annual cost of the Iraq war. Projected over the next 10 years the cost will be $10 trillion — it will be the greatest transfer of wealth in the history of mankind.
America uses a lot of oil. Every day 85 million barrels of oil are produced around the world. And 21 million of those are used here in the United States. That’s 25% of the world’s oil demand. Used by just 4% of the world’s population. The simple truth is that cheap and easy oil is gone.”
Discussion Quesitons
- Is Pickens correct in saying that America’s addiction to foreign oil is a problem? Be sure to use the concept of comparative advantage and specialization in your answer.
- If we assume it to be a problem, what solution would you recommend? Do you agree with Pickens?
About the author: Raised in Japan, Joe was an international school student throughout his school years. He studied government and religion at William and Mary, and later economics at UNC Asheville. He has taught in North Carolina, Hong Kong and Switzerland. Joe now teaches AP and IB Economics at Zurich International School. 
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Not only America but the entire world has to greater dependence on oil at this point in time. Aside from transferring large amounts of money from a large number of people to a small number of people it is arguably more important to be using the oil for production of plastics rather than transportation. Plastics can be made with oil only, where as transportation can be done with a large number of resources. That being said trying to change the source of fuel of all the cars in America, let alone the world would be astronomical. As would changing all the fuel pumps and surrounding infrastructure.
One the topic of power generation I believe that nuclear would be a more reliable source of energy than wind or solar. The safety issues have almost be completely resolved and it is proven that it is safer in both terms of production and waste material than coal.
Wind power can only be generated when there is enough wind to power the turbines but also when there is little enough as to not overload them. Also, these turbines due to their nature have to be placed in an exposed position, making them susceptible to damage from the environment.
I agree with Pickens basic idea that power generation and transportation fuel needs to change but I disagree with his choice of change.
America isn’t the only country with a dependence on foreign oil. The statistics presented for the US were quite eye-opening and do reveal that it is a problem. 70% of the oil they use is imported from overseas, that figure has jumped by 28% since 1990. The total cost of it is $700 billion, it’s a ridiculous amount, especially when Pickens states that it could be significantly cut down if they took action and used their own resources. So yes, it is a problem and not only that, it doesn’t NEED to be a problem. If America just took advantage of their own resources they could save billions of dollars. The video also states that 750 out of 1000 people in the US own and drive cars. Not only is the US overusing petrol, they are also creating pollution whose effect may not be felt now but will be in the future. The US should invest the money they could save from buying foreign oil and develop an efficient transport system. This would reduce pollution, reduce traffic on the roads and allow the US to use their own resources such as wind power, coal and bio fuel. All in all I do agree with Pickens, though I know very little about wind energy and how reliable it is. It’s all down to the government to address this problem, and hopefully they address it soon otherwise America will be faced with a huge problem when oil prices soar and only a minority can afford it.
I think that Pickens’ presentation on America’s dependency on foreign oil is absolutely correct. The figures that Pickens’ presents are alarming and show that this trend of importing too much oil has to stop. Not only it makes America highly dependent on other countries, but also this will lead to an imbalance of imports and exports. When the American economy imports more goods than it exportes, this will result in an acute economic recession.
That’s why I think that the Picken’s plan is a very good short-term solution, since America itself has the means to reduce the import of oil. So by taking the 22% domestic natural gas in order to use it for the transport sector and replacing it by 22% wind energy, this could lower the costs on oil by 300 Billion dollars. And not only this solution would lower the costs on oil, but the American economy would profit from it too, since those 300 Billion dollars spent on natural gases stay in the country.
However, as Pickens pointed out, the key to sucessfully executing the Pickens plan is organization. There need to be people who are able to lead this nationwide project and every American has to cooperate. As already mentioned, this plan is only a short-term solution, but really helpful, because it grants people more time to do research on alternative energy for oil in the transportation sector. Aside from alternative energy, the American government, in coorporation with the car industry has to put forth new policies (e.g. one household is only allowed one car, only consumer-friendly cars permitted) in order to control the use of oil.
Without a doubt, it is clear that America has a growing issue that can eventually lead to trillions of dollars of debits to other nations. Without a plan, it is very possible that the minority, as Alex said, will not be able to pay for the rising oil prices as it becomes more scarce - and the demand rises - in the near future.
It is clear that this addiction to foreign oil is a problem, and therefore I wholeheartedly agree to Pickens’ plan to replace the 20% natural gas sector with 22% of wind energy, and subsequently moving the natural gases over to transportation, which, in turn, can cause prices to decrease by over $300 billion.
It is time that the next presidential nominee takes matters into his own hands and sets this plan into action. With a more efficient and clean transport system, green house gas emissions can be slowed down to a more favorable rate, and with the new wind-energy sector the US of A can partially fight it’s addiction to foreign raw materials.
Because America is so dependent on this foreign raw material, any market collapse or conflict of some kind can leave America stranded, without a secondary backup system. (Nuclear energy is simply not efficient and wide spread, and coal is simply too expensive)
As Pickens explains in the very end of his presentation, this simple “10 year plan” (how ironic) of building wind mills in the wind corridor can give the human race 15 years of head-start to be even more innovative and to catch onto hybrid or fuel-free transportation before it is too late; before oil and other scarce natural resources finally reach the bottom of the gauge.
I think that Pickens is right in saying that the US’s addiction to oil is a problem. They spend alot of money on oil and as everyone knows oil prices keep rising, which means that the United States in the future will be spending even more money on oil, instead of less. I think they should start using their own natural resources to reduce the cost of foreign oil. I think that it is not possible not completely stop the purchase of foreign oil, because to many people in the US drive a car. But I am convinced that if they were to make more of an effort to try and use their own resources that maybe they could reduce some of the debt that they are in.
It has become crystal clear that the United States’ addiction to foreign oil has become a problem. Households now own two to three cars, and they have become our addiction. But as Alex said, it should not need to be a problem. Many alternative energies can be used to resolve this problem, such as wind, solar energies as well as natural gas. Those energies are still rather expensive but will certainly be the solution to this problem. It has become everyone’s problem over the past few years, the fact that most teenagers already own a car at the age of sixteen only aggravates the situation. But with the right government and the right leadership, this problem can be solved in less than 10 years. By using their own resources, the United States will be less dependant of other states and its economy will soon see better days.
The fact that there has been problems in the Middle East does not help the American economy, and oil is now fought over by the world’s powers. Therefore the United States should try to rely on other resources, available in their own nation, rather than rely on resources that will soon become too expensive and scarce.
It would be hard to stop driving cars abruptly, but if people tried to do something about this issue, they would be able to reduce their costs. It is now up to the government to take action and lead its citizens in the right direction.
I agree with pickens, America has a big problem with the amount of money that they are spending on oil. I think that Pickens idea of replacing the 20% of natural oil to wind energy is fantastic and a great way to safe money. Even though i agree with Pickens idea im not sure though that it will be as quick and as efficient as he says it will be. America is a large country and will need a lot of wind energy all year round for everyone to get an amount they need. If America decides to follow Pickens idea it would be great because i think that they might influence other countries to also think into the idea of using a new source of engery to benefit their country. As everyone knows oil prices are rising at redicules amounts, which as we also now know is going to lead big countries such as America into a lot of trouble later down the line. If America doesn’t change within the next 10-20 years it could be facing some serious fincial problems. If they don’t decide to go down Pickens route to benefit themselves then i think they should consider doing something very similar. Oil is a hard thing not to have, as most people have cars which can only run on oil at the moment. America does not provide its own so therefore will always have to have some foreign import of oil.
This is a classic examlple of what happens when a country focuses on obtaining one resource. Dependancy on a single resource is never good, but because oil is becoming more and more valuable (generally) and because it can be used for more than just powering machines and cars, people are overlooking this dangerous mistake. Its almost like the goldrush all over again, except that this time, because losses are potentially on an international scale, people are fighting and killing each other for oil. Reducing oil dependancy is paramount if we want to maintain peace and economic development, because when oil eventually becomes too expensive for the general public to regularly buy, we need to have invested in alternate fuels and plastics etc. It would lead to quite a devastating crash if we all of a sudden ran out of oil right now.
The Pickens Plan seems to me like the first reasonable approach to solving this economic issue. Pickens has purposed that due to the heavy winds across Central America, they should exploit this Natural resource and reduce the amounts of import and consumption of oil. America only uses 22% of the U.S. Electric Power Generation on Natural Gas. America imports 21 million of the 85 million barrels of oil produced in one day. This large percentage of oil is being used by a small percent of the world’s population. With Pickens plan they could use the 2 thousand megawatts of wind for a valuable resource. However, as Christian clearly pointed out, this is a short term result and in order for it to be carried through successfully every American needs to cooperate.
If America carries this through what would they use all of this wind power for? Would they simply swap it for oil in vehicles and other mechanic devices or will they create a new transport system reliant on wind power? Either decision would help this economic crisis.
Im not sure that I am convinced. Not only is natural gas still bad for the environment, but its price will also start to rise. Since there isn’t an amazing demand on natural gas now doesn’t mean that there wont be any in the near future. What will the US do when there is more demand than that 22% they can produce? They will have to “rely” on other countries (especially middle eastern ones where there is a lot of petrol, since natural gas is a byproduct of it). Normally trade is good for a nation (as long as the comparative advantages even out), yet in Americas case their relations with the Middle East are not the best… therefore this “dependence” on foreign oil/natural gas could become a problem if a country decides to halt the export of oil to the US.
Ok, heres a normative suggestion: what about if america uses corn, but in order to keep corn prices down they could stop feeding a third of it to live stock. Its not just becasue its for prices, its also logical, you loose energy and protein when you feed it to a cow, you get out of the meat about half the protein you put in… America exports Corn in vast amounts, and contributes about 70 percent of all the corn on the global market (http://seattletimes.nwsource.com/html/businesstechnology/2003305110_biofuel15.html) so theres no shortage… I completely agree with the man in the film and his solutoin, but in order to acheive this, we need to find solutions, like mine (as in cut down on meat production) in order to save america’s economy. That much money flowing out of the country is really bad news. Yet if the problem of corn prices is not adressed either, then its the poorest who suffer.
I believe that Pickens is correct saying that America’s addiction to foreign oil is a problem. I don’t believe his plan will solve the problem, and am not sure if its achievable; but it is a good initiative to get the world to start thinking about to find a good solution. The only problem with wind power is that like nuclear power, it takes a while to start functioning because many fields of wind turbines have to be constructed. With a bit of research i found out that the capital costs for wind projects are $1,500 - $2,000 per kilowatt of nameplate capacity. I take the example of Pampa, Texas, that will supposedly become the largest wind farm in the world. They aim to produce 4000 megawatts of energy… that is 4 million KILOwatts… and would cost 6 to 8 billion dollars to build (2000 turbines). Until this is payed for and begins to generate energy, I don’t know, but Pickens is sure to make some profit from it, as i found out he is the main investor in this project (which could also mean that the video may be biased).
On the topic of Bio Fuel, I believe we have to be careful because if it becomes a principal fuel, the price will go up, and this will also increase the price of any food grown on farms, because farmers will want to start planting corn, instead of the vegetables and fruits they are currently producing.
I agree that its a problem, as the price of oil is overpriced meaning that america is getting ripped off so in away its getting little for its money, the oil is soon consumed and shipped abroad. This means that the money is lost out of the economy which could make it weaker. As alot of the money is probably not returning to the US this will occour.
I agree very much with Pickens’ evaluation of America’s addiction to foreign oil, yet at the same time I believe his solution, although theoretically possible, is an idealistic solution for a country that is already indebted 1 trillion dollars to China alone. A plan to build thousands of wind powered energy producers would further create an economic crisis that many would be too scared to even consider, even if it meant the long term rejuvenation of the economy. America is a country dominated by self-interest and, as it has done until now, will probably just ignore the problem, hoping someone else will deal with it, and wishing it will resolve itself; it has not been the first time such a situation has presented itself and the result was the fall of the Twin Towers: America ignored the signals of an approaching crisis, even when all the signals were there.
Yet all it would take, as Pickens’ suggested, would be a good leader to save the country from an economic crisis; a leader who could take the reins and force the issues. The plan is theoretically viable, and just like a transition economy, after a few years of crisis, the economy would reverse and improve dramatically.
The statistics shown in this video were very shocking. The fact that 25% of oil daily oil consumption is used by the U.S was alarming, and also the fact that 70% of the oil they use is bought overseas is also alarming. I very much agree with Picken’s plan because it is unacceptable for the U.S that they are spending 700 billion dollar on foreign oil, this makes them completely dependent on other countries and if something were to happen to those countries, the consequences would be catastrophic. Pickens suggests that they should invest in Natural Gas, and that would help the problem of both the price of oil and the contamination. This would be a reasonable solution but it would take a relatively long time to get into practice and would require the cooperation of American citizens. The fact that they would be producing the gas themselves would mean that they would not be dependent on another country so much. This would also mean that the 700 billion dollars they are spending now could be used for other things. As Pickens states, there are plenty of good resources in the U.S and the government is not taking advantage of them. This would save millions of dollars. This is obviously a problem for the U.S not only in financial terms, but also because of contamination.