Keystone Pipeline revisited
In September of 2013, i wrote a blog on the Keystone pipeline and the mental myopia of the Obama administration on failing to authorize construction. Four years later, it has been given approval by the Trump administration. As you can imagine, Facebook, amongst other venues were quite active on this topic. Below are some of my comments from Facbook:
The world uses approximately 98 million barrels (42 gallons to the barrel) of oil /day of which the US uses 18 million. Slightly more than 98 is being produced. Prior to affordable fracking technology, the US was producing 5.5 million barrels/day and we imported the rest. With Fracking, we are now producing slightly more than 9 million bpd (Barrels per day) and are capable of much more but the price needs to be around %55-60/barrel to make it viable. If we were to stop fracking, worldwide demand would outstrip supply and oil would rise to $100-$150/barrel. About every $1 change in a barrel, equates to 2.5 cents at the pump. Once again, there will always be accidents where man/woman is concerned, but the benefits far surpass the costs.
Here is a picture of my house with amorphous solar panels. Solar panels are a ridiculous investment with a 20-25 year breakeven. Why then do I have them? Because of all the ridiculous tax credits offered by the Obama Administration. As a result, these panels only cost me $5000, as opposed to $17,000 with a 7 year breakeven (I bought them in 2009). Thank you for subsidizing my electric bill with your tax dollars by the way. Some facts about solar panels: they lose 15% of their generation capacity within 6 months, so if you have a 2700 watt system like I have, the max amount of generation power is approximately 2300 watts, if you have monocrystaline panels (like most homes) and a leaf floats down on one of the panels, you just lost 95% of your generation capability. Think xmas tree lights, 1 goes out they all go out; and lastly, it's February and cloudy out right know, and they are only generating 225 watts of electricity. There may be a lot of answers but alternative energy is not one of them.
What many economists do (myself included) is look at welfare analysis. It is not an analysis of the welfare system but an analysis on weather society benefits from a particular police/procedure; in this case fracking. As a result of fracking, we have doubled are output, decreased our dependency on foreign oil and decreased the cost of a barrel of oil from an all time high of $147/barrel to its current level of slightly over $53. Currently the average price of a gallon of regular gas nationwide is $2.29 as opposed to a high of over $4. The downside to fracking/pipelines (costs) are spills and isolated cases of contaminated water. The most notable is Dimock Pa where 44 people had well water that was contaminated. Cabot immediately provided them with bottled water (an inconvenience) but a Federal jury last March compensated them with an award over $4 million. There are clearly environmental costs which are handled, but the benefits far exceed the costs, and given the fact that there are over 500,000 natural gas wells in the US, and roughly the same amount of producing oil wells, this meets my definition of a safe industry, and once again, while there are costs, they are far exceeded by the benefits
The pictures below are from a recent grant I received to travel to Alaska and do research on the Alaska pipeline which is currently pumping about 575,000 barrels of oil/day. At it's inception in 1977, it was pumping 2.1 million barrels of oil/day
John Tommasi is a retired Senior Lecturer of Economics & Finance from Bentley University and the University of New Hampshire.