Why Not the Cheapest?
Why Not the Cheapest? Now that so much natural gas, the invisible salvation, is in the offing, how do we take advantage of it? First, Congress should decontrol gas wellhead prices immediately,...
...Open competition for the sit-still market would be a healthy development to fight the artificial price mentality...
...G.E...
...Conversions will probably occur on their own, at industry's expense, because sit-still users will be anxious to get at cheaper fuels...
...Then the gloomsday panic mentality that held up OPEC's monopoly price as the "true value" of oil will be shattered...
...The U.S...
...Once wellhead prices are decontrolled and gas use decriminalized, a significant conversion trend should begin...
...Its exhaust products are carbon dioxide and water vapor...
...Presto...
...Next, throw in the price of Chad and Lesotho...
...Converting sit-still oil boilers to natural gas will not be difficult...
...We have something they must have, money, and they have something we can do without, oil...
...It is, of course, a debt poor nations cannot possibly repay...
...If sit-still industrial oil users are encouraged to convert, and perhaps half of them do, that saves almost 3. million more barrels...
...Most sit-still oil users would rather burn natural gas...
...The balance, 8 million barrels, must be imported...
...Sit-still facilities like factories and utility generating stations actually consume almost ha^lf of the country's oil...
...Immediate decontrol will bring forth the surplus now, and allow the campaign against OPEC to begin without delay...
...Surprise, surprise...
...Most of the money was borrowed to buy OPEC oil at its blackmail prices...
...uses 17 million barrels of oiladay (half its energy supply...
...It is a tax subsidy to oil...
...That sum buys no military strength, only a false sense of security for Aramco's accomplices...
...Natural gas consumption can readily be increased by half, from 20 trillion cubic feet to 30 TCF per year...
...So add up $35 billion for the futile RDF, $50 billion a year in bad debts and all the public revenues lost to overseas oil tax gimmicks, factor in the artificially high price of oil itself, and suddenly $20 billion for boilers sounds like a fleet discount...
...The Fuel Uses Act might have seemed sensible when the simulated gas crisis seemed real, but it's exactly the reverse of what's required today...
...It's already expected that transportation oil demand will fall as much as 2 million barrels a day by 1990, as fuel-efficient cars take over the roads...
...For instance, every non-oil energy supplier who tried to cash in on OPEC's monopoly, by selling price-indexed fuel by what is generally called a "BTU-equivalencyscale" contract, will suddenly find his income plummeting...
...RDF is projected to cost $35 billion...
...OPEC is an unusually resilient monopolist, but only because "crisis" illusions and stammering political indecision prevent us from thinking clearly about cartel...
...Its sole purpose is to protect Arabian oil fields...
...oil imports fall to 3 million barrels a day, OPEC would crumble like a pressed rose...
...Militarily, RDF is useless...
...We don't have to buy OPEC oil...
...But even if the government had to finance conversion, the taxpayer would come out way ahead...
...Five million go to sit-still factories and utilities, and 4 million go to heat and cool buildings...
...We can't afford another shakedown by the sheiks...
...Converting a boiler back to natural gas is a snap," says Robert Broeker of Foster- Wheeler, a large boiler manufacturer...
...Blackmail prices are to blame...
...During the summer, some OPEC member nations were already making under-the-table discounts to maintain sales, cutting each other's throats in the highest tradition of free-market capitalism...
...At this point, we'll finally be able to junk the mad jumble of tailchasing regulations and subsidies that were invented in vain attempts to counteract one absurdity or another of doing business with OPEC...
...They'll be free to choose coal, sunlight, pulverized peach pits, or whatever is cheapest...
...They will do so, to escape OPEC's price...
...Any sit-still oil user (with a few exceptions, like petrochemical plants which use oil as a raw material rather than a fuel) can just as easily switch to some other power source...
...The tubes are already there...
...Take a wild guess as to which prominent North American country's taxpayers will get to pick up the tab when the Third World defaults...
...So Congress must hold in reserve the option of a flat ban on sit-still oil use...
...Next, Congress should repeal the antigas provisions of the Fuel Uses Act, which forbid construction of new gas boilers and order present industrial gas-users to stop by 1990...
...In recent months, the world oil market has been nearly glutted...
...If we pick our showdown properly, we win...
...But addicted as it is to federal subsidies, and leary as it rightly should be of constant Washington policy reversals, industry may drag its feet...
...Of course, nothing will require sit-still users to convert to gas...
...For technical reasons, it burns more efficiently in boilers, producing more power output per BTU input...
...The Third World continues to spend another $50 billion a year for oil...
...Third World nations are already more than $300 billion in debt to commercial banks and "multilateral" institutions like the International Monetary Fund...
...Many boilers hardly need any work at all—they are "dual fuel" devices originally designed to burn either oil or gas at the flip of a valve...
...This would be challenging, but far from impossible...
...Oil imports fall from 8 million barrels to 3 million...
...He will react by foresaking indexed contracts, and return to competing for sales by bargaining prices head-to-head...
...It's reasonable to project that more than half of the country's large oil boilers can be converted to natural gas for about $20 billion...
...Of that 17 million, 9 million barrels are produced domestically...
...No matter how well-equipped, a small expeditionary force stands no more chance against the overwhelming numbers of locally based Russian troops than the well-equipped Dallas Cowboy Cheerleaders stand against the Pittsburgh Steelers...
...The cartel is shaky, economists say, because oil demand is slack...
...If the pressure grows, the rats will abandon the sinking sheiks...
...Doubling natural gas consumption would replace 9 million barrels a day, covering all sit-still oil users, every drop...
...It is much easier to convert an oil boiler to gas, a physically similar fuel, than to coal...
...The Sinking Sheiks What effect will the conversions have...
...Signs of OPEC vulnerability are visible even now...
...First, Congress should decontrol gas wellhead prices immediately, instead of waiting until 1985 as the Natural Gas Policy Act's timetable specifies...
...OPEC, on the other hand, has to sell oil...
...Gas price controls, like the womb, have offered protection but kept us from developing...
...That level can be sustained for a long time, but probably not increased...
...Then energy can return to being what it is, a commodity in commerce, not some magical elixir exempt from competition...
...That increase would replace most of the 5 million barrels of oil now used daily by factories and utilities...
...OPEC breaks...
...There hasn't been a new naturalgas boiler ordered in this country in five years," says a Capitol Hill aide...
...Consider, when calculating the tax payers true cost for oil, the Rapid Deployment Force...
...Either way, if U.S...
...The U. S. holds the trump suit...
...The main constituent of natural gas, methane, is a bare molecule of one carbon and four hydrogens...
...We can produce our own oil for transportation, and switch almost everything else to other sources...
...It's cheaper than OPECpriced oil, and will stay cheaper even after decontrol...
...Twice in a single decade the world economy has been damaged by the worst jolts since the Great Depression...
...Conversion should work this magic unassisted, since it will save industry money...
...Breaking OPEC will provide not only the motive, but the opportunity to be rid of them...
...And it's almost pollution-free...
...Price, not supply, is what counts...
...Oil and coal, in contrast, are complex molecules with many extraneous atoms of sulfur and other pollutants...
...Of the 17 million total, 8 million barrels go for transportation...
...Which is exactly what we need, since it will drive prices down...
...But a calculation based on natural gas is useful both for simplicity and peace of mind...
Vol. 12 • October 1980 • No. 8
