How to Stop Being Held Hostage by Saudi Arabia

In an article entitled, Who Needs Mideast Oil?, a writer at Conservative Blogs Central wrote:

Gregor MacDonald’s article in Business Insider reveals how the percentage of our GDP spent on energy affects the nation’s economic growth. As the share of our productivity consumed by energy costs increases, the economy weakens. This principle is known as the energy limit model, and it is working beautifully, having come into play prior to the 2008 crisis and now once again forcing another global slowdown.

The US cannot reduce its energy expenditures relative to GDP; recently, lower energy expenditures merely reflected a lower GDP. Industrialism in the US, and elsewhere in the OECD, is therefore no longer able to outrun energy costs. This means that in order to maintain production, prices for assets like housing, and input costs such as wages, are now under secular downward pressure.

The economic dynamic that resulted from industry’s switch from wood to coal is reversing, and it will not stop. The same model which explains that ascent now explains our descent.

Imported petroleum represents a significant part of our energy costs. At $100 a barrel, the five billion barrels that we import annually costs us $500 billion, or about our entire balance of trade deficit. OPEC is artificially inflating the cost of oil by limiting production. There are things that we can do about being held hostage.

One approach is H.R, 1687, the Open Fuel Standards Act that Robert Zubrin discusses in his article in National Review Online. This proposal would cost the Treasury nothing; rather, it would create competition among alternative fuel providers and increase demand for their products by requiring motor vehicle manufacturers to provide flex-fuel options on new cars and trucks.

Using methanol could lower oil imports and help the economy, and methanol is cheaply made from coal, natural gas, or biomass. The worldwide effects of the Open Fuel Standard bill would be profound…because foreign car makers will not wish to walk away from the American automobile market.

With flex-fuel as the US standard, manufacturers abroad will adopt it to create a global competition between gasoline and methanol and put downward pressure on oil prices. Shell Oil has invented another promising fuel source that competes effectively with oil.

The PJ Tatler reveals that Shell’s Pearl project has created a process that transforms natural gas into synthetic replacements for petroleum products. In other words, turning natural gas into oil. This Gas To Liquid method is simply running the refinery backward. One result is a fuel like diesel fuel, that can be used without engine changes in a conventional diesel engine, but that produces cleaner exhaust.

The US has vast reserves of natural gas that have recently been increased immensely through hydraulic fracturing. Our clathrate deposits are estimated to exceed twice the known petroleum reserves in the world. The gas-to-liquid process makes all those sources available not just to generate power and heat, but to replace fuel oils, and even lubrication oils. The combination of natural gas production and GTL technology could end importation of Mideast petroleum.

That’s the literal bottom line to the GTL process: it appears that the Shell process, as it stands right now, is financially feasible [as long as] the price of oil exceeds $20 a barrel. What a joy it would be to put Saudi Arabia out of business.