Interesting ideas about Oil.

February 21st, 2009 by Chris

I’ve been reading back blog entries from Tesla Motors which are rife with pro-electric anti-internal combustion engine rhetoric. I find it rather reassuring that an honest to goodness real business enterprise is working on this. With any luck, they will continue to revolutionize the US auto industry.

Anyways, I just read an old post where their CEO, Martin Eberhard, commented on President Bush’s 2007 State of the Union address. He made two comments with regards to energy planning and cars which made me sit back and think for a while. You can read his post first if you wish, or just trust my interpretation. It’s ok, this post will still be here when you get back.

Caught up? Ok… here are the two “Hare-Brained Ideas”[1] that seem pretty reasonable to me.

  1. Allow CAFE standard credits to be traded on a market between car makers.
  2. Avoid exploiting US domestic oil resources specifically so we will still have them when the ‘foreign oil’ starts running out.

First: Trading in CAFE standard credits would obviously benefit those manufacturers who are producing the most fuel efficient vehicles. These manufacturers would get real economic (CA$H) benefits for their investments in fuel economy. Interestingly, this might also tend to discourage less efficient manufacturers from improving, because they would have the option to simply pay for their excesses. In the end though, I think this would emphasize the divide between the efficiency haves and have-nots. Of course, you would have to make sure that electric vehicles were judged appropriately to calculate the effective fuel efficiency since they still burn energy to run. Regardless, we can expect electric vehicles to remain many times more efficient than internal combustion vehicles due the nature of the internal combustion beast.

Second: This rather unusual approach of sucking down the foreign oil while holding our own in reserve. One benefit would be keeping our un-exploited lands un-exploited for as long as possible. Hopefully, by the time we are forced –I’m pragmatic enough to realize that there will come a practical tipping point to extract even in the most environmentally precious regions eventually– to exploit our own national reserves our extraction methods will be even environmentally safer than they are now. The other benefit is obviously economic, rarer resources are worth more, so the longer we sit, the more valuable the oil becomes. I expect that curve will only level off when oil is replaced by other (hopefully sustainable) energy sources. On the other hand, we’re giving foreign powers cash NOW, and these aren’t the friendliest places in the world right now.[2] Do our holdings make any real impact to the total world reserves? Will the increase in value for everyone else in the short term (if we hoard) offset the fact that we will have more expensive material to sell later? Recall that petroleum products are still valued commodities even if we don’t burn it in our cars anymore.


  1. His words, not mine. []
  2. There was an interesting article I read recently about the future electronic economy and where those valuable resources are held. Central Africa and China anyone? Sorry, I can’t find the article to point to it. []

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