Tuesday, June 5, 2007
Oil
For today's economics lesson, consider this fact: oil is fungible. Well, not perfectly fungible, but mostly so. It may be that some crude oil is better than others, but refineries can make gasoline and the other petroleum distillates from bad crude as well as good. Because oil is fungible and because a world-wide market for oil exists, it doesn't matter much where the oil we use comes from. If there is a significant disruption in the supply of oil produced anywhere, prices will rise here. Even if the United States produced 100% of the oil that it needed. This is why (or at least one of the reasons why) people who blather on about energy independence either don't know what they're talking about or have other agendas that they choose not to discuss.
Subscribe to:
Post Comments (Atom)
1 comment:
A few years ago, there was a great post on the Volokh Conspiracy talking about how — given oil's fungible nature and the higher cost to produce oil in the USA — really effective domestic conservation would actually increase the proportion of oil we import.
Post a Comment