Letter Re: Some Good May Come From High Gas Prices

Dear Jim,
Believe it or not, I find current oil prices encouraging as well as annoying, but with an undertone of warning. At our current domestic US price, it becomes cost effective to exploit the Canadian tar sands. Canada is next door, civilized, and easy to deal with. Their reserves in that form are probably larger than the entire world’s crude supply. Venezuela has an equal amount, and Chavez can’t live forever. The Canadians have gotten production cost down to $15/barrel, but are not yet producing at full speed. It is obvious, however, that growing technology will improve this, and some sites are able to extract up to 85% of the available hydrocarbons using three overlapping techniques. (By contrast, Saudi production is currently about $5/barrel. Even adding in transport and refining, how’s that for a profit margin?)
Add in growing electric technology for cars and increased development of our 1,000 year supply of natural gas, plus TDP (thermodepolymerization–turning trash to hydrocarbons) recycling and the Middle East looks less appealing as a trade partner all the time.
Looking at the Middle East, Bahrain, Kuwait, the Emirates and Qatar, which are all city-states founded by trading families in centuries past, are already diversifying away from oil. However, that leaves Saudi Arabia and some others with no real long term plans once their oil becomes as cost ineffective as it is politically ineffective.
My concern is that it was Western money that developed their region, brought them untold trillions of dollars and Western morals and “decadence” that the hardliner Muslims find so objectionable. I don’t expect they’ll thank us for taking the money elsewhere at this point. In fact, I expect an increase in hatred and terror tactics with us completely independent of them economically. We could very well buy energy independence at the cost of a small but relevant insurgency within our borders, and certainly threats to our overseas assets.
Keep your eyes peeled and your powder dry. – Michael Z. Williamson