Monday, February 27, 2006
Oil Economics in the Comics - Dogbert and Oil Markets
Dilbert Comic Strip Archive - Dilbert.com - The Official Dilbert Website by Scott Adams - Dilbert, Dogbert and Coworkers!
I like many people find Scott Adams' comic strip amusing. I also find energy economics and environmentalism amusing subjects as well. In this strip, Dogbert points out to Dilbert that buying an energy efficient automobile will not reduce his dependence of oil from terrorist supporting countries because oil is a fungible commodity and will low cost supply (which is in the terrorist supporting countries) will flow to the market first, because if we don't buy it someone else will.
Dogbert's analysis is correct, but beside the point. What Dogbert overlooks is that the reduction in demand for oil, which is a relatively inelastic product, will have a substantial impact on price. That is, relatively small reduction in total oil consumption will have a relatively large impact on the price of oil. Thus, if the purpose in reducing consumption is to deny terrorist supporting countries funding, the purchase of low petroleum consumming vehicles can have exactly that impact.
Another factor to consider in this analysis, is the fact that a large number of our defense dollars and foreign policy, is devoted to maintaining access to this relatively precious commodity. Our dependence on oil (not foreign oil but oil - remember it's fungible) distorts our economy and foreign policy.
Here's a policy that we'll never hear from the Bush administration. First, we need to add a defense surcharge tax to oil from the middle east, by doing so one recognizes that the actual cost of purchasing that oil is not limited to its market price, but also includes the defense costs that are necessary to secure it. Given that such a tax would induce arbitrage, it might simply have to be turned into a foreign oil tax period. The second thing that might make sense is a new CAFE fuel efficiency standard that makes some sense. With such a standard we can drive down consumption and reduce the amount of funds we provide to countries that support terrorism.
Call it my modest proposal.
I like many people find Scott Adams' comic strip amusing. I also find energy economics and environmentalism amusing subjects as well. In this strip, Dogbert points out to Dilbert that buying an energy efficient automobile will not reduce his dependence of oil from terrorist supporting countries because oil is a fungible commodity and will low cost supply (which is in the terrorist supporting countries) will flow to the market first, because if we don't buy it someone else will.
Dogbert's analysis is correct, but beside the point. What Dogbert overlooks is that the reduction in demand for oil, which is a relatively inelastic product, will have a substantial impact on price. That is, relatively small reduction in total oil consumption will have a relatively large impact on the price of oil. Thus, if the purpose in reducing consumption is to deny terrorist supporting countries funding, the purchase of low petroleum consumming vehicles can have exactly that impact.
Another factor to consider in this analysis, is the fact that a large number of our defense dollars and foreign policy, is devoted to maintaining access to this relatively precious commodity. Our dependence on oil (not foreign oil but oil - remember it's fungible) distorts our economy and foreign policy.
Here's a policy that we'll never hear from the Bush administration. First, we need to add a defense surcharge tax to oil from the middle east, by doing so one recognizes that the actual cost of purchasing that oil is not limited to its market price, but also includes the defense costs that are necessary to secure it. Given that such a tax would induce arbitrage, it might simply have to be turned into a foreign oil tax period. The second thing that might make sense is a new CAFE fuel efficiency standard that makes some sense. With such a standard we can drive down consumption and reduce the amount of funds we provide to countries that support terrorism.
Call it my modest proposal.
# posted by Strange Anomaly : 11:31 AM
