Mon, Sep 10, 2012 - Page 8 News List

Measuring the actual value of oil production

By Chi Chun-chieh 紀駿傑

What is a reasonable price to pay for a liter of gasoline? The current price in Taiwan of about NT$36 per liter is a lot more than the NT$20-odd that it cost many years ago, but does that really means the price is high?

Of course, there are many possible answers to this question. It depends on what angle you are coming from.

Petroleum is categorized as a fossil fuel, because it is formed through the decomposition of biological substances accumulated over millions of years. At the rate at which we are using petroleum, it is a non-renewable resource. In fact, it is estimated that there are only enough usable oil reserves around the world to last for another 50 years or so. From this point of view alone, when you consider that the price of a liter of gasoline is only about twice what it costs to buy a liter of bottled water from a supermarket, it can be seen that the price of oil is really too low.

Of course, the price of oil is not the only problem associated with the commodity. The environmental issue that is causing the most concern these days is global warming and the biggest cause of global warming is the combustion of oil, coal and other fossil fuels. Besides, the extraction, transport and refining of oil cause pollution, and they can easily cause ecological disasters like the calamitous BP oil spill that struck the Gulf of Mexico two years ago.

A few days ago, the US Department of the Interior approved a permit for Shell to start preparatory work for extracting oil in Alaska, within the Arctic Circle. This decision has aroused strong criticism from environmental groups, because the region is one of the few remaining integral natural environments in the US. Oil extraction is certain to cause serious and irreversible effects on the region, and to have a heavy impact on the lives and livelihoods of the region’s indigenous people — the Inuit.

Oil prices have been kept too low for too long, failing to take into account the cost of production and the negative results of oil use. The low oil price, along with the influence of politics, is one of the reasons why the development of renewable energy resources like wind power has been so slow in Taiwan. In Germany, wind turbines can be seen all over the country and what makes this possible is that the private individuals, groups, villages and businesses that build these turbines can conveniently sell the energy they generate to electricity companies at a reasonable price. However, in Taiwan, where electricity distribution is a monopoly, private investors are not keen to invest in wind generators and so the sector has not flourished.

The main reason why the US launched its widely criticized war against Iraq was to stabilize its sources of cheap oil. Of course, the business of oil refining and supply is a near-monopoly in Taiwan, and the issue of monopolies needs to be critically discussed. In the long term, however, we must look at the issues from the standpoints of the environment and future generations when we consider what is a reasonable price to pay for oil.

Chi Chun-chieh is a professor in the Department of Ethnic Relations and Cultures at National Dong Hwa University.

Translated by Julian Clegg

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