A glut of fracking-induced supply will soon cause oil prices to collapse, leaving the Middle East strategically unimportant to U.S. interests, an economist said during an annual economic breakfast meeting on Wednesday.
Calling computer-guided horizontal drilling and hydraulic fracturing one of history’s great technological breakthroughs, Dr. Philip Verleger, a Carbondale resident who served as an energy economist with the Treasury Department during the Carter administration, predicted a future with abundant, cheap, domestically produced energy.
The price decreases could be so pronounced that U.S. taxpayers will eventually demand their government stop spending billions on naval deployments to protect Persian Gulf shipping lanes, Verleger said.
Speaking at Vectra Bank’s annual “Economic Update Breakfast” at the Doerr-Hosier Center at Aspen Meadows, Verleger also noted that while supplies of oil and gas will increase, demand factors are decreasing. Due mostly to increases in efficiency, in 40 years, the amount of energy needed to produce $1 of gross domestic product has dropped 60 percent, according to Verleger’s research.
He also said he supported a carbon tax, and that the Keystone XL pipeline, which would run from the Canadian tar sands to the Gulf of Mexico, was a bad idea.
The pipeline is the equivalent of Canada’s “tar sands road to China,” Verleger said, adding that it is intended to upset current distribution models and ultimately raise U.S. fuel prices.
He also said he doesn’t believe the pipeline would be operated in an ecologically friendly manner, and that the damage it could do to productive Nebraska farmland isn’t worth whatever benefits might come.
A carbon tax makes sense, Verleger also said, calling it simple to administer. He said it could be a good way to reform the corporate and individual income tax rates.
Dr. Rich Wobbekind, an associate dean at the University of Colorado Leeds School of Business, who also was a keynote speaker at the Vectra breakfast, agreed that a carbon tax makes sense.
“Most economists agree on this,” Wobbekind said. “I don’t know why we haven’t moved faster on this.”
Verleger also said that people in the petroleum industry can be their own worst enemies, and that their public statements are deemed some of the least trustworthy of any occupation. They keep finding new ways to shoot themselves in the foot, Verleger said.