Oil Rents - Drill for Health Care!
by tdaxp ~ September 13th, 2008
Eddie of Hidden Unities sent me this post to think about:
Marginal Revolution: Drill, drill, drill?: the economics of drilling
Under the authors’ understanding of incidence, consumers wouldn’t benefit much at all because oil prices would not fall noticeably. Still, drilling makes economic sense if the loss of environmental amenities is valued at less than $1,141 a person (per American, not per Alaskan) and that was with a price of oil roughly half of today’s price.
Much of the anti-drilling talk misses the point: even if drilling does not free us from foreign oil, it redirects “rents” (payments for oil in excess for what’s needed to economically produce that oil) from Gap countries like Saudi Arabia and Russia to our government, and our taxpayers.
According to the calculation at Marginal Revolution, oil drilling would essentially pay for a $1,141 health care insurance payment for every American every year. That would be good for business, good for health, and good for America.
[1] http://www.tdaxp.com/archive/2 008/06/19/the-foreign-polic...
September 13th, 2008 at 7:49 pm
Assuming, though, that the reduced revenue for foreign suppliers is dividing proportionally by their percentage of the American market, the damage to the MidEast and Russian concerns would be relatively modest compared to relatively friendly African and Latin American suppliers.
September 16th, 2008 at 11:46 pm
“According to the calculation at Marginal Revolution, oil drilling would essentially pay for a $1,141 health care insurance payment for every American every year.”
I think the correct interpretation of the finding is that “…oil drilling would essentially pay for a $1,141 health care insurance payment for every American for a year.”
The present value is $1,141. Annual payments of $1,141 would have a much higher present value.
September 18th, 2008 at 6:00 pm
tv,
You’re right. I was wrong.
The line should read “a $1,141 health care insurance down-payment for every American”
Considerably less than the first take, but still wealth that could be used for helping the country.
Michael,
Oil is highly fungible, so except for marginally higher transportation costs of getting oil to a slightly more distant market, there would be no specific costs for our oil suppliers.