This is a very interest solution for USA's continued liquid fuel shortage. At $65/barrel, it may not be as cheap as most conventional crude oil but being cleaner it could be a winner when fuels are taxed on GHG total created. Secondly, an importation fee of $0.54/gallon (or more for fossil crude) on all imported fuel (like duties currently applied on imported ethanol) could help local production and reduce imports.

OPEC can easily drop oil prices if they see substitution. They have done it before and will do it again in a blink.

The moment there is an alternative for fossil fuel and there is a 'green excuse' for western protectionism, the west can easily raise CO2-taxes on fossil fuel.

On the other hand, OPEC is even more addicted to oil-money than the west is addicted to oil, and that difference is only going to increase. We have many alternatives in the running for oil. They have almost none for oil-money. Dropping the price of oil to 60$ just like that, is like increasing income-taxes with 20% just like that.

Just like we walked into our oil-addiction with our eyes wide open, simply because of the political reality, OPEC is killing the world's oil-addiction prematurely because of their political reality.
Once our alternatives will be mature and will have the benifit of scale and mature technology, their oil will be completely worthless, and their political reality will be dramatically different (and dangerous).

Oil price is no longer a question of supply and demand since OPEC decided to fix prices and production level in mid-1970's.

It is fair to say that many oil producing countries have become addicted and dependent on Oil $$$. Their economy would fail quickly if oil price or oil shipment fall. Unfortunately, many other economies would fall with them because Oil $$$ are mostly recycled.

Fortunately, fossil fuel replacement will be progressive and producers will have time to adapt but them may have to stop building 160 stories structures.

The best thing that could happen to USA would be to switch from imported fossil fuels to locally produced substitutes, even if it cost more. Competition could be maintained with extra carbon or import taxes of crude Oil and high enough subsidies on substitutes. Fuels made from local wastes could have a higher priority. Why not use all garbage to produce some of the essential liquid fuels and clean up the local environment at the same time?

@Alain,

In broadstrokes you're right the Middle East will take a hit when oil's time is past. However, they have had hundreds of billions of dollars to invest and play with, and you will see them in many facets of life for a long time, especially in Air Travel.

Once we stop needing the Saudis we can recognize their religious imperialism as a declaration of war and just cancel any bonds they hold.

This process is yet another addition to the liquid fuels solutions coming from biomass and waste. Together, along with scaled up processing of algal biomass, cellulosic alcohols ARE a real and viable alternative to fossil fuels.

The tax structure can help with the transition simply by raising import taxes on fossils and eliminating or crediting taxes on renewables.

With the ongoing selloff of big oil assets (BP, Shell) we are already seeing the undoing of energy monopolies. However a primary caution should be given to the investment by cash rich investors in North American electrical energy structures. Oil money will gravitate to electric power production and distribution via "smart grids." This will repeat the oilco's take over of energy in the 1920s.

Electrical energy MUST be diversified and distributed off-grid if we are to avoid a new energy monopoly. This is readily accomplished by distributed energy technology and regulation of centralized power production. Home Combined Heat and Power systems will guarantee North Americans avoid new big energy cartels using the grid to corner markets.

Reel$$ has a good point. There's nothing to stop oil $$$B from going over to electricity production an distribution. It will possibly happened during the next decade or two. If is not properly regulated it could become ugly by 2030/2040.

Distributed (domestic) production is a possibility but lower cost solar panels and storage batteries are required. Domestic NG power units may not be sustainable due to limited (8.6 years in USA) NG reserves.

Large Nuclear, Sun and Wind (and cleaner coal) power plants may be more competitive for the near/mid term future. Both centralized and distributed systems could co-exist to reduce impact of larger monopolies. Selective taxation could play a role, specially to promote domestic production.

SJC:

1) Current USA's NG reserves are about 226,000 Bcf

2) Current USA's NG consumption is about 63 Bcf/day

Assuming that US's NG reserves and consumption will move up at about the same rate, reserves will last about 8.6 years. If either reserves or consumption change differently in the future, reserves may last more or less.

Please correct me if I'm wrong.

EP may be correct on electric sector current ownership restrictions. This could change under pressure from world free enterprises + local lobbies.

SJC: Here are more info:

USA's NG consumption:

All sources seems to agree on 60 Bcf/day to 63 Bcf/day for the last 5+ years.

USA's NG conventional-traditional reserves.

USA has about 3.5% of the world conventional NG reserves. Russia and the Middle East have over 80%.

Different sources quote different reserves for USA. Anywhere from 175,400 Bcf (7.6 years); 226,000 Bcf (8.6 years) ; 521,000 Bcf (22.6 years); 935,000 Bcf (40.6 years); to something as as high as 2,000,000 Bcf (86.9 years). This last estimate may include some non-conventional potential reserves.

USA's conventional or traditional NG reserves seems to be changing as often as the local weather. Is the right answer half way between 7.6 years and 86.9 years = 47.25 years? Maybe.

USA is already importing 4 times as much NG as it exports. It is still a small percentage of the total.

Converting 436 coal fired power plants and many million mid/large size ground vehicles to NG may double daily NG consumption and reduce average conventional reserves from 47.25 years to 24 years. Either way, NG is not an endless energy source. It could be a rather short term (25 years) panacea. Should it be used to produce electricity with high efficiency turbines or to fuel low efficiency ICE vehicles? That option is still up in the air. For the longer term, Nuclear, Solar and Wind energies are more sustainable and relatively cleaner. However, it is more than possible that we will use NG (and crude oil) to the last drop before we willingly and largely switch to other sources.

Here is the EIA link showing more than THREE categories in case you did not read the other story.

http://www.eia.gov/dnav/ng/ng_enr_sum_dcu_NUS_a.htm

Dry Natural Gas
244,656 -2008
Natural Gas, Wet After Lease Separation
255,035 -2008
Natural Gas Nonassociated, Wet After Lease Separation
226,012 -2008

A few examples of yearly per capita energy consumption (Kwh equivalent):

Canada = 11,100
USA = 10,400

Japan = 5,400
UK = 5,200
Germany = 5,600
France = 5,000

China = 1,500

How can China feed/operate the world's factories with so little (1/8) the energy consumption? Our (USA/Canada) per capita energy consumption could be 20% to 30% higher if we manufactured all the good we use.

Don't bother too much about NG reserves. Nonconventional NG (which has in the last year become mass-scale) will last for several decades. Quite soon, 10MW floating windmills, next generation nuclear and solar will produce much more energy than we need. Any energy can be transformed in any other (electricity <-> any chemical). And it will be abundant, cheap and non-monopolizable. As long as there is the political will to push it. Since the West realises China does have this will, it will only be pure economical necessity to do so also. Luckily.