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Thursday, August 14, 2008

Alternative fuels are more expensive?

There is no grand conspiracy involved with our use of petroleum for energy. It is the cheapest and most efficient form of energy we have for mass consumption. There might be third-party costs (negative externalities) but it is difficult for me to wrap my brain around the idea that the third-party costs are greater than the first-party benefits.

The alternative fuel push might, one day, generate a fuel that is able to effectively replace petroleum based energy, but my guess is that it might happen first at energy producing plants rather than at the consumer level, i.e., at the gas pump. Regardless of whether it occurs, the alternative energy proponents consistently fail to mention that it will cost more to use alternatives, thereby requiring many of us to suffer a reduction in our standard of living or a reallocation of our individual resources against our will.

This headline from a Popular Mechanics article is telling:

Ready to make your own gas alternative? These products can give you a start—but energy independence won't come cheaply.

Energy independence flies in the face of comparative advantage and economies of scale and therefore economic theory predicts alternatives (at this point) will be more expensive than petroleum.

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