Saturday, May 06, 2006

Energy and Freedom

The 21st century will be marked by a crucial debate: How can we make economic development compatible with the spread of freedom around the world? One might argue that those goals are synergistic, that one will drive the other.

However, in an ironic example of Intelligent Design, it pleased the Creator to put much of the Earth’s oil in turbulent places and under the control of despots. With Iran developing nuclear weapons and threatening to annihilate Israel, terror tactics increasingly used around the world and oil prices above $70 per barrel due to global uncertainty, it seems we must find a solution before long.

In his State of the Union address President Bush said that America is dangerously addicted to oil. We consume nearly 21 million barrels of oil per day, over 25 percent of global oil production, while our known oil reserves make up only 3 percent of global supply. Some dream of a grand compromise: President Bush bucks Big Oil and Detroit by raising auto fuel-efficiency standards, while enviros grind their teeth and support oil drilling in the Arctic National Wildlife Refuge.

But the news is full of conflicting statements. On the one hand we find cause for optimism:

Rising gas prices and home values represent the forces of good, not evil. I say at least two cheers for higher prices because I believe in markets. When the price of energy goes up, demand falls off and supply increases.

Soaring oil prices have revived the old bogeyman that the world is running out of oil. Economics is a great field for nostalgia buffs because the same old fallacies keep coming back, like golden oldies in music.

Hidden 1,000 feet beneath the surface of the Rocky Mountains lies the largest untapped oil reserve in the world - more than 2 TRILLION barrels.

The amount of accessible oil worldwide could eventually be doubled with the help of new drilling, imaging, and oil extraction technologies, including the use of microbes, say MIT researchers.

A new type of ethanol-boosted, turbocharged gasoline engine design approaches the efficiency of gas-electric hybrids, but could be far cheaper.

In an agroindustrial complex ringed by fields of 12-foot-high sugarcane, a giant mechanical claw dumps stalks by the tons into an even larger crushing machine. Here's where the renewable fuel used to power seven of every 10 new Brazilian cars gets its start.

General Electric says its new machine could make the hydrogen economy affordable, by slashing the cost of water-splitting technology.

On the other hand, there are plenty of worries:

What would OPEC do if it wanted to keep America addicted to oil? That's easy. OPEC would urge the U.S. Congress to deal with the current spike in gasoline prices either by adopting the Republican proposal to give American drivers $100 each, or by adopting the Democrats' proposal for a temporary lifting of the federal gasoline tax of 18.4 cents a gallon. Either one would be fine with OPEC.

If I could change one thing about American foreign policy, what would it be? The answer is easy. I would adopt a serious national program geared toward energy efficiency and independence. Reducing our dependence on oil would be the single greatest multiplier of American power in the world.

Hydrogen fuel cells won't significantly dent fuel consumption for 50 years -- we need to look elsewhere.

The issue is a complex one and all the easy answers need rigorous scrutiny. That is just what we plan to do in our Omnilore Great Decisions 2006 class dealing with energy consumption and its effect on US/World policy. In preparation for the class we were asked to ponder the following questions. I’d be very interested in the opinions of PalosVerdesBlog readers.

1. What do you think of Exxon making $10B/quarter and GM losing $5B? Where do you stand on the continuum between free markets and a command economy?

2. How do you choose a car? (performance, styling, reliability, fuel consumption or other) Do you use Consumer Reports or Road and Track or other?

3. Where does the Hydrogen come from for the future fuel cell powered cars?

4. How is the price of oil is determined? What about the price of gas?

5. What is the best way to shape fuel consumption policy; invisible hand, regulation/mandate/law, tax/credit incentives?

6. Half of cars sold in Europe are diesel, zero in CA. Is that good? What about Ethanol?

7. Should we tax gas so that it is over $7.00 per gallon?

8. Do Hybrids pay for themselves (e.g., Prius)?

9. What are your thoughts on Hybrids?

10. What are your thoughts on wind, solar, nuclear?

11. Does the foreign country supplying our crude oil matter?

12. Is increased nuclear energy production a positive thing?


Anonymous Anonymous said...

It's interesting how you would point out that the "Creator" put our oil under the sands of the Middle East. It's also ironic that the Creator would create cancer and vestgial organs.
As for Bush, facsinating that an former unsuccessful oilman just discovered that we are addicted to oil. It's like he rediscovered wheel. On the one hand, he touts renewable energy, but then only apportions $150 million to the effort. This should be given much bigger priority. While we've spent in excess of $300 billion in Iraq, we could have used that money to really attempt energy independence. As for drilling more in ANWR, assuming it has 7 billion barrels, is the equivalent of supplying our oil needs for 215 days. Wrecking a national treasure for not even a year's worth of oil is downright silly. It is true that there are vast reserves of oil shale and oil sand, but do the thermodynamic requires an enormous amount of energy to process that resource into usable oil. Why don't we do what Brazil does and focus on renewable, sustainable,clean energy sources that don't require dependence on fossil fuels, resources that are finite? As for CAFE standards, the Repubs have turned that down time and again. With some political pressure, maybe they will come to their senses.

2:13 PM  
Anonymous Anonymous said...

There is a misleading logic: Oil price rise may lead to a good result doesn't mean those oil companies gouging oil price have good intention. You inject a virus into a body, creates an antibody doesn't mean the original virus is good.

6:33 PM  
Blogger gary daily said...

Here's Ben Stein, a certifiable conservative if ever there was one, writing in his _New Yor Times_ (yes, despite rumors and lies to the contrary, the NYT does regularly publish conservative views) column 5/7/06:

"In the same way, even I was startled when I read about the pay of Lee R. Raymond, the former chief executive of Exxon Mobil, who recently retired. His retirement package was in the neighborhood of $400 million — a breathtaking sum, even for those of us who admire the job that Big Oil does and think that the industry gets a bum rap.

"Still, that's between him and his stockholders, not a matter for Congress. And it would not even remotely be addressed by a windfall profits tax — an idea that has been tried and has failed miserably."

This goes down easily with mindless dittoheads and thinking lamaheads alike. But here is how Ben "I never met a free market I didn't like" Stein ends his column:

"America is becoming a nation of many rich people. I recently read that there were close to 10 million millionaire households. I read that there were hundreds of thousands who made more than $1 million a year. Good for them.

"But it's unlovely for them to pay as little tax as they now pay. The real problem in this country is only temporarily about oil. That will right itself, or we'll get used to it and adjust.

"The real problem is saving a nation that is beset by terrorism, and we cannot do that unless we feel that we are all in the same boat, pulling at the oars together. That includes the rich.

"Whatever rationale there may have been in 2001 for lowering their taxes is long gone. It's time for them — us, because it includes me — to pay their (our) share.

"It's not about oil. It's about fairness."

Whoops! Do I hear "class warfare" and the "politics of envy and resentment" in this? Ben, how could you?

8:54 AM  
Anonymous Anonymous said...


I do not have time to answer all these questions, but what we should do is not possible politically.

1. Put though a gaduated tax on gasoline and oil increassing it every year slightly so that people and manufacturers can plan ahead. If necessary I do not think that anything is wrong with $7.00 a gallon gas, the rest of the world has been close to this for a long time.

2. Settle the storage of nuclear fuel as presently proposed so that we can jump start a nuclear rector program at home.

Unfortunately, the democracy we live in with the voting power overwhelmingly in the hands of the uninformed make these and other similar measures impossible. I wouldn't trade it however for any better energy program.


11:07 AM  
Anonymous Anonymous said...

"with the voting power overwhelmingly in the hands of the uninformed" Totally agree. The wingnut theocrats are definitely misinformed. They distrust science and get all of their talking points from Faux news. As for Stein, he is one of many conservatives who realize the fiscal morass we are facing. Tax cuts in a time of war is just downright silly, regardless of the Laffer curve. $7 gas is fine, but we also need to increase the minimum wage so that our low wage workers can actually afford to eat. But of course, those living high on the hog want to keep all their "hard-earned" money, blow it on "specialty and muscle cars" while the poorest among us barely squeak by. We need real energy independence, and nuclear may help but it's not the whoel answer.

1:04 PM  
Anonymous Anonymous said...


I agree with the anon posts above.

It is frankly embarrassing and infuriating that we're so far behind the Europeans and Japanese in coming to terms and dealing with our lack of oil independence. The Japanese have zero indigenous oil and the Europeans have very little,now that North Sea production in decline. On a per capita basis their oil consumption is half ours.

It comes back to a favorite topic of yours - entitlements. For some reason we think we have some kind of constitutional right to cheap gasoline (like our right to bear arms - God help us!). The Japanese and Europeans long ago figured out that this wasn't the case and have done a reasonable job of adapting their economies over time to restrain oil consumption. They tax it heavily, cars are smaller and more economic, and amazingly they still get around OK.

Why are we so dumb? Part of it is "voting power in the hands of the uninformed" and part of it is pure arrogance.

I also agree that the solution is (currently) politcally unacceptable. Taxing gasoline now would be political suicide, although since Bush's legacy is in tatters anyway this might be the way for him to redeem himself. We just need to let the price mechanism work its magic, and try not to do anything too stupid like wrecking ANWR or invading Saudi Arabia while it plays out.

The good news is that this is a good dose of reality for the US. If it humbles us a little, then that's no bad thing.


7:30 PM  
Anonymous Anonymous said...

So why is it that Brazil (for one) is moving ahead with the "Flex" cars that have apparently lessened Brazil's dependence on foreign oil to virtually nil? Why aren't we leading the pack when it comes to forward thinking?? I'd love to see the middle eastern bullies fizzle out when the world says we don't need your oil anymore.

I think it's time we start thinking about all of us as a whole or we'll all suffer as a world. I'm all for capitalism, but at some point the selfishness must stop. There are too many who are suffering right here at home and too many who don't care.

"The land of a certain rich man was very productive. And he begain reasoning to himself, saying, 'What shall I do, since I have no place to store my crops?' "And he said, 'This is what I will do; I will tear down my barns and build larger ones, and there I will store all my grain and my goods. And I will say to my soul, "Soul, you have many goods laid up for many years to come; take your ease, eat, drink and be merry."'

"But God said to him, 'You fool! This very night your soul is required of you; and now who will own what you have prepared?'

"So is the man who lays up treasure for himself, and is not rich toward God."
Luke 12:16

I'm sick and tired of the same old rhetoric from those in power. I'll borrow from that old Chrysler commercial..."lead, follow or get out of the way."

Where are the leaders? When they show themselves, let's be involved enough to get up and support them with our votes.


11:03 AM  
Anonymous Anonymous said...

1. Free market capitalism Baby! It’s the only way to go!
2. When choosing ANYTHING to buy I check with Consumer Reports first. Whether it be an automobile or a washing machine, it’s usually a question of what they recommend dove-tailed in to what we can afford.
3. Hydrogen is an element of the physical universe, so I suppose one could say that it comes from God. If the question is how do we get it from nature into a car, then I’m lost (hey, that’s why I went to law school: I knew I couldn’t cut it as an engineer)
4. The price of Oil and gas, and every other product or service, is – or should be – confined to supply and demand (one of these days the democrats will get it and stop trying to socialize everything). Let the free-market do its thing.
5. New diesel technology makes it as clean as gasoline – bring it on!
6. I’m all for increasing gas tax (with any increase going to the global war on terrorism), but I fear that $7 per gallon would be more than our economy could bear, and the unintended consequences could be real bad.
7. I think you’d have to drive it for a million miles with gas at $5 per gallon for it to pay for itself. If someone wants to drive it for the emissions factor, God bless ‘em.
6. I suppose the emerging technology makes some sense, but as I said, I’m not an engineer.
Wind and solar – non-starters for now; maybe in the future we can figure out how to make them practical; nuclear – bring it on baby!
7. Of course it doesn’t, but it would be nice if we could get to the point were we could tell the despots paying for their repressive regimes with their oil profits to drink their oil because we won’t do business with them.
It’s a positive thing unless and until we can figure out a better technology (i.e. one that we don’t have to guard the by-product(s) for 10,000 years).

One comment – Let’s get that Manhattan Project for energy independence going forthwith!!


10:22 PM  
Anonymous Anonymous said...

Hi Bill
1. I say bravo Exxon..GM hopefully will do better next quarter.
I believe in supply and demand and as little taxation as possible. I do feel bad for all the regulations and taxes GM has to deal with, though I don't regret that some of that "governmental interference" has lead to cleaner air.
2. I choose a car for style first. Performance is second. It would be nice if my Hemi 300 Chyrsler got 30 mph. But it doesn't. It looks nice, though, and it's fun to drive! I do look thoughly at Consumer Reports, but it may not mean a thing if the test drive proofs different than the CR infor.
3. I have no idea.
4. Supply and demand.
5. Design walk towns, instead drive towns (rather hard to do with all the existing cities so poorly constructed for walking to the local stores.) But realistically, hands off of future drilling in America (did America learn nothing from the success of the Alaskan pipeline?). We have oil in America. Let's go get it and let the Middle East keep it's oil. And let's refine ethanol and other alternative fuels.Come on America, you can do it!
6.Diesel engines run forever! We had a Mercedes diesel that had over 100,000 miles on it when we sold it. But diesel is no prize in the price department. Stinks, too.
7. NO WAY!..who the heck do people think is going to pay for those taxes? We are, the consumer! And, the government is very poor at keeping it's promise in how it spends it's tax revenues.
8./9. My only experience with a hybrid is my brother-in-laws' experince with his Prius. The sticker in the show room promised 50+ mpg. He gets about 30+ mpg. That's good, but not what was promised. He has had some minor repairs here and there that were annoying.
10. A sail on a car? Hmmm, a new sport, wind driving! But I digress..sure, if it works, go for it America!
11. Yes. A major amount of terrorist financial support comes from "the Kingdom" (Saudi Abrabia). America should strife to remove itself from dependency on foreign oil. It's unethical to denounce certain behavior, namely terrorism, yet buy their oil. Demorcrats have consistently interferred with new oil drillling in America. The result is our oil dependence on our enemies (people who hate America and the freedom for which she stands.)
12. I used to think so. But Chernoybl (sp?) proved greedy, arrogant people don't deserve clean, but dangerous, fuels.
And it may be arrogance on America's part to say we would never have a three mile island incidence..It's hard not to remember the Titanic.."pride comes before the fall."
Can't wait to read your next blog! Keep up the good work.
love in Jesus,

10:24 PM  

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