The Myth of Energy Independence
Energy prices have been going higher again. With the price of crude oil closing Friday at $72 a barrel, roughly double its level in January, talk of energy independence is again prevalent.
But energy independence is not a desirable goal for the country (and it may not be doable, either). Lower energy prices raise real wages for all Americans. Paying more for energy in order to get it from wind or solar sources lowers productivity and destroys wealth, and will actually be adversarial for long term economic growth.
When you buy any product or service, both sides benefit or they would not engage in the transaction. If Wellcap Partners is forced to pay a higher price for a product or service it needs, the firm is not better off for it. In the same vein, if instead of buying the energy you need at a price that's acceptable to you, you must turn to a more expensive energy source in the name of achieving "independence", it will be to your detriment.
Closing America to trade of any kind has always been a bad idea. And it should be intuitive: the U.S. economy depends on openness, and the consequences of that openness have a large role in creating jobs and reducing prices for all consumers across the board. After all, in a global economy, we don't try to grow our own vegetables, and we don't insist on buying shoes made in the US. Why would energy be any different?
One argument for independence holds that we should pay more for energy in order to diminish our reliance on the Middle East and its treacherous ways. While that sounds nice in theory, we must remember that we do business with the Middle East in the open market. Voluntary exchanges are not zero sum, rather they are positive sum. This is an important lesson in economics. That's the advantage of capitalism: it allows both sides to prosper while pursuing their self interest. So cutting off our current energy suppliers comes at a high price and does not coalesce with our economic best interests.
The other argument for energy independence, the ecological desire to "save the planet", is equally dubious. Someone has to take the unpopular stand and say it: We had record cold temperatures in many American cities last winter, and many well-respected scientists doubt the thesis behind global warming. Even if global warming is happening, there is no clear evidence mankind is the cause. And even if mankind was causing the globe's temperatures to rise, it isn't clear that would be calamitous for us and what's more, the solutions offered by the proponents of global warming may be worse than the problem itself.
Take cap and trade for example. In the midst of a deep recession, cap and trade would substantially raise the cost of energy and shut down U.S. factories, shipping jobs to China. The only beneficiaries will be government bureaucrats who, in running the oversight and enforcement of the new environmental rules, will see their power soar and authority expand at the expense of ordinary Americans.
Lyndon Johnson once said "being president is like being a jackass in a hailstorm. There's nothing to do but stand there and take it." Sometimes a President has to internalize that lesson.
Alan Schram is the Managing Partner of Wellcap Partners, a Los Angeles based investment firm. Email at aschram@wellcappartners.com
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" increasing in places."
Malarky and more red herrings. Net loses according to the lastest surveys.
One of the craziest ideas is that we will use Texas winds to power electric cars. Boone Pickens mesmerized the country with that plan. The reality is, we drive more in the summer when the Texas winds are completely unreliable to supply our energy needs.
http://nofreewind.blogspot.com/2009/05/texas-wind-doesnt-work.html
We will NEVER attain energy indepenence. NEVER. Should we die trying?
JBatch
10 out of 10 for the pomposity there!
You're right- predicting the climate is different from predicting the weather, the climate is far more complex, inherently variable and poorly understood. If you have incontrovertible evidence that can sway the thousands of distinguished skeptical scientists to create a true consensus on this controversial subject, we are all honored to hear from such a brilliant and soon to be famous scientist! Galileo did it, Einstein did it, it's not impossible, but they did it on the strength of the science itself, not through political, intellectual/ ideological persuasion.
A consensus among 'climatologists' on global warming is about as convincing as a consensus among paranormal investigators on ghosts!
One of the strict principles of science is to scrutinize your own studies, never to be dogmatic, everything must be falsifiable, and this is what you will find from most honest real scientists, especially
with regards to such a soft science as this. Galileo died more unsure of his own theories than the Catholics were of their beliefs.
I.E. being so certain bertrays the fact that you have a particular ideology that approves of the 'solutions' regardless of the of the problem, so that you don't feel the need to scrutinize the science itself, a consensus from a like-minded political institution is trustworthy enough.
Red Herrings, straw-men, false choices, all around nebulous gobbledygook. The only tools in the deniers box.
You are the one lumping all you're pre-packaged responses vaguely together instead of actually responding to anything at all. What is it you think you've actually accomplished with your comment? It amounts to nothing but an attempt to have the last word.
Here's some more non-consensus from NOAH, home of a very skeptical bunch on climate change--meteorologists.
http://www.noaanews.noaa.gov/stories2009/20090616_climatereport.html
Hmmm. Let's see, you dismiss "climatologists" out of hand (because you don't like their conclusions, perhaps?) and mention the thousands of "scientists" who disagree with AGW theory, and then call me an ideologue? You're making a joke, right?
I've seen the list of "thousands" and it contains some engineers, a few statisticians, and a lot of TV weathermen and women with 6 weeks training in weather maps and terms, etc. but no bona-fide climate scientists.
Why do you dismiss climate scientists, whose job it is to understand climate. Do you go to an auto mechanic when you need heart surgery?
And as for Climate being more complex than weather, not so. Weather is tantamount to predicting whether a coin will come up heads or tails on each toss, while climate is more like saying out of 10,000 tosses, half will be heads.
Dude, if you want to use science, great, but don't distort stuff to fit your preconceived notion. Take all the facts and evaluate them; question them; and do it all again. If you actually do that, you'll see that the preponderance of evidence says GW is happening, humans are doing it, and it's likely to be very, very bad.
One other point, Mr. Scram: Applying the rules of a free market to a commodity that is controlled by a cartel; is in finite supply with demand outstriping supply for well over a decade; and is vital to our economy is either naive or disingenuous. Or stupid, but I don't think you're a stupid man.
Take your comparison of mid-east oil with shoes and veggies, for example. If we believe Italians are ripping us off for shoes, we'll buy from someone else; similarly, if Chilean chiles cost too much we'll get them somewhere else. If worse comes to worse, we'll do without chiles and wear our old shoes. Can't do that with oil, dude.
Because that option eixists and because shoes or veggies can come from many different places, competition keeps the prices down.
This simply isn't the case with oil -- more than 65% of globally exported oil is controlled by OPEC, and most countries not in OPEC (Russia, Mexico, Nigeria) cooperate in price setting. So there's nowhere else for us to go. In a globally traded commodity the price is set -- our one hope to avoid extortion is to get off the stuff.
Yeah, the liberal boogie men climate science lovers just want to control the world....Another financial guru challenged by reality.
I think most economists would agree with this. Trade is good. I'd think that any argument against this would have to be more political than economic.,
Although I think it perpetuates the myth that the Middle East is our main supplier of oil.
The largest chunk is home grown, then Canada, Mexico, S.America/Africa- depends how/when you measure but fair to say the Middle East is less than 10%?
I'd also add that oil exporting countries are generally valuable allies, countries like Bahrain, Kuwait, Qatar,UAE are quite civilized & friendly, embrace free-markets and western culture, hotels, chain stores, etc and have almost no problems with terrorism despite all the 'Western' targets.
It would be tough to argue that cutting them off from global trade would improve stability in the region,
or friendliness towards the U.S/ outside world
The problematic countries have generally been socialist/backwards Iraq/Iran/Palistine/Afghanistan/ not trading partners- admittedly S.Arabia doesn't fall neatly into either group.
In a globalized world, where the price is set by a cartel, it really doesn't matter where or from whom we buy our oil -- the price is set by the global market. So it really doens't matter if they are our friends or enemies. The calculus of the free market is relentless, remorseless and amoral-- the imperative is to get as much as you can -- and with a finite commodity that is as essential to our economy as currency -- that's a lot. Indeed, it makes extortion inevitable. The only question, then, is how long do we choose to leave ourselves vulnerable to economic extortion?
I agree that as a global commodity in a global market, it doesn't matter too much in terms of supply and demand where our oil physically comes from- if there is supply disruption in the Middle East, it effects global supply. And of course this adds a risk premium to the commodity for everybody.
Not sure what you mean when you say 'the price is set by a cartel' AND 'the price is set by the global market'. both to some extent? - and also the supply/demand/price equation is disrupted by non free market forces. IE price fixing in China, extraction/refining restrictions in the US, high European gas taxes that bury fluctuations in price.
So I agree reducing our exposure is good under these circumstances, i.e. drilling domestically,oil produced here is safer, closer, more reliable and more efficiently extracted by well run free-market companies, not inefficient, politically unstable Govt. operations.
Another counter-intuitive factor to consider is that a lot of US companies provide the tech. equipment/ infrastucture/ personel etc for the oil extraction and refinement in foreign countries. So quite a bit of the money sent abroad comes straight back to the U.S.
A diversity of well-supported and well-argued perspectives is valuable.
Unfortunately, this was neither. For example, Schram ignored the role efficiency will have in reducing the net cost of energy even if the price per kW goes up (if you use less but pay more, your bill can stay the same or go down). The US economy uses twice as much energy per unit of GDP as Europe, and more than twice as much as Japan, so there's a lot of costly waste we can squeeze out. In fact, our profligate use of energy reduces the productivity of our economy and hurts us --
It also ignores the costs of using fossil fuels --associated air quality problems already impose trillions of dollars of costs on our economy. Adding the cost of climate would impose several tens of trillions more. (See Lord Sterns Report).
There are only 2 climatologists -- and both accept money from the fossil fuel industry-- who aren't convinced that humans are changing the climate and that it will be catastrophic. Note: weathermen with 6 weeks training, a few engineers and statisticians have no expertise on climate.
As for the recent "cool" period, 2007 was the second hottest year on record and 1998-2008 has been the hottest decade in recorded history by far. Schram makes a mistake seen in 6th grade science classes -- he confuses weather with climate.
Bring on dissenting views, by all means, but please make them informed, and intellectually coherent.
Historically, greater efficiency does not decrease energy use:
http://www.eoearth.org/article/Jevons_paradox
Also, your figures on the warmest years are Hansen "adjusted" surface-based temperatures that have been shown to be corrupted by UHI (urban heat island effect) and poor siting:
http://www.surfacestations.org/
Objective satellite derived temperatures show nowhere near the warming.
the "rbound
" effect you cite for effiency is overstated PNL showed that energy use increases were less than 255 of energy saved throgh efficiency .. that stil a net 75% gain.
Alos, the sattelite myth has been debunked by the national Academy of Sciences and NOAA and NASA ... it was a measurment error in the algorythm.
You can go on citing debunked studies all you want, but it won't make them true.
Disengenuous and dishonest.
Home grown renewable energy also provides jobs for Americans. More Americans with good paying jobs is better for all Americans.
Oil from the middle east is heavily subsidized via our enormous military expenditures to keep the oil lanes open. Any small increase in cost of energy to heat your home would be offset by huge savings in the military budget, and taxes.
another global warming denier. The ice caps and glaciers are melting. of course some aren't, but the trend is clear. just go look at switzerland, antarctica and greenland. the water has to go somewhere. so what if it is cooler one year in podunk.
The N. ice cap floats- melting would not affect sea level (try melting an ice cube in a glass of water)
Most ice in Greenland and S.Pole is high and dry and not going anywhere- increasing in places.
the glaciers round the edges like all glaciers have been melting since the last glacial maximum 18,000 years ago. If the they ever stop melting, then that is actually really bad sign!, we don't want that to happen
Don't take this from me, look up interglacial periods etc.- some of the real science is way more interesting than an Al Gore rant- and you won't feel so angry afterwards!
Most ice in Greenland and S.Pole is high and dry and not going anywhere- increasing in places."
Net loses on the GL and SP ice sheets, according to the latest surveys.
arctic ice extent increasing since 2007:
http://arctic-roos.org/observations/satellite-data/sea-ice/observation_images/ssmi1_ice_ext.png
antarctic ice extent 1,000,000 km2 above the 1979-2000 average:
http://arctic.atmos.uiuc.edu/cryosphere/IMAGES/current.365.south.jpg
Silvretta Glacier in Switzerland growing at 7 miles/yr (increasing mass since 2007):
http://blog.the-thinking-man.com/melting-glaciers
Ice Melt in Greenland synchronous with the Atlantic Multidecanal Oscillation (AMO), not co2 levels:
http://icecap.us/images/uploads/GreenlandvsAMO.jpg
Extreme melting in Greenland.
"The Arctic fauna has followed the climatic change, and both fishes and fowl are now found much farther north than formerly. The southern limit of permanently frozen ground in Asia has moved many kilometres farther north, and the Spitsbergen period of navigation has lengthened considerably."
The number of ice-free days went from an average of 95 days to an average of 175 days.
"This part of the Arctic may, without exaggeration, be said to have experienced a climatic revolution."
Date of report: 1946 (H. W. Ahlmann, The Geographical Journal (1946)).
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