Thursday, March 31, 2011

Energy Smoke and Mirrors

You have to admit that President Obama is nothing if not a politician. His energy speech Wednesday promised a one-third decline in energy imports to show that he is "doing something" about high gas prices. And, according to the New York Times his speech included:

  • boasting of newly approved drilling permits
  • new safeguards for deepwater drilling intended to prevent repeating last year’s oil spill in the Gulf of Mexico
  • not prepared to open additional public lands and waters to drilling, officials said, but will propose incentives and penalties to prod the industry to develop resources where they already have access.
  • producing more electric cars, converting trucks to run on natural gas
  • building new refineries to brew billions of gallons of biofuels
  • increasing fuel-efficiency standards for vehicles.

In other words, nothing new. The president did seem to indicate that he proposed to criticize oil companies for record profits.

The mess in energy policy is so deep and so wide that it's hard to know where to start. That's because it is a combination of moral imperative and the prophetic. On the one hand, we don't know what the effect of, e.g., increased carbon dioxide, really is on the environment, and on the other we really don't know what the future supply of energy looks like. Everyone has an opinion, and everyone has a pet program they want to advance.

Of course, it is all rubbish. We have a well-diversified spectrum of supply. The Wall Street Journal publishes a pie chart today that shows energy distributed at petroleum 37%; natural gas 25%; coal 21%; nuclear 9% and renewable 8%. That's a pretty wide distribution. You could deal with a collapse in one of those, e.g., Peak Oil, pretty well. Don't agree? Just 500 years ago, don't forget, the energy supply was almost completely: wood 100%. In Britain, during the early industrial revolution, there was an energy crisis as the nation ran out of charcoal from wood. The solution? Coal. Pretty soon there was another crisis, this time in whale oil for lamps. The solution? drilling for oil in Pennsylvania. Then came natural gas and nuclear. There's plenty of energy, whatever happens to Peak Oil or any other hyped up crisis.

My guess is that the current liberal/environmentalist panaceas, wind and solar, will probably collapse within five years, because the size of the subsidies and corruption scandals will create a public backlash.

Then it's back to the serious energy sources: oil, gas, coal, and nuclear. There's a brilliant system that humans have devised to determine which of them to pursue. It is called the price system, backed up by sensible safety and environmental regulation.

But first, the current liberal/environmental chimera must crash and burn. That's the way of politics. You can only get something done when the system is broken. Otherwise the special interests and the crony capitalists are too strong to allow reform.

No comments:

Post a Comment