Changing my views on oil...a bit
I was having a conversation with my friend Rich who is now driving a Toyota Prius. Rich is not an environmentalist or a liberal. In fact, he's an active Republican in Colorado and a very smart guy.
In the past, I have been very skeptical of arguments against "dependence on foreign oil" simply because oil is a fungible commodity and I don't believe we can substantially produce domestic production. In other words, if we don't want to buy oil from Venezuela, we can buy from other producers, or we can buy from third parties who may tell us they bought from Mexico, for example, but who might have actually bought from Venezuela. At the end of the day, the world's oil will slosh its way into wherever it is needed.
My problem with the "dependence on foreign oil" fear is really the word "foreign" because almost all oil is foreign and always will be. So for a long time, I stopped thinking about the issue for that reason.
But Rich makes an important point and one which I believe has merit: There is a national security issue here. I realize it's not a new point, but I'm coming to the view that we're at a time when it's important enough that I can't ignore the question any more.
As Rich said, every time we buy fuel we are directly or indirectly increasing the wealth of our true enemies and our might-as-well-be enemies. Every increase in marginal demand in America causes an upward pressure on the price of oil, and those higher prices go right to the bottom lines of the governments of Iran, Venezuela, and Saudi Arabia, among others.
This picture, which I saw on the BBC's web site, brought the concept home to me:
So, if I accept my own premise that worrying about the "foreign" part of "foreign oil" is pointless from the perspective of looking for non-foreign sources of oil (of which there are not enough to matter), then it occurs to me that the real issue is simply "dependence on oil". In other words, any dependence on oil must be primarily dependence on foreign oil.
Maybe part of my reticence to reach this conclusion is because it brings me uncomfortably close to people with whom I disagree on almost everything economic and political. Maybe part of the reason Rich reached the conclusion sooner than I did is because he is very active in Jewish and Israeli issues, so is even more aware of the danger that a smiling maniac like Iranian President Iminajihad poses and how much more clear and present that danger becomes as he is loaded up with petrodollars.
Rich made it perfectly clear: “For me this is a national security issue, and that trumps everything else. If I could buy extra CO2 to emit to prove that this car is not about the “global warming” hype, I would.” (I made a suggestion about eating more Mexican food before driving, but that’s beyond the scope of this discussion.)
While I dislike bring readers more questions than answers, I must say that I am struggling with the answers for this one (and am most interested in reading your comments). If Rich is right that it is a national security issue, what are the proper policies for our country and proper behaviors for our citizens which don’t violate my strongly-held fundamental principles about limited government, the importance of liberty, the unacceptability of subsidies, and the fact that the free market is almost without fail the best provider of answers to all questions economic?
I ask these questions of you and of myself in part because most people who bring up the fundamental argument I’m discussing here go immediately to either killing the economy or to ethanol (and other alternative energy) subsidies.
Al Gore, flying around in his private jet or scheming in his well-heated mansion, and his various disciples, want to cut carbon emissions to levels what would be impossible without doing tremendous damage to the world economy. The anti-capitalist anti-American wing of the Democratic party (which includes most global warming activists), if they get their way, will be responsible for the first time in America’s history where parents like me truly should not expect their children to have a better quality of life than we have now.
And then there are the ethanol leeches: I remember the huge grin on Iowa Senator Charles Grassley’s face during the last State of the Union Address when President Bush called for more ethanol use and thinking to myself “Boy, this is gonna be expensive”. Indeed, as Senator John McCain mentioned in a meeting I attended just last week, McCain is doing badly in Iowa because he opposes farm subsidies “which amount to over $2,000 a year for every man, woman, and child in Iowa.”
What is someone who finds both of those camps repugnant to do?
My belief (and I repeat that I’m more interested in my readers’ views on this than I am on most things) comes down to a few key points:
• The president and members of Congress should go out of their way to encourage people to conserve energy and explain to them if they don’t already know just who the two villains in the above picture are and why they are smiling. Note that I did not say “force people to conserve”.
• Rather than giving farm subsidies which I believe are absolutely unconstitutional and unethical, give tax credits and thereby encourage people to find ways to do these things profitably. To the extent that the Treasury’s net revenue suffers due to tax credits (although this point need not be made since they would almost certainly be much less than current subsidy payments), “pay for” those credits by cutting other spending…including on entitlements, again making a big point of educating the nation on the subject.
• Make a similar huge educational and research push on nuclear energy. Some argue that nuclear energy is not economically viable without subsidies. I don’t believe it, and no matter what that is not a condition that remains permanent as technology and knowledge increase.
• And finally, I continue to believe that while it may be slightly slower than many would like, the market does indeed take care of such things. We’ve had a great example just this month as a slew of solar power companies reported earnings and gave guidance far ahead of analysts’ estimates. Many of these stocks are up over 30% just in a month as the market realizes that people are buying into the idea of producing at least some of their own energy…in part because the price of fuel and electricity has increased and in part, I hope, because they are beginning to realize what it took a conversation with Rich for me to realize.
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