Among the issues most commonly discussed are individuality, the rights of the individual, the limits of legitimate government, morality, history, economics, government policy, science, business, education, health care, energy, and man-made global warming evaluations. My posts are aimed at thinking, intelligent individuals, whose comments are very welcome.

"No matter how vast your knowledge or how modest, it is your own mind that has to acquire it." Ayn Rand

08 July 2008

An Evaluation of What Americans Think About Energy

As we saw in the last post, most Americans are angry about high energy prices. They should be. However, the important thing is for them to understand who they should be angry at. They could be angry at the inefficient national oil companies in most of the oil-exporting countries, but there is little they can do about that. The most constructive anger is anger directed at Congress for setting up obstacles to oil and gas production in the United States. They have prevented the drilling for oil in ANWR for 13 years, thereby making at least 10 billion barrels of oil unavailable to us now. Off-shore Alaskan waters near AMWR hold at least another 19 billion barrels of oil. Until further development of these fields is undertaken, we will probably underestimate the amount of oil in them. There are thought to be a conservative 90 billion barrels of oil on the continental shelf that Congress has put off-limits.

Meanwhile, those in Congress who oppose drilling say that the oil companies already have leases they are not producing oil from. True, leases are often bought before anyone is sure whether they have oil on them or not. If they do, the leasing company has to figure out whether there is a way to retrieve it profitably after a big investment is made to get at it. With oil prices as high as they are now, much oil which could not be recovered at $30/barrel prices can be economically produced, but the investments are huge and one also has to know that the price of oil will not again be $30/barrell one year from now. In addition, there are huge costs in satisfying the EPA about pollution protections and the process can take many years to work through. Congress could expedite the time to production by speeding up the EPA approval process.

One might say there is some price gouging by OPEC on oil, but then we set them up to be able to do it by minimizing our own drilling for oil. We chose to make them the only major source for oil in the world market. The best plan is to pursue as much oil drilling, gas production, and alternative fuel production as possible in the U.S. and the remainder of the world. We can also do better in insulating our homes, installing more energy-efficient furnaces and refrigerators, making engines more fuel efficient, and pursuing many other wise personal choices in light of the present high cost of energy. Such choices will either bring the prices of fuel down or at least keep them from continuing to grow. It is interesting to note that Americans have been putting engines into their cars which have much higher horsepower ratings in recent years and that this uses more additional gasoline even than the SUVs on the road. There are many reasons why Americans should be a bit angry at themselves as well as at Congress!

The criticism that the federal government is not doing enough is more heavily leveled at the President than it should be. It is primarily Congress that has not done enough. But Congress' role is to get off the backs of those who want to produce energy. It should not be for them to pick winners and losers. They should not be subsidizing solar and wind, while restricting coal, oil, and gas. This would be especially foolish given that solar and wind are likely to remain secondary sources of energy for decades yet. They are too seasonal and irratic in their output within a given day or week to be counted upon for large portions of our energy needs. At the present time, their total output is minuscle compared to coal, oil, and gas, or even compared to nuclear, despite no new nuclear power plant having been built in the U.S. in 30 years. Wind, solar, and geothermal power will all add to our total available power generation capacity over the next few decades, but they are very unlikely to overtake coal, oil, and natural gas.

The idea of the 5-year moratorium on coal-fired power plants is a great one if you want to live with random, rolling black-outs of power. That will surely happen unless instead we have a massive effort to build nuclear power plants. I expect it will happen unless we build many of both coal and nuclear power plants. The population is growing and people are buying more and more plasma TVs, which use four times as much power as a conventional TV did. Curiously, these same people are convinced that the U.S. should lead an effort to reduce the use of energy to prevent a catastrophic global warming which is not even occurring.

So, are those who want improved home-efficiency standards going to impose the added initial cost upon new home buyers only or are they going to have government inspectors inspect every home in America and condemn it unless it is brought up to some new energy-efficiency code within a short period of time? What on earth are they thinking here? Will grandmothers be thrown out of their homes and into the streets? Will children live with their parents until they are 30 years old as they try to scrounge up the added money to qualify for the down-payment on a much more expensive home? New business start-ups will be hit by higher first and last month rent payments due to the added insulation costs, though in time they will save money on their energy bills. Commercial building companies will have some larger construction costs and insulation upgrade costs on older commercial buildings.

Finally, I love the 56% of Americans who believe that steps taken to curb global warming will create new jobs and investment. Of course they will! But,....the big question is will they produce as many new jobs as they will destroy? Will they create more new investment and wealth than they will destroy? The answer is that they will not create as much as they will destroy, because government action is only required when one intends to destroy rather than create. The people acting as individuals are the path to efficient creation. Government is the path to destruction. The usual inducements to making money will create whatever energy is needed, if the destructive power of government does not climb upon the backs of the individuals who would create that wealth of power. Subsidies from government are always inclined to become the boondoggles such as the ethanol subsidies have become. Decades of government sponsored research into alternative energy sources has done little to produce significant power capacity using alternative energy.

There is no forseeable path to energy independence for America. Our best policy is to pursue many sources of energy both by type and by source. We need to develop more oil and gas fields within the United States and wherever else in world there is oil or gas to be found. We need to start building nuclear power plants again and to continue to build coal-fired power plants, using suitable stack cleaning processes, but not worrying too much about CO2 production, because it does not much matter. Wherever wind, geothermal, tidal, and solar power production make economic sense, then the free market should be allowed to install such power plants, even though they will amount to only minor contributors to our total power needs. Meanwhile, people do tend to under-insulate their attics, to buy bigger car engines than they have a need for, to brake late rather than take their foot off the gas earlier, and forget to turn out lights they are not using. There are many ways to conserve expensive energy, but these are best left to the free market, rather than some government coercive programs.

No comments: