Energy Independence is Fool’s Gold

Mitt Romney has lately taken to grounding his energy policy in “energy independence”. This is rather unfortunate since earlier he had avoided the demagoguery implied in energy independence.

As is evident from yesterday’s post on oil imports, it should be obvious that the concept of energy independence is bankrupt. What do you think is meant by energy independence? Ordinarily, one might suppose that it means that the United States (or as Mr. Romney sometimes refers to North American energy independence) is self-sufficient with regard to the supply and consumption of energy.  If this is what is meant, then it is a silly idea. As pointed out in Prof. Nordhaus’ brilliant article on the integrated global oil market, oil markets are like a bathtub. The only thing that matters is how much oil is in the bathtub. It doesn’t matter where it goes in or where it comes out. The price of oil will depend on how much oil is in the tub and how much oil is removed from the tub. Thus any country that pretends to disengage itself from global oil markets will pay a heavy price by such disengagement.

It is possible that something else is meant by the term energy independence. While ambiguous, what is probably meant is that America should fully exploit its abundant natural resources and that such reliance would put the United States in a better energy position than it currently finds itself. Secondarily, what might be also meant is that the United States should regain its position as the global technological and business leader in energy. Energy resources are plentiful but they are not infinite. As the globe consumes easy-to-reach energy resources, increasingly sophisticated technological means will be necessary to access more difficult-to-find energy resources. The development of fracking technology in the US is a good example of how the US can lead both the technological and business sphere.

caem believes we need a new and better word to describe this concept.  The words we have been using is Energy Exceptionalism, a homage to American Exceptionalism.  In contrast to Autarkism/Securitism (national self-sufficiency or energy independence), Envirocentrism, and Laissez-faire (complete reliance on free markets), caem pioneers Energy Exceptionalism, an actionable philosophical framework based on principles that would solve the Nation’s energy problems, achieve global sustainability, and restore American global leadership in energy. Energy Exceptionalism relies on economic principles that recognize:

  • the benefits of robust, level playing field competition in energy markets;
  • the critical role of innovation, technology, and adaptivity in meeting energy challenges;
  • dysfunction in energy markets caused by market failures (monopoly and environmental externalities) and government failures (subsidies, mandates, and overkill);
  • the wisdom of cautionary government intervention disciplined by the lessons of energy policy history; and
  • the necessity of US global leadership in the energy sector.

Is there anything that Governor Romney would disagree with in Energy Exceptionalism?

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Oil Imports are Good for America!

Campaigns are certainly the silly season when it comes to oil imports.  Every politician points to oil imports to justify any policy idea that they support.  Frankly, it is not popular to stand up and defend oil imports but I am going to.  OIL IMPORTS ARE GOOD FOR AMERICA!  There I said it.

But I am in good company it seems.  Professor William Norhaus of Yale University agrees with me.  See his brilliant article “The Economics of an Integrated World Oil Market” at http://nordhaus.econ.yale.edu/documents/iew_052909.pdf.

Economists argue in favor of a doctrine called comparative advantage.  It simply means that you should buy goods and services from anyone who can do it cheaper than you can.  You do not build your own car because Honda can do it cheaper.  This applies especially to international trade.  We don’t make our own coffee and we buy plenty of goods from Wal-Mart made in China.  Each of us sells our unique services to the highest bidder and then we buy goods made by others.

The fact is that the US has used up most of its cheap oil.  Whereas, the Middle East still has a lot of cheap oil.  They need our technology and nearly everything else in their economies must be imported.  In return, we buy their oil.  (Actually, Canada and Mexico are our main suppliers of imported oil.)

Oil prices are the same in the UK (which imports virtually no oil, relying instead on the North Sea), Japan (which imports all its oil, having virtually no indigenous natural energy resources) and the US (which imports about 50% of our oil).

Now that doesn’t mean we are importing the optimal amount of oil.  If we put up barriers to the development of domestic oil, we will import relatively more oil.  But that’s not the fault of oil imports.  Frankly, we should thank them for filling in the gap.

Posted in Book Review, Oil Imports, Uncategorized | Leave a comment

Fox News Special on President Obama’s Green Agenda

Fox News has tackled one of the most complex ecoviergy issues—climate change and what should be done about it.  The REP Index recognizes that carbon emissions may be causing some global warming.  It recognizes, however, that: there are as yet significant uncertainties; that policy must be rigorously market-oriented; and that polices must be effective, not wishful thinking.  caem! largely adopts the positions of Bjorn Lomborg in his books Cool It (2007) and Climate Solutions (2010) that monies proposed for climate change policies must be measured against other positive things for which that money could be used.  When such a rigorous calculation is made, immediate radical carbon mitigation is a very poor investment and harmful to economic growth and third world aspirations.

Posted in Green Energy, Obama | Leave a comment

Power Hungry: The Myths of “Green” Energy and the Real Fuels of the Future

My review of the new book, Power Hungry: The Myths of “Green” Energy and the Real Fuels of the Future , by Robert Bryce.

You just have to feel sorry for the advocates of global warming. They’ve had a bad year. First it was the continuation of a decade of stable or slightly cooling weather, completely unpredicted by the climate models. Then it was the devastating scandals, not only in the Climate Research Unit but in NASA and the IPCC as well. To add insult to injury, there was the jarring failure of Copenhagen. Then the failure of Congress to adopt a cap and trade scheme when they had a Democratic President and overwhelming majorities in the House and Senate. Now the coup de grâce, Robert Bryce hits yet another home run by completely demolishing the argument for renewables in his new book Power Hungry: The Myths of “Green” Energy and the Real Fuels of the Future.

Bryce really ticks me off. I am an energy policy expert. His earlier book Gusher of Lies was an excellent rebuttal to the demagoguery on oil imports. But oil wasn’t my thing so I gave him a pass and enthusiastically supported his book. But now he writes Power Hungry about the idiocy of many of the arguments supporting “green energy.” This is my field and so I am truly in awe of his ability to so cogently skewer mindless advocates of green.

Bryce is addicted to numbers. He is ruthless in presenting numbers that make his points. His main weapon is the tyranny of big numbers. Many ideas sound good in the abstract–e.g., wind power, electric cars, cellulosic ethanol–but fail miserably when put into the context of US energy demographics.

I marvel that Bryce could deliver a nugget of new insight on literally every page. (I realize I am leaving myself open to abuse.) But he does. The list would be too long of all the fascinating nuggets that Bryce has so artfully strung together in an altogether gripping story of our modern day energy dilemma. A few will suffice to make the point:

  • He presents the Four Imperatives of energy supply: power density, energy density, cost, and scale;
  • He describes the technology advances that allow us to access huge natural gas shale resources;
  • He discusses modular nuclear units (some as small as 25 megawatts);
  • He absolutely skewers T. Boone Pickens and Amory Lovins;
  • He devastates the argument that Denmark is an exemplar for relying on renewable energy; and
  • He catalogues China’s dominance in the “natural earth” resources essential for wind and solar.

It goes on and on.

Given all the attention given to literature that paints false pictures of green energy, I hope Bryce’s book takes off like a rocket. The country very much needs this splash of cold water on the phony claims made for green energy.

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Welcome to the CAEM Blog

Thanks for coming to the CAEM Blog.  Here I will post messages and updates along with my views on news, issues, books, and just about anything else energy related.  Please visit often and feel free to post comments.

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