US Energy policy: Who’s-on-first?

Everybody hates $4 gasoline. Everybody wants to be independent of foreign oil. Two no-brainers in a row.  Here’s the brain teaser: What’s the preferred solution?  This is where the political rhetoric gets downright laughable…

Q: Why is the oil price so high?
A: Because of those greedy speculators.

Q: To get the price down, should we drill more in our own territory?
A: No, of course not; that wouldn’t yield oil for years.

Q: But wouldn’t that new policy cause the speculators to start bidding the oil price down?
A: There’s no guarantee it would drop immediately.

Q: Is there a guarantee is wouldn’t drop immediately?
A: The only guarantee is that energy from wind and solar is cleaner than energy from oil; shifting to wind and solar power is the right energy policy.

Q: Will wind-generated electricity be available for powering our cars sooner than gasoline from increased domestic oil production?
A: If we don’t start a bigger push for wind and solar power now, we’re just prolonging our dependence on oil.

Q: But if we don’t change oil drilling policy now, won’t we just prolong higher than necessary oil prices?
A: Forget oil, we need to kick that habit.

Q: But isn’t today’s pressing problem the high price of gasoline?
A: You don’t get it, do you? We won’t NEED gasoline if we switch to wind and solar power.

Q: Gasoline is a liquid fuel that goes into my gas tank; each tank gives me 300 miles worth of driving. If I shift from gasoline to electricity from the grid, how will I store that much electricity in my car?
A: In rechargeable batteries, dummy; plug-in cars. Where have you been?

Q: But today’s best batteries take up a lot more room than my gas tank, only give me a hundred miles of driving, take hours to recharge, wear out with usage, and make the car cost thousands of dollars more. Not many of us consumers can afford all that money and hassle. Can’t we just drill for more oil here, using current technology, to give consumers a break on gasoline prices?
A: No, we need to kick the oil habit. What we need is a breakthrough in new technology--a superbattery of some kind that’s as affordable and safe as a tankful of gasoline, yields the same mileage per tankful, and recharges quickly from the power grid.

Q: Okay, okay, we need a superbattery, and we need it quickly. Could government energy policy help reduce the time it would take to get us to that breakthrough?
A: Of course it could; how long have I been trying to tell you that government should be doing a lot more to force us to kick our addiction to oil? Sheesh.

Q: How much would it be worth to our economy if a superbattery breakthrough eventually displaced our need for foreign oil?
A: Hundreds of billions per year, even trillions of dollars. And, we could become a superbattery exporter instead of an oil importer.

Q: Okay, I get it. But if we’re going to give consumers a break from high-priced gasoline, and we’re not going to allow any more drilling, we’ll need that superbattery as soon as possible, won’t we?
A: Duh.

Q: But to encourage entrepreneurs, scientists, and companies to get moving a lot faster towards that superbattery breakthrough, the government will need to set up some kind of new incentive, won’t it?
A: Of course; I’ve been trying to tell you all along that government energy policy needs to change in a big way.

Q: How about something like an “X-prize” for a new superbattery?  Maybe a few hundred million dollar prize for the first entrepreneur, or company, or group of scientists to come through with the new technology?
A: Uhhh… No, no, we couldn’t do that. Uhhh… that’s McCain’s idea… obviously just a “gimmick” (...according to these talking points they sent me...). 

Q: What’s your solution, then?
A: Don’t worry. Obama promised “change.”  He’ll figure it out, just trust him.

Q: Could you please get a little more specific?
A: Sorry, I’m out of time.  Gotta go fill up my car before gasoline goes higher.

Comments

[Grodge]

Disingenuous.
You seem to make a a couple decent points, but then you take an unnecessary and unfounded swipe at a presidential candidate.

It's too bad because it detracts from your otherwise reasonable piece.

Obama's website says: "Obama will also invest in advanced vehicle technology such as advanced lightweight materials and new engines."

So if you want to compare campaign rhetoric (which I would argue is a pointless endeavor anyway-- remember Bush's "humble foreign policy" and "no nation- building" pledge?), then tell me how this is materially different than McCain's battery science fair prize?

Your columns seem most interesting when they stay out of the silliness of political squabbles.

[Jimmy the Dhimmi]

If funding research will help bring us closer to oil independence, how is that dependent on high gas prices?

In other words, you have always stated that high gas prices may be a good thing because it will push the market away from oil and into something else. But everybody knows we need to ween ourselves off of oil anyway - and high gas prices won't effect the actual science behind the research.

I say we do everything we can to reduce oil prices and fund the research. We could even fund more research because our economy, and therefore expendable tax revenue, goes up when oil prices are low; and the research itself would have lower overhead costs because energy is cheaper.

[Bob]

Frankly, I'm not enthused about either of the candidates when it comes to energy. On second thought, I'm pretty much downbeat on the entire Congress on the subject as well.

To be fair we've had the potential of a major problem since the eighties and Reagan, Bush 41, Clinton and Bush 43 have all failed. Ditto the Congress in that period _ Republican or Democratic controlled....none of them acted.

So, now we're in pain...intense pain and everyone is scurrying around pointing fingers, laying blame and telling us why we can't do this or that. Seems to me that's a self fulfilling prophecy and portends a bleak outlook.

And, please. Tell the pundits and politicians to get off the "addicted to oil" thing. Of course we're addicted to oil because right now it's the only form of energy we have to power our vehicles. I'm addicted to food too because it's the only substance that keeps me alive.

[muirgeo]

I agree! What a cheap shot at Obama who has pledged not some "prize" but $150,000,000,000 in research and development of alternatives.

from his website;
"Invest in a Clean Energy Future
Invest $150 Billion over 10 Years in Clean Energy: Obama will invest $150 billion over 10 years to advance the next generation of biofuels and fuel infrastructure, accelerate the commercialization of plug-in hybrids, promote development of commercial-scale renewable energy, invest in low-emissions coal plants, and begin the transition to a new digital electricity grid. A principal focus of this fund will be devoted to ensuring that technologies that are developed in the U.S. are rapidly commercialized in the U.S. and deployed around the globe."

Further, one Jimmy Carter set us on the course for energy Independence 30 years ago. He was laughed at, the naysayers and the no-can-doers and the oil industry lobbyist won the day and changed course and put us on this road to dependency and economic decline.

Republicans and McCain have lost all pretensions of legitimacy as has their bankrupt idea of supply side credit financed economics. The bill for their recklessness has come do and Obama with Keynesian economics will rebuild this country and its economy.

http://www.barackobama.com/issues/pdf/EnergyFactSheet.pdf

[Higgs Boson]

Re: Super battery X-Prize

The market itself will reward the inventor of a super battery with such unimaginable wealth that government inducements are unecessary.

[Optimist123]

Obama will look more attractive to many, including me, if he takes the muzzle off his U. of Chicago economics advisor, Austin Goolsby -- and then starts talking that way himself. Until then, if he continues down the obligatory political path of reacting negatively to any idea coming from his opponent, such as calling a no-lose proposal such as an incentive-boosting x-prize a "gimmick", he's merely employing a political gimmick.

By the way, I forgot how many billions the failed synfuel "initiative" cost the taxpayers back in the late '70s. (A low oil price killed synfuels.) That's one reasong I prefer x-prize-like incentives, because they cost the taxpayers nothing if they don't produce results. (The British government offered an x-prize in the 17th century -- the Longitude Prize -- for an accurate seaworthy clock. It worked: it speeded up development of a breakthrough, they paid up, and it paid for itself many, many times over.) There's a big difference between government committing to specific technologies and taking on the investment risk, versus offering a prize and paying only for success.

Obama so far seems to be following the failed Carter example, instead of the successful Longitude Prize example. I do understand the political imperative of never admitting your opponent just might be onto something; but I'm more interested in successul science and technology than successful political tactics.

Lastly: Unlike several commenters here, I have not yet made up my mind about Obama/McCain, and am therefore not obliged to defend every move either one of them makes. In short, I am not invested in either candidate more than the other yet. If McCain blunders (for example, by saying something stupid such as "no x-prize, however, if it would increase the deficit"), I just might end up not voting for anyone this fall; I might just let you folks handle the election. Again, however, what Obama does, or doesn't do, with Goolsby will be important for me in the next three months.

[Higgs Boson]

This is deeply troubling. I agree with everything you just wrote. I must not have taken my meds to today.

[Bob]

Muirego's back!

Yup, you're right and consistent I might add. Ole' Obama's gonna set everything right, yes indeed. He has a remedy for everything. He's going to cure warts, too!

You see it's simple. Just let the government run things because they can do a better job. Amtrak is sailing along nicely, just raking in the cash and that $54 billion we spend on education is positively impacting our shortage of engineers and scientists.

Note to Steve:

For what it's worth I'm disappointed that you may consider not voting. It's your choice, but let me play the civic duty card. Right in Soupy Sales if you must but please vote.

[Optimist123]

Bob,

My attitude about voter turnout is a bit different, I guess.

If, for example, I decide I'm going to vote, I will then start trying to convince as many other Texans as possible *not* to vote. "Stay home; let me handle it" will be my basic message.

If I decide *not* to vote, I'll let you know, so you can then tell any Texans you know that I will be gifting them a little more power at the ballot box.

[muirgeo]

"Synfuels are back. In 1985, President Ronald Reagan killed President Jimmy Carter’s Synthetic Fuels Corporation. Twenty years later, President Bush signed the “Oil Shale, Tar Sands, and Other Strategic Unconventional Fuels Act of 2005.” Unconventional fuels means “gas or oil from coal, shale and tar sands,” and that’s exactly how Time magazine defined synfuels in 1979."

Also imported oil went from 9 million barrels /day to 7 mbd during the Carter adinistration and then fell further do improved CAFE standards to 5 mbd. Since Reagan the graph of our imported usage has looked like a hockey stick.

Also Carter, established the strategic petroleum reserve, birthed the modern solar power industry, led to the insulation of millions of American homes, and established America's first national energy policy.

"We simply must balance our demand for energy with our rapidly shrinking resources. By acting now, we can control our future instead of letting the future control us. The most important thing about these proposals is that the alternative may be a national catastrophe. Further delay can affect our strength and our power as a nation."

And now we are seeing that national disater play out as the oil men won out and bought the policy that protected their interest and harmed our countries.

http://www.commondreams.org/views05/0503-22.htm

[Bob]

Steve:

Nice to see that your tongue has found its' rightful place again. I recall reading some quirky econ oriented blog about a nutty idea the
author had for "one person, one vote". Darned if the title of that blog escapes me for the moment. ;>)

Cheers.

[Optimist123]

Bob: My strategy at one time was to get elected president with only eleven popular votes. Subsequent research said it was possible, but not likely, so I backed off. Here was my idea:
http://tinyurl.com/6ce244

[Grodge]

Steve, you say "Obama so far seems to be following the failed Carter example, instead of the successful Longitude Prize example. I do understand the political imperative of never admitting your opponent just might be onto something; but I'm more interested in successul science and technology than successful political tactics."

I'm glad McCain is taking his cues from policies from 400 years ago-- who knows maybe he authored that policy as well.

The point is that there is very little way of telling what policy will be instituted once the guy is elected. So why bring that up?

Likewise, I have yet to decide who will get my vote between Obama or Mccain, but I doubt a science fair prize will change my mind-- especially when Obama has also committed to developing new technology.

I used to like reading this blog, but it has become full of partisan "gotchas" and snarky irrational hit pieces on prominent Democrats.

It's unseemly-- and I voted for McCain in two primaries.

I guess it's time to take this off my "favorites" list.

[Bob]

Yes Steve, I remember your strategy very well. How does it feel to be that *quirky* econ blog? You should be honored. I use that word with reverence.

[steve.]

Steve,

It looks like you summed up the energy argument quite nicely. I see from the comments you have riled up the Carter history rewriters and Obama zombies and even a supposed McCain voter who will never read your blog again because of all of the politics you NOW throw in. (chuckles)

As we have seen with Bush talking about drilling more here in the USA, the price of oil futures has come down. Now, if the Democrats in congress would just drop their moratorium on drilling we could get that price down even more. BUT, they like us paying $4 gas so tough luck seeing action from them.

Note: Price of gas has doubled since the Democrats took over Congress. Obama wishes it had risen a little slower but does not want it to go down. Try to rewrite that history.

[muirgeo]

Steve,

If you think drilling for more oil here will make a difference in the price of oil you really haven't a clue for the facts. And the fact that guys like McCain are suckering people like you for more of the same makes him a dishonest person.

Here let me help you a bit;

For free you can go to NPR: Science Friday and listen to one of the latest discussion on drilling for oil in America by an expert ( that's some one other then Rush or Sean or Bill)

Main website;

http://www.sciencefriday.com/

The specific show from 7/18;

http://www.sciencefriday.com/program/archives/200807185

And here;

http://www.facsnet.org/pdf/audio/08_06_24_gas_prices_teleseminar.mp3

and here; last but not least.

http://www.facsnet.org/pdf/2008/08_06_24_Kaufmann_oil_prices.pdf

Take the power point presentation and share it with some of your friends so they can know the facts and the continued desire of the Republicans to lead us down a path to no where but continued dependency. Wake up man your country needs you!!

Oh and I love the point about the price of gas doubling since the Democrats took over congress. That had to be from Mr. Blowhard himself Rush Limbaugh.

The funny thing is that if that pisses you off then the fact that the price of gas has quadrupled since George W Bush became "president" might really tick you off.

[Optimist123]

steve- Two of the most powerful persuasive forces (self-persuasion) are "belief preservation" and "confirmation bias." Once one has bought in to a political party or a political candidate, for example, one tends to find every way possible to keep that commitment looking like it was a wise one.

Try to imagine anyone saying "Gee, that's new information I had never considered; looks as if I've been wrong all my life." It's difficult, isn't it? That's why new ideas require the generation committed to the obsolete ideas to die off, before the new, better ideas can really take root.

[muirgeo]

Above post was to Bob.

[muirgeo]

"That's why new ideas require the generation committed to the obsolete ideas to die off, before the new, better ideas can really take root."

That's not always true. I used to always vote for Republicans but after seeing how their policies are so destructive and self serving I've transmogrified into a evidence based pragmatic progressive liberal.

What you described in you post IS the very definition of conservatism. In a rapidly changing world it makes no sense.

[Optimist123]

muirgeo:
Sounds like you think you now have sufficient information to have things figured out to your satisfaction. By the way, it's called "satisficing." Congratulations; you are with a formidable majority. By my estimate, that places you with 98%+ of the people, all of whom feel the same way about themselves.

[muirgeo]

Steve,

I don't have it all figured out but I do pay close attention to what's happening to our country. And in doing so it is beyond me how anyone who truly pays attention and listens to both sides could consider voting for Republicans after all their secrecy, hypocrisy, dishonesty, incompetence and cleptocratic ways which have been laid clear for all to see. The results are staggering, putting our country 30 years behind where it should be.
McCain wants to continue the lie that drilling for oil here will make a difference when all the evidence suggest it will do very little to make us independent and will likely only prolong our dependence and delay development of alternatives.

I notice the list you have of your daily rounds. I dare say its very one sided compared to my list of daily rounds. In fact, I'd say far more then 60% of my daily rounds involve libertarian/ conservative sites, talk shoes ect... because I want to be sure my positions stand up to scrutiny. And when I read both sides I consistently find the logic and the facts favoring the liberals.

And on economics though nothing is settled I'm more and more convinced that Keyenes was right and massive concentrations of wealth are bad for the country and the economy. And that is consistently what we see during period of Republican dominance.

[Optimist123]

I'd like to hear more about the libertarian views with which you agree.

ps- Don't conclude that my list of daily rounds is sufficient information to slap a label on me.

[Mike H]

Well,

My beliefs are in economic/personal freedoms and prosperity. Fortunately, the two tend to go together (especially for the poor) the vast majority of the time. Unfortunately, even if controlling parts of the economy and peoples lives would lead to the best forms of prosperity, I would not be for it, because my desire for freedom supersedes my desire for everyone, including myself, to be wealthy.

This is my bias, and within it I try to be open to anything that will help us reach optimal prosperity. Luckily, so far, I have been consistently surprised how intertwined freedom and prosperity tend to be.

[muirgeo]

Mike,

My problem with strict libertarianism is that I do not see how it would not end up with all property eventually being held by an elite minority and the rest of society left to be serfs serving at the pleasure of the wealthy elite. Once you get to that point liberty and prosperity are in no way optimized.

It's my belief that prosperity is maximized when you have a strong middle class and that occurs best with social democratic forms of government and some degree of planning and some at least small degree of forfeiture of personal rights for group rights. Not full blown socialism or anywhere near it but indeed pragmatic democratic planning and maybe even some redistribution of wealth.

[Mike H]

Muirgeo,

I wouldn't mind having some redistribution of income, especially since most people in the country want a safety net. But instead of paying into government programs that pay out to the less fortunate, what if we *actually* redistribute wealth and give a cash subsidy to the less fortunate. Then the people can choose what to do with the money instead of relying on the hodgepodge of government programs?

Also, I am of the impression that less tax on the wealthy grows the economy and benefits everyone. Ironically, it seems to me that the closer you get to socialism, the more you have elites and poor separation, but there are so many more similarly poor people and so few elites that there appears to be more equality. Remember, when you raise taxes, you are not hurting the wealthy; you are hurting those trying to become wealthy. Bill Gates and Warren Buffet don't care what tax rates are because they already have so much money. Those who have hopes of reaching a fraction of a percent of what those two have obtained are hurt most by higher taxes.

Why I am ok with some redistribution, I don't think you can have a strong middle class by giving them other people’s money or by taxing the wealthy into middle income. I think the middle class is only strong if they are highly productive, and that will only happen if they are prepared for the high skilled jobs of the present and future.

I'm in physics, and someone put it to me nicely, the market is a "quantum computer" because the entire system is solving itself. It moves towards the best answer and to the most efficient use of resources. I'm afraid I don't trust Congress, bureaucrats or any other subset of people to be as good with coming up with solutions as a quantum computer.

[Bob]

"And on economics though nothing is settled I'm more and more convinced that Keynes was right and massive concentrations of wealth are bad for the country and the economy. And that is consistently what we see during period of Republican dominance."

This is a link to Forbes list of the 400 richest Americans. You'll notice that many of them are a bit long in the tooth. That tells me that they got rich during Democratic and Republican "dominance". Buffet is donating most of his fortune to the Bill and Melinda Gates foundation which in turn will give most of their dough to charity. Is that good or bad?

http://www.forbes.com/2007/09/19/richest-americans-forbes-lists-richlist07-cx_mm_0920rich_land.html

"voting for Republicans after all their secrecy, hypocrisy, dishonesty, incompetence and cleptocratic ways which have been laid clear for all to see. "

So, if I understand you correctly only politicians belonging to a certain party are secretive, hypocrites, liars and thieves.

Hhhmmmm.

"The results are staggering, putting our country 30 years behind where it should be."

Maybe you can share with us exactly where you think the country should be right now and why it will take 30 years to catch up. And if we have to catch up, who or what do we have to catch up to?

BTW, I don't listen to Hannity nor Limbaugh.

[muirgeo]

Mike the market is NO quantum computer. It's Windows Me at best. If it was efficient we would be blowing off tops of mountains for coal or fighting wars for oil. We'd have cars that were electric or got 100 mpg.

If the market were a quantum computer it would not have allowed the huge credit and mortgage meltdown that is now crippling our economy and making credit so difficult to find the rebuild of our infra-structure and the delay in R&D for alternative fuels is now 10 to 20 years delayed.

Good planning would have told the oil companies of the 1970 and 80's to take a hike and steered policy toward renewable and energy Independence.

Look around at todays global market failure and tell me it runs like a quantum computor... there are several billion people in the world scraping by in shanty town house far worse off then they would have been left to their indigenous ways.

[Higgs Boson]

1)"If it was efficient we would be blowing off tops of mountains for coal…"

Is there a shortage of coal that I am not aware of?

2)"…or fighting wars for oil."

Free markets have no standing armies and cannot declare war. Wars are the domain of governments.

2)"We'd have cars that were electric or got 100 mpg."

Now how do you know that? Even motor scooters don’t get 100 mpg.

3)"If the market were a quantum computer it would not have allowed the huge credit and mortgage meltdown that is now crippling our economy…"

It is my understanding that the Federal Reserve’s loose monetary policy has created bubbles, first in the stock market, then in real estate, now in commodities. The free market does not control monetary policy.

4)"…there are several billion people in the world scraping by in shanty town house far worse off then they would have been left to their indigenous ways."

Then what is stopping them from going back to their indigenous ways? If the government took their land and sold it to developers, then blame the government, not the developers.

You are blaming the free market for things that are really the province of government.

[Mike H]

Muirgeo,

I guess I regret bringing up the quantum computer idea since it 'caused you to completely ignore the rest of my comment which I was quite proud of.

I don't really know how to reply to your comment, we should probably try to keep the discussion as focused as possible. Like I said, the market allocates resources as efficiently as possible. Individual businesses, people, and the government can screw things up, but the market will right the wrongs faster than anything else.

For instance, the housing market will bottom about the middle of next year, the pain we're feeling now is the market correcting mistakes people (private and public) made, so unless the government tries to "help," which will do nothing at best and prolong the bottom at worse, things will be getting better very soon.

[Grodge]

Steve (the commenter, not the blogmaster),

You say, "...even a supposed McCain voter who will never read your blog again because of all of the politics you NOW throw in. (chuckles)."

Talk about revisionism. My problem with the post is the distinction being made between McCain's and Obama's energy policies where there is none. Both want to advance technology with federal funds.

Then you go on to say, "As we have seen with Bush talking about drilling more here in the USA, the price of oil futures has come down. Now, if the Democrats in congress would just drop their moratorium on drilling we could get that price down even more."

Please. Does demand destruction have anything to do with the drop in oil prices? Bush yammering on about drilling had nothing to do with it-- but that's my opinion and it's at least as valid as yours. BTW, if Bush's brave act of calling for offshore drilling had such a profound effect, then why the hell didn't he do it, say, seven years ago!!??? No, instead he ended the administration's moratorium only two weeks ago.

Talk about belief preservation! Have fun living in your fantasy world where Bush's ideas have improved our lot as a nation. Yikes.

I have another off-topic question for Steve Conover or anyone who can answer it. You are fond of evaluating our federal budget deficit as a percentage of GDP and are always quick to point out that deficits in the 2% or 3% range of GDP are historically within reason.

Why do you use GDP, and not just the total federal revenues? If you use GDP, then shouldn't we also count all the liabilities of the citizens, ie, consumer debt, mortgage debt, etc, as part of the overall "deficit" as well?

Also, the usual household may run deficits during a certain phase of high expenses and relatively lower earnings, such as when kids are small and a larger house is necessary, but that same household eventually pays down that debt with household budget surpluses as the kids move out and the breadwinners' salaries increase. Why is this analogy not appropriate in your example of the US budget deficit and national debt?

The US seems to be more akin to an aging household that must pay down that outstanding mortgage and credit card bill in order to prepare for those years coming up when a greater percentage of us are on Social Security and Medicare.

To continue to take out loans for frivolous wars and other discretionary spending seems ludicrous, and financially crippling.