The Sticky Logic Of An Oil Spill

I was reading the other day where some members of Congress and the punditocracy think that a cap and trade bill is dead in the aftermath of the Gulf Oil Spill. Huh? A bill designed to limit the long term damage being done to our environment (read, the place we all live in) by slowly changing our energy infrastructure, is at risk because of an event doing massive damage to our environment. Does the term, ice cream headache, mean anything to the good folks we elect as our representatives? Admittedly, the politics of passing a bill as involved as cap and trade are daunting; stranger bedfellows than John Kerry and Lindsey Graham are hard to imagine. But this whole episode is hard to swallow; days on end of politicians straining to turn themselves inside out in search of political brownie points.

A couple of weeks ago, liberals were incensed that Obama cleared the way for expanded off-shore drilling. In the aftermath of the disaster, Rush Limbaugh went on the air to describe a conspiracy theory involving Obama, SWAT teams, and the intentional detonation of the rig…at the President’s direction and with the intention of helping environmentalists. This idea friends, represents the depth of insanity and clearly describes how Limbaugh and others think. Power and glory are so important to them, that they could imagine the President ordering the literal destruction of a major ecosystem and staple economy, all to help a bill designed to safeguard the environment.

The process of energy reform and environmentalism has been so distorted by politics as to damage the United States. We lag behind every major industrialized nation on most of the keys within both topics. When the Oil Embargo of the 70’s took place, nations like Denmark buckled up the chin straps and figured out a way to generate all of their own power. This is a country with limited natural resources friends. In our nation however (home of the innovator), we have been puttering around with renewables for 30 years or more with little to show. The entrepreneurs who have invested in wind an solar have been left to rot for lack of capital and/or government support. Thinking of strange bedfellows once more, small business interests and land owners in Texas have been forced to turn to Communist China for the capital to build wind farms.

I am not able to place all of the blame on the oil interests and the politicians who they have bought and sold. The environmental lobby is quite possibly the most disjointed, disorganized, and unrealistic group in the world. People have been trying for years to build a wind farm off the coast of Massachusetts; trying for years because folks like the Liberal Lion, Ted Kennedy himself, have fought against it. My friends with a sustainability focus and in the renewable energy field rarely consider the investments already made by major energy producers and heavy industry. Some feel that companies with literally billions invested should finance short turn around moves into clean technology, without regard to the effect on those company’s balance sheets.

I know there are folks on the RM who are sceptical of climate change; and I know the RM has friends that couldn’t care less about the wealth of major companies or their investors. But the simple fact of the matter is that we have a major problem that needs a major solution. You may choose to believe that corporations should bankrupt themselves for the greater good. You may choose to believe that climate change is a scientific assault on God. You may ascribe to the belief that the left-wing media is using global warming as a tool for power. Regardless of your prejudices, it is important that the keys are clearly understood:

  1. The Earth does not have a infinite ability to absorb our waste; anyone thinking otherwise needs to breath the air in Mexico City, see the Great Pacific Garbage Patch, or go out to your local trash dump.
  2. The Earth does not have an infinite supply of oil. We have, by all accounts, entered the age of peak oil production. The total worldwide supply will be exhausted in the next 150 years (at most).
  3. Energy producers, oil companies, and coal companies, have extensive capital investments that need to be reconciled if we are to move onto a clean production grid.

Let us apply a little economics to the facts above. First, as any resource becomes scarce, it becomes more expensive. Second, an increasing percentage of oil reserves are going to be located off-shore…in places where doing something like say….capping a leaking wellhead are difficult, dangerous, and expensive. So oil is going to continue to appreciate in price until it goes away, and with it, all of the things like plastics that we tend to forget when we talk about energy. Third, and swallow hard when you read this; this is something that we need to do now, and it will be expensive. Be prepared to quit whining and pay taxes and/or higher rates for energy.

When we aren’t talking about oil spills or energy policy, we all like to talk about debt. A continuing theme of the debate today (and by that I mean all of the debates today), is that “we can’t/shouldn’t do that, because we can’t afford to pass this debt on to our grandchildren..” Yeah well, it sounds like a good argument. It does seem to strike a good, fiscally conservative tone. These measures are bad for business, aren’t they?

Our nation spent trillions in the 20th century on roads, bridges, safety equipment, and enforcement to support the brand new technology of the automobile. All of that money was raised and spent (and continues to be raised and spent) by various local, state, and federal entities in support of private enterprise. Enormous taxes were levied and paid, and we became the nation of the automobile. The energy providers of the United States spent trillions building coal-fired power plants to support our galaxy of electric appliances in the 20th century. Local, state, and federal entities raised tax dollars, allowed modifications to labor laws, and provided tax credits to support the private enterprise that powered the American Century.

That was then friends, and this is now. Next century, our great grandchildren will run out of oil and we will have had to literally take the tops off of several thousand mountains to feed our appetite for coal. If we spend this century not modernizing our energy and transportation systems, how much will it cost them to change when they no longer have a choice? It is our addiction to fossil fuels that must be cured, and the cost of not acting is rising faster than inflation. If we share a serious interest in leaving a positive legacy to our children and grandchildren, then we need to stop with the excuses and take action. Exxon Mobile and British Petroleum are not going to fix this for us…that isn’t their job folks.

We need solutions now that recognize the needs of the people and the planet. Those solutions must be mindful of of the industry that provides our power; we simply can’t live in the dark, literally or figuratively. But those solutions should also be mindful of what happened in the Gulf of Mexico recently, and Three Mile Island in our recent past. Let’s get Congress to stop posturing and act on legislation that takes our markets in the right direction.

The Rational Middle is listening…