Wednesday, April 26, 2006
I want to talk some more about Iran, but first I suppose I should chime in on energy policy, another topic in the news.
(Actually, what I should do is stop blogging and finish that novel I abandoned eight years ago. It would be both more productive and more personally rewarding, and I obviously am completely useless as a pundit; whatever I say today, I hedge tomorrow, and when I actually make a prediction it more often than not proves inaccurate within hours, as when I predicted no action on Sudan two days ago only to read in the next morning's paper that the U.N. had approved some sanctions against individual malefactors in Sudan.)
In any event: energy policy.
If you believe in the "peak oil" graphs that show global petroleum production declining inevitably from its current peak, then you should view the massive political instability in oil producing countries that is the real cause of current high oil prices as a godsend. There is no way any government policy of any kind could create the kind of incentives to develop alternatives to petroleum that are being created right now by sky-high oil prices. And because political instability is limiting the actual amount of oil that gets pumped out of the ground in places like Iraq and Venezuela, we're buying time until the real crunch comes.
There are good reasons to disbelieve the "peak oil" graphs, including: that they don't include vast nontraditional sources of petroleum like Alberta's oil sands; that they don't allow for the possibility of a technological breakthrough that would enable us to pump more than 35% of the oil in a field out of the ground (roughly the current limit); and that they extrapolate to the globe from the situation in the United States, where companies have been free since the 19th century to explore for oil pretty much anywhere using the latest technology and excellent infrastructure, where much of the oil outside the Persian Gulf (in Central Asia, for example, or in West Africa) has been much more difficult to exploit for political and economic, not geological reasons, and continues to be so. If, in fact, the point of inexorable decline is some decades off, then current high prices are no longer a godsend. But neither are they the proper topic of energy policy; they are the proper topic of foreign policy.
Some day, the hydrogen economy will be a reality, but probably not for several decades. I don't think it's unreasonable for the government to do some planning towards that day, but that planning should, I think, be limited to three areas: funding basic research (which I pretty much always favor anyhow); studying what the major transition costs will be and whether there is a public role to play in offsetting some of these; and eliminating unnecessary regulatory barriers to the development of new electric power generation capacity (especially nuclear power, which is for all practical purposes infinite), because hydrogen is not a fuel source but a way of storing energy, and so the hydrogen economy will require much greater electric power generation than our petroleum economy does.
Apart from that, the government should do what it can to ensure that we are not militarily vulnerable to a sudden oil shock, something I think we already do. The private economy provides plenty of hedging mechanisms for individual firms to protect themselves from sudden price spikes.
There is, needless to say, no need to go to war for oil. We did go to war with Saddam in 1991 in part because we were worried about him dominating the oil fields of the Gulf. But we worried about that not because we needed to "lock up" control of Middle Eastern oil in our own hands, but because we worried what Saddam Hussein would do with all the additional power that would accrue from such an acquisition. And, more to the point, we went to war because of how he achieved that acquisition: by forcible invasion and incorporation of a neighboring country.
There are those who worry about China "locking up" access to Sudanese, Iranian or Venezuelan oil. But this is, again, not legitimately a worry about our ability to obtain oil to fuel our economy. It's about the limits of our ability to achieve our foreign policy aims in these countries in part because they own a resource that is of great value generally and of particularly great value to China, which means it is the basis for an anti-American friendship between these rogue states and China. Again, it's not an energy policy question but a foreign policy question, not a question of will there be oil for us to burn but of whether we have the practical ability to bring rogue states to heel. We aren't worried so much about our dependence on the Middle East as about one Middle Eastern tyrant's ability to become independent of *us*.
What everyone should be most encouraged by is that oil has gone from close to $10 per barrel to over $75 per barrel, and our economy keeps chugging along nicely. The oil "card" has already been played and it turns out not to be trump. High gas prices are causing pain down at the bottom of the income scale in America, but this is something that could be addressed any number of ways that do not involve either economically illiterate market interventions or frightening foreign interventions.
Or, I guess I could have put this more simply: Ronald Bailey is mostly right and John Judis is mostly wrong.