Peak Oil News: Energy (thinking) crisis

Friday, May 06, 2005

Energy (thinking) crisis

Peter Foster

The major threat to free energy markets -- and freedom more generally -- comes from a motley mob of green activists, oil-producing despots and energy policy-makers. The Greens declare they are acting for the good of the Earth; the despots claim more directly that they hate the West; policy-makers say we must deal with them both. It's hard to know who is the biggest threat. However, their greatest ally is ignorance.

Those who allege that the world is facing an unprecedented energy crisis share -- apart from historical amnesia -- two basic misconceptions: They lack an appreciation of the nature and subtle power of extended markets, and they cherish a naive and/or self-interested faith in the ability of governments to put things straight.

The most egregious example of economic ignorance is the constant references in the media to supply and demand as if they were two quite unrelated entities that needed to be corralled by governments into the same space. The International Energy Agency (IEA) says global demand will be 120 million barrels of oil a day in 2030, but current production is not much more than 80 million. How can we possibly get there? Don't sweat it. The one certain thing is that you can't have a demand of 120 million barrels and a supply of 80 million barrels. Bringing supply and demand into line is what prices are for. And yet this piece of Economics 101 seems to be quite beyond most observers.

"Peak oil" mania is another variant of anti-economic thinking. We are allegedly on the point of reaching the highest possible level of global output, whereupon economics will cease to function and our societies will be in danger of collapsing like the stone head cultists of Easter Island.

That oil production will peak some day appears obvious. That we are there, or almost there, is highly unlikely. The U.S. Geological Survey and the IEA put the likely peak production points between 15 and 25 years away, but whatever the precise date, markets will provide signals for the development of alternatives in good time. Indeed, they are already doing so.

The greatest drag on oil exploration and production these days is that the world's greatest reserves sit under despotic and corrupt nations, who are pursuing the kind of destructive economic nationalist policies to which Canada fell prey a quarter century ago. Oil revenues certainly fund radicalism and fail to lift local populations out of penury, but the notion that we should put on the energy equivalent of government-mandated sackcloth and ashes in order to protect against possible external disruption is surely the fulfillment of our enemies' dreams. Nevertheless, such was the view put forward earlier this week in a piece in the National Post by Hoover Institution scholar Victor Davis Hanson. Mr. Hanson amply exemplifies the above-mentioned lack of market comprehension combined with a wonkish faith in simplistic policy solutions.

Although he doesn't get into peak oil, Mr. Hanson pooh-poohs "conservatives" as worshippers of free-market "gospel." He makes obeisance to laissez-faire "in general," but suggests that it somehow just doesn't apply to energy in particular. To introduce the appearance of Solomon-like balance, he attacks the "utopian" schemes of "the left," but his solution is an allegedly middle-of-the-road approach that relies on draconian regulation (with him as chief policy wonk).

The anti-market prejudice of Mr. Hanson, like that of many intellectuals, is bolstered by a moralistic superiority about short-sighted consumers in their gas-guzzling SUVs, "too many" of which are allegedly being turned out by Detroit.

But hang on, isn't Detroit in "crisis?" Doesn't that mean the market is telling it something? (And it surely isn't telling it to build more ecologically fashionable, deathtrap Smart wristwatch/cars, which are costing Daimler Chrysler a bundle.)

Mr. Hanson then proceeds to inform us that there is no single best solution, and here it is! Environmentalists "must" embrace nuclear power; natural gas use should be mandated by the state; everybody else has to "gradually accept that one alternatively fuelled small commuter car per household should be the norm for short trips to work and nearby shopping."

He does not outline the penalty for non-acceptance.

Mr. Hanson makes the stunning claim that energy efficiency has to be government mandated. Otherwise it just wouldn't happen. He pulls out the hoary fallacy that economic objectives can be treated like those of wartime. He calls for a "radical change in attitudes," making him sound like somebody from the David Suzuki Foundation rather than the Hoover Institution.

"A conservative," declares Mr. Hanson, who is a specialist in military history rather than economics, "should accept that government guidance in the domestic market is not as bad as empowering a nuclear Iran or Wahhabist Saudi Arabia." Now I don't know about "conservatives," who are traditionally not that hot on free markets, but the notion that Western nations should tie themselves in red tape and allow an enormous extension of congenitally incompetent government so as to deprive whackos of oil revenue is moot to say the least.

As the editorial on natural gas reproduced below from The Wall Street Journal indicates, the greater threat to energy markets perhaps comes from within. The first priority for U.S. energy policy-makers, notes the WSJ, should be to remove the anti-energy fifth columnists. The Sierra Club is similarly a threat to natural gas development in Canada, most particularly in its role as aboriginal puppet master in holding up the Mackenzie Valley pipeline, which was recently put on ice by its frustrated promoters.

The peak and decline we should most eagerly seek is that of the power of anti-energy, anti-development, anti-human radicals. When it comes to the global arena, the best defence against disruption is surely to unleash human ingenuity via free markets while promoting policies of stout defence against mad mullahs, and democratization for the regimes of nouveau czars, disco sheiks and Bolivarian dingbats.


At 9:36 PM, May 08, 2005, Blogger Mister Roboto said...

More Kool-Aid, anybody? :-P


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