Update: Oil, Sugar, and 35 (Now 41) Wasted Years

So much for all that happy talk about American energy independence. With the solar energy booming, domestic fossil fuel production soaring, and conservation increasing, the Saudis have decided to take action and get Americans re-hooked on cheap imported oil.

http://www.marketwatch.com/story/can-saudis-beat-north-dakota-in-an-oil-price-war-2014-10-08

“Saudi Arabia earlier this month cut the official selling price for its crude, according to news reports, a move that put additional pressure on oil prices at the time” according to Marketwatch.com. And this morning news sources were celebrating the spread of sub-$3.00 per gallon gasoline, the most important value of life.

http://www.bloomberg.com/news/2014-10-07/shale-boom-tested-as-sub-90-oil-threatens-u-s-drillers.html

“The last time the U.S. had a domestic oil boom was in the 1980s, following the Arab embargo. It ended when new supplies overwhelmed the market” according to Bloomberg News. “Prices dropped to $9.95 a barrel in April 1986 from $32.35 the previous August, and the annual average stayed below $30 a barrel until 2000.”

The next thing you know we were back on our knees begging for imported oil for our newly bought SUVs at $100 a barrel, crushing our economy. Has anything been learned from this? No. Not with Generation Greed still in charge. Rather than write a new rant, I’ll just repost the old one from 2008.  It follows after the break.

The United States is heading for a major anniversary on October 20th, 2008. It will be the 35th anniversary of the OPEC oil boycott, which began on that date in 1973 in the shadow of the Yom Kippur war. (Gee, a war in the Middle East! There is no reason to worry about another one of those, is there?) That was the first signal, years before the environmental consequences of fossil fuel use were understood (by some), that abject dependence on a depleting resource increasingly concentrated in potentially hostile hands was a future economic and national security disaster.

The 1979 oil crisis, associated with the Iran Hostage Crisis was the second signal. (Gee, conflict with Iran, that’s not likely to recur is it?)

The 1990 Gulf War was a third signal.

The attack on 9/11 was the fourth signal.

But two generations of Americans willfully ignored these messages. And they instead listened to the messages they wanted to hear, that cheap and available energy was what they deserved — regardless of the future risks and consequences. And voted for elected officials who delivered those false messages. And here they have left us.

These generations wanted things cheap and easy for themselves. And aside from periodic crises, nothing has been cheaper and easier than imported oil. In the late 1970s and early 1980s when the price was last this high, Americans began to adjust, to conserve, to research and invest in alternatives, but as soon as conservation had an effect the price of oil fell. Those who conserved were left with little savings, those who invested in alternatives lost their money. They were made to be fools. The oil industry has been extremely parsimonious with oil and gas exploration ever since. They may be making record profits now, but they remember the massive losses of the mid-1980s.

Update: in the last few years there has been a boom in domestic oil and gas production associated with more advanced “fracking” techniques. It took nearly 30 years for the domestic oil and gas industry, wiped out in the mid-1980s, to attract investment again. But it seems possible that this will come to an end. So it isn’t just alternative energy and conservation that are put at risk by America’s Pavlovian response to cheap gasoline.

In the years after America’s energy party resumed, making the American way of life of even more dependent on cheap fuel, until once again OPEC (and developing nations, who wanted their share) took the cheap fuel away, leaving us deeper and deeper in debt and collapsing the value of the dollars we spend.   That low dollar allows others, who also want to burn more oil, to outbid us.

You can’t say we weren’t warned. I’m sure many of those my age or older remember the much-mocked and ultimately rejected speech by former President Carter on April 18, 1977, less than four years after the oil embargo. Some of us listened. But in the emerging culture of irresponsibility, both personal and social, most of us did not. Here are some excerpts.

“Tonight I want to have an unpleasant talk with you about a problem unprecedented in our history. With the exception of preventing war, this is the greatest challenge our country will face during our lifetimes. The energy crisis has not yet overwhelmed us, but it will if we do not act quickly.”

“It is a problem we will not solve in the next few years, and it is likely to get progressively worse through the rest of this century.”

“We must not be selfish or timid if we hope to have a decent world for our children and grandchildren.”

“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.”

“Our decision about energy will test the character of the American people and the ability of the President and the Congress to govern. This difficult effort will be the ‘moral equivalent of war’ — except that we will be uniting our efforts to build and not destroy.”

You can read the whole speech here http://www.pbs.org/wgbh/amex/carter/filmmore/ps_energy.html.

There it is, a choice that had to be made, and was made – and reconfirmed by elected officials and would-be elected officials for another 30 years. Right up to Al Gore’s decision to downplay his environmental principles in an effort to get elected President in 2000, and the Bush Administration’s open contempt of those who choose to live with less energy demand during its first five years.

Until in early 2006, when President Bush suddenly realized that “America is addicted to oil, which is often imported from unstable parts of the world,” yet proposed no action that might require any short-term sacrifice, because that would be unpopular with those of his generation.   The big response from people who “must not be selfish or timid if we hope to have a decent world for our children and grandchildren?” Extending daylight savings time, which subsequent studies imply may have saved absolutely no energy. And mandating more energy efficient light bulbs, which Bush’s Republican Party has since sought to reverse.

Yes, the decisions about energy over the past 35 years have revealed “the character of the American people and the ability of the President and Congress to govern.” Not all Americans. Not those who came of age before and during World War II, and hopefully not my children’s generation. Just those in between.

Just imagine that instead of pandering, the elected officials of the late 1970s and early 1980s had enacted a tax to keep the price of oil (adjusted for inflation) at the level it was at the time, with the tax increasing to capture most of the savings as the market price of oil and gas fell. Imagine that they had been willing to stand up for short-term sacrifice – no more than was occurring at the time anyway – in exchange for long-term gain. The revenues, during the years of cheaper fuel, would have been enormous, perhaps enough to avoid the massive national debt those same generations are leaving to us, and to have all the extra Social Security taxes we have paid actually set aside for Social Security.

Note: of course they could do that now. Despite the consequences, does anyone think they will? Our red-blooded American Patriots would rather be desperately begging ISIL for oil five years from now (what’s a few beheadings and some raped infidel women among business partners!) than forgo cheaper gasoline today.

More importantly, the incentive to invest in energy alternatives, or even domestic fossil fuel supplies, and to conserve energy would have remained in place during that entire 35-year period. The domestic oil and gas industry would not have collapsed in 1985. Solar and wind power would be far more advanced and widespread than they are now.   New nuclear plants might have come on line. The SUVs would never have been bought, and the far-flung exurban McMansions would never have been built. Both hog power, but now we are stuck with them, because simply throwing them away and replacing them would take more energy than would be saved. That is why the demand for energy is relatively “inelastic,” and people cannot expect to make rapid adjustments to changes in price without significant economic harm. Like the kind we are experiencing right now.

Was it an ideological dedication to leaving the free market alone that has led to this lack of policy? Hardly. Just compare the government’s energy policy with its sugar policy. The federal government has acted to keep the price of sweets for American consumers far higher than the world price, in order to protect domestic supply. In this Homer Simpson policy, the availability of domestic sugar, not the secure availability of energy, is treated as a matter of national security.

With insufficient domestic supplies of more desirable cane sugar, Americans have been forced to shift to less desirable (and according to some evidence less healthy) beet sugar and high-fructose corn syrup. To the point where aficionados of real Coca-Cola, originally made with cane sugar but now made with corn syrup in the United States, illegally smuggle it in from Mexico, where the good stuff is still sold. Our elected officials, Republicans and Democrats, feel free to manipulate the market to make us pay more to eat corn syrup, but somehow would not interfere raise the price of energy to encourage conservation, less energy-intensive lifestyles, alternatives sources of energy, and domestic supplies until those alternatives could be developed. Couldn’t be bothered.

For 35 years.  Actually now 41 years.

Now we have a fifth signal. On top of all the problems created by Americans’ tendency to spend more than they earn – in government and at home – and the consequences of the housing bubble and its aftermath, we have yet another energy price shock. Have our elected officials finally decided to change their tune?

Hardly. The bi-partisan response has been to look some a scapegoat to blame for Americans not having the cheap gasoline they “deserve.” So-called speculators. Price gouging oil companies. Environmentalists and their rules. Gasoline taxes. Red herrings, all. Frankly, they disgust me every time the open their mouths.

And our President? According to Politico “President Bush said Tuesday that he will not call on Americans to conserve gasoline despite the rising price of oil, saying consumers are ‘smart enough’ to figure out for themselves that they should drive less. ‘They’re smart enough to figure out whether they’re going to drive less or not. I mean, you know, it’s interesting what the price of gasoline has done’ Bush said at a news conference in the White House press room, ‘is it caused people to drive less. That’s why they want smaller cars: They want to conserve. But the consumer’s plenty bright. The marketplace works.’”

Except, of course, that the price of gasoline did the opposite for most of the past 35 years, and in response Americans have organized their lives in ways that would be difficult, disruptive, and economically damaging to reverse. As President Carter said in his speech, “government policies must be predictable and certain. Both consumers and producers need policies they can count on so they can plan ahead.” So does Bush now favor making sure that price stays high to prevent the same mistake from being repeated in the next 35 years, and allowing the price of oil to encourage the changes that need to be made? Do any of them? Any at all? No, because they don’t want to be rejected like President Carter.

After Bush, President Obama and the Tea Party, but no change. Not with regard to the low value of the future, and the younger generations who will live in them, relative the present and the ever expanding “needs” of Generation Greed.

“Other generations of Americans have faced and mastered great challenges,” Carter said. “I have faith that meeting this challenge will make our own lives even richer. If you will join me so that we can work together with patriotism and courage, we will again prove that our great nation can lead the world into an age of peace, independence and freedom.”

Three years later, in another much-derided speech on what others call the “national malaise,” Carter said “ten days ago I had planned to speak to you again about a very important subject — energy. For the fifth time I would have described the urgency of the problem and laid out a series of legislative recommendations to the Congress. But as I was preparing to speak, I began to ask myself the same question that I now know has been troubling many of you. Why have we not been able to get together as a nation to resolve our serious energy problem?”

The speech, which you can read here http://www.pbs.org/wgbh/amex/carter/filmmore/ps_crisis.html also mentioned “the first time in the history of our country a majority of our people believe that the next five years will be worse than the past five years. Two-thirds of our people do not even vote. The productivity of American workers is actually dropping, and the willingness of Americans to save for the future has fallen below that of all other people in the Western world.”

The savings rate was just 8 percent then. In recent years, it has been around zero.

It is nearly 35 years since the 1973 oil embargo, and many of the politicians now in charge have been around for most of them, given perpetual incumbency. So what do they have to say for themselves?

Note: it is now 41 years since the 1973 oil embargo. Will anyone even ask the selfish, shortsighted jerks the question?

Advertisements