Thursday, June 05, 2008

'The worst nightmare of the climate worrywarts'

The oil barons will not go quietly. There's still way too much money to be made with the current investments in machines and infrastructure for the current crop of oil tycoons to be lured down the clean energy path with total conviction. T. Boone Pickens is the exception, ExxonMobil the rule.

In fact as the following Wall Street Journal op-ed makes clear, as the oil industry sucks the last remaining reserves from the bowels of Ma Earth, Exxon Mobil, Shell and their brethren are realizing record profits. Moreover, they will continue to justify and perpetuate their existence by any and all means possible. Peak Oil? Foolishness. Climate Change? Pseudo-Science.

Supply and demand may work in a perfect free market, but given that there's no such thing in the real world, modern society's dependence upon and addiction to petroleum is making a lot of rich corporate executives a lot richer. For them the prediction that a barrel of the "black gold" will top $150 sometime later this year is music to their ears: "Ka-ching". (GW)

The Coming Oil Investment Boom

By Holman W. Jenkins, Jr.
Wall Street Journal
June 4, 2008

When oil hit $40 and then $70, this column was serene. With a couple billion Chinese, Indians and others joining the global marketplace, they will need energy, and lots of it. The price mechanism is our only hope.

Sure enough, it's working. Money is pouring into Canada's massive tar sands. A thousand substitutions are taking place on the demand side. Sales of SUVs are falling; sales of four-cylinder sedans are up. The number of miles driven by American motorists shrank in February for the first time in 26 years.

At $70 a barrel, we worried only that the folly of India and China in artificially holding down prices to consumers would spread. The news is happy here too. Taiwan, Indonesia and Malaysia are cutting back subsidies or thinking about it. India and China may not let prices float anytime soon, but they're letting gas lines and spot shortages ration supply anyway.

If today's towering price of oil reflects some speculator's bet on a long-term scarcity of liquid motor fuels, this will prove the misguided bet of a lifetime. Hydrocarbons are abundant and can be extracted from living plant matter as well as from their fossil remains. Many oil fields under current technology are considered depleted when they're still 50% full. But technology advances, doesn't it?

Yet there's one miracle of adaptation that even $135 oil apparently can't vouchsafe. It can't bring intellectual coherence to American rhetoric or policy on energy.

By one count, America sits on enough oil and gas to meet its own needs for half a century. We won't help ourselves although our environmental delicacy somehow doesn't stop us from screaming at other countries to tear up their own pristine wildernesses to supply us with cheap energy. President Bush rushes to the Saudis, supplicating for more oil. Congress threatens OPEC with antitrust action. Go figure. That U.S. politicians can afford to indulge a persistent unreality about a basic input of industrial civilization only testifies to how responsive and resilient the global energy market has been despite the political silliness it meets at every turn.

But the biggest fools today may be those greenies who are clapping their hands over $135 oil as if this somehow represents the beginning of the end of fossil fuels. High prices are not the equivalent of carbon taxes – they will have the opposite effect in the long run, spurring investment and technological progress to bring vast new resources of fossil energy into production. For instance, turning coal, oil sands and oil shale into motor fuels, which is cost-effective at half of today's oil price, means massive additional releases of CO2. It's the worst nightmare of the climate worrywarts.

Here, we offer advice to those whose cause we don't necessarily share. Politicians may not find $135 oil sufficient incentive to grow up, but the global warming crowd should.

Growing up would begin with recognizing that science doesn't prove the case against CO2. Our political system has been looking at the problem of climate change for a generation, and lack of action is not due to the machinations of big oil – but to the inability of policy to bridge a giant chasm between proposed costs and benefits. Even if carbon's guilt is assumed, the economics are far from certain that it wouldn't be cheaper just to endure a changing climate.

Growing up would also mean realizing that climate activists are in danger of losing all political credibility as they become handmaidens to corrupt pork bonanzas for the corn ethanol lobby and Silicon Valley alternative energy impresarios. Look no further than the climate bill being debated on Capitol Hill this week. The only real question it poses is how much Congress will spend on climate pork while having no discernible impact on climate.

Finally, growing up means recognizing that their one politically and morally saleable proposition is to offer carbon taxes as a de facto consumption tax, with the proceeds used to offset labor and capital taxes that discourage work and investment. This would be a case of taxing "bads" not "goods," with benefits for growth and the average voter's bottom line independent of any problematic evidence about CO2 and climate.

Voters and their representatives then could at least contemplate supporting a climate policy on cost-benefit grounds, rather than on the religious posturing that Al Gore and others adopt to push what they can't sell rationally. Will the greens learn these lessons? Not likely – which is why $135 oil may prove the beginning of the end of any political movement to do anything about climate change.


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