Energy Independence?

The “hot” new topic this summer seems to be “energy independence.” Officially, this has been a national goal since at least the Ronald Reagan years. I’m all for it and, I’ll bet, so are you. So why has it taken twenty-five years for this to become a “hot” topic? When you cut through political posturing, it’s really all about the high price (not cost, but price) of petroleum and its increasingly unstable supply.

For years we have endured all of the political rhetoric, all of the hand wringing, all of the predictions of impending environmental doom, all of the government restrictions on energy use, and all of the government subsidies for alternative fuels. But in the end, it is the marketplace, not the politician which has made energy independence the “hot” new topic. It is always that way – even when the government’s heavy hand tries to alter the marketplace concepts of supply and demand.

In Oregon, one need look no further that the city of Portland where, in the name of conservation and “green living”, costly government decisions have created a light rail system that has had virtually no impact on the commuter use of automobiles. It has simply replaced a flexible commuter bus system that cost about $1.22 per passenger trip with an inflexible, weather dependent, light rail system that costs about $31 per passenger trip. Even a heavily subsidized light rail fare has not made it attractive. But heck, it’s only taxpayer money and it makes the uber liberal commissioners happy that they can be so trendy. Ninety plus percent of commuters still drive – drive by themselves – in their SUV’s and sedans because the cost of fuel has not risen beyond economic tolerance. Government interference did not alter consumer transportation preferences.

But I digress. The cost of production in the Middle East and South America has not changed materially since the discovery of oil in the post-WWII era. What has changed is the marketplace. First, these oil producing nations have created a monopoly cartel (OPEC) and use their monopoly position to extract as much lucre as they can from Western nations. Prices went up as OPEC manipulated supply but there was only so much they could manipulate supply without injuring their own economies. After the first spasm during the Nixon years and the boneheaded response of wage/price controls, the Western nations have learned to live with the cartel.

The second, and the major new factor, is that China and India which are becoming major participants in the global economic community have increased their need for energy by dramatic amounts and have imposed significant pressure on the current supply. And, as usual, when demand outstrips supply, the price goes up. The result is $3.00 gas in America.

And it is the $3.00 gas that has triggered the real interest in “energy independence. There are two elements to this. First, there is the understandable desire by Americans to not be hostage to an unstable Mideast where petro-dollars are the source of financing fanatics who would do us harm at every turn. Second the price of gas has begun to approximate the cost of producing alternative fuels that will help gain “energy independence.” While the technology has existed for quite some time to produce ethanol, bio-diesel, and wind generation, the cost of such production has so far exceeded the price of fossil fuels that the marketplace would not sustain their use in any large quantities.

But a funny thing happened on the way to the marketplace. As each new alternative source became viable, the radical environmentalists found fault and condemnation of the source. The environmentalist who once embraced wind energy now decry the clusters of generators in wind farms as visual and noise pollutants that kill birds and other living things. Now with the emergence of commercially viable biofuels, the environmentalists have once again done an about face and are condemning biofuels as a danger to food supplies and more costly than we think. The radical environmental crowd has only been in favor of alternative energy sources so long as they remained commercially unattainable. It would appear that the only acceptable energy supplies for this crowd are those that exist in concept but not in reality.

But energy independence is not so simple as growing more corn or flax. It is a complex organism that requires the utilization of all of the available sources of energy in a measured and disciplined manner that will maximize the period of availability. To that end, we should not only be looking at increasing our use of biofuels (and wind and solar energy) but also increasing the production of coal, coal bed methane, natural gas, oil and gas in Alaska and the coastal areas, refinery capacity, distribution networks and nuclear energy. America has the technology and the resources to achieve energy independence within a five-year period. As usual, almost every man and woman on Main Street can describe the elements of that energy independence – apparently only the politicians cannot.