To the Editor:
One need not be an “oil hawk,” as Peter W. Huber and Mark P. Mills refer to some members of our Set America Free Coalition, to lose sleep over the prospect that tens of trillions of dollars could be shipped to the Persian Gulf in the coming decades in order to satisfy the world’s appetite for oil [“Getting Over Oil,” September]. Such a transfer of wealth would contribute materially to the terrorist threats we face, and should be of concern to every American.
In a time of global war against radical Islam, it is imperative that our national expenditures on energy be directed away from those who would use them against us. The only way to accomplish this is to achieve in the transportation sector of our economy, where two-thirds of our oil is consumed, what was achieved in the power sector following the 1973 oil embargo: a shift from oil to domestic sources of energy.
We agree with the authors that the electrification of transportation through massive deployment of plug-in hybrid cars is a critical part of the solution, but we strongly object to their laissez-faire approach that would leave our future to the forces of the free market while the government sits on its hands.
In a perfect world, it would not be the role of the government to intervene in the energy market or to pick technological winners. But at a time when we are at war, when Communist China competes with us over access to the world’s oil, and when most oil companies acknowledge that (in the words of Chevron’s CEO) “the age of easy oil is over,” we do not have time to experiment with textbook theories of economics. It is the role of government to advance public policy that provides for the common defense.
Messrs. Huber and Mills’s thesis that the free market can solve our energy crisis fails on another ground. The energy market is not a truly free market but one that is heavily rigged in favor of the big oil and automobile companies. The recently passed energy bill, which includes billions of dollars’ worth of tax breaks for oil and gas companies, is a stark reminder of this. While we do not advocate rolling back government support for the petroleum industry, we do think the government should level the playing field and promote free competition among alternative-energy suppliers. Purely on national-security grounds, it should also encourage Americans to shift from petroleum- to non-petroleum-based fuels like electricity and liquid fuels made from plentiful domestic resources like coal, agricultural material, and waste products.
Messrs. Huber and Mills’s aversion to a government push for fuel efficiency ignores those cases in which government intervention has effected positive change. They wrongly suggest, for example, that the successful market penetration of hybrid cars happened “not because of decrees from Washington,” but thanks to “market forces alone.” It is true that the new hybrids are attractive and perform well, but the rapid adoption of the technology would not have been possible without the federal and state tax credits that consumers have used to cover the premium they pay for such a car. The authors’ favorite technology, plug-in hybrids, which we support wholeheartedly, will demand an even higher premium from early adopters, and rapid market penetration will require a helping hand from Washington.
The pervasive role of government has long been a source of concern to Americans, but considering the threats our country is facing, leaving our oil supply and transportation sector suspended in limbo between jihadists and free marketers is far scarier.
Frank J. Gaffney, Jr.
Set America Free Coalition
To the Editor:
Peter W. Huber and Mark P. Mills state correctly that the peaking of our oil reserves need not lead to a catastrophe, since oil, for most of its purposes, can be replaced. But the authors miss key points.
The first is that we are running out of natural gas and have started to import it in large quantities from the same unstable Middle East that we have relied upon for oil. It makes no sense to switch to a “hydrogen economy” that uses natural gas to make the hydrogen. There is no alternative to obtaining 60 percent of our energy from non-fossil-fuel sources. Coal may be plentiful, but replacing oil with coal (as the authors advocate) would increase its consumption fourfold, and our more easily recoverable reserves would be depleted in less than 30 years. Moreover, greater coal consumption might accelerate global warming and increase pollution.
Other solutions, like solar thermal energy with storage, could supply most of our energy needs and could be coupled with wind, nuclear energy, and, in the future, solar cells. Switching to these sources would take at least thirty years at a cost of at least $200 million a year. With the future so uncertain, private industry will not invest in building new plants without incentives. Thus, government intervention is needed. On the bright side, the technology needed to solve our energy problems already exists; we lack only the will.
The authors are wrong to think that energy consumption cannot be decreased. The 1974 “corporate average fuel economy” (CAFE) laws were so effective that in twenty years gasoline consumption decreased by 30 percent despite an increase by 50 percent in the number of cars. This achievement was wiped out completely when President Clinton allowed SUV’s to be produced through a loophole in the law. His decision is the main cause of our current oil crisis.
If we do not change our ways substantially, the peaking of the fossil-fuel supply can catch us unprepared and lead to the total breakdown of our society. Unfortunately, the analysis presented by Messrs. Huber and Mills lulls the reader into an illusory complacency. It is based on the belief that the free market will always solve our problems and that new resources can always be found if the price of extant resources is increased. They fail to recognize that the increase in prices may be highly nonlinear and thus much greater than our economy can absorb.
Clean Fuels Institute
City College of New York
New York City
To the Editor:
The optimism of Peter W. Huber and Mark P. Mills is unwarranted. They argue that switching from oil to electricity will alleviate our dependence on the former. The energy for the production of electricity will come from coal, uranium, natural gas, and, at the margins, from the harnessing of non-stored solar energy in its various forms: hydropower, wind, photovoltaics, biomass, etc. But all these sources of primary energy have their own constraints.
A reversion to coal, the main primary energy source before the oil era, will be hampered by finite availability, environmental rules, and a scarcity of miners. Uranium is scarcer than coal, and the long-term storage of nuclear waste still awaits a solution acceptable to all parties. Natural gas as a resource is indistinguishable from oil not only because it represents the lighter end of the hydrocarbon continuum; it is, or will be, mainly imported, and gas resources geographically overlap oil resources. The contribution of solar energy will increase with time, but it will be decades before its contribution to our total energy needs will be meaningful, and its cost will far exceed even the recent, seemingly exorbitant, cost of oil.
Finally, Messrs. Huber and Mills suggest that the quest of a billion people in China and another billion in India to move from “carbohydrate power” to hydrocarbons, which exerts a sharp upward pressure on the cost of oil, will be satisfied by hypothetical, super-efficient engineering marvels. They magnanimously accord these masses the use of hybrid rickshaws but not of Hummers. The decision-makers in China, India, and elsewhere are nevertheless trying frantically to assure themselves oil supplies just to be on the safe side.
A further illustration of the unwarranted optimism of Messrs. Huber and Mills is their description of hydrogen as “technically easy” to extract from water or natural gas—despite the fact that each step in its production, distribution, and storage is a potential show-stopper. The last ten years of hype and heavy outlays on hydrogen have hardly made an advance toward practical use.
Tightness in the oil supply and consequent price increases in the next few decades are a virtual certainty. The experience of the last 40 years should be sufficient to disabuse the authors of any facile possibility of “getting over oil.” The getting, if any, will be painful and disruptive and fraught with dangerous conflicts.
Bloomfield Village, Michigan
To the Editor:
I was surprised that Peter W. Huber and Mark P. Mills did not mention nuclear fusion technology. As I understand it, nuclear fusion is the ultimate answer to our energy problem. When this technology is perfected we will have available to us virtually unlimited, nonpolluting, radiation-free energy. We ought to be devoting the same level of funding and scientific application to nuclear energy as we did to the Manhattan Project.
John E. Bright
Fairfax Station, Virginia
Peter W. Huber and Mark P. Mills write:
Frank J. Gaffney, Jr., Anne Korin, and Gal Luft do not want Americans to buy oil from people who fund, harbor, or incite our enemies. We, too, would like to bankrupt those people; but we differ on how that can be done.
As we pointed out in our article, the United States, by itself, does not buy all that much oil from the Persian Gulf—but the rest of the world certainly does, and the global economy is growing rapidly. Short of a quarantine, or an invasion, the only way to make the current owners of oil poorer is to lower the price of oil.
One way to do that is to produce more oil, or more of a good substitute. The oil hawks named in our article have concluded that the best way forward is to grow lots of corn and switchgrass on the prairies and convert it into alcohol fuel. They might be right—but, then again, they might be wrong. Reuel Shinnar apparently prefers solar and wind to grass. John E. Bright likes nuclear fusion.
We invite Messrs. Gaffney, Shinnar, and Bright to work out among themselves whether the first hundred-billion dollars in government subsidies, tax credits, and so forth should chase the sun above (right to its core, if we want to put our money on fusion), the grass below, or the wind in between. What is clear is that without direct government subsidy, each of these alternatives remains prohibitively expensive in all but a few niche applications.
Meanwhile, global oil sales at current prices generate about $1.5 trillion a year. Speaking for ourselves, we doubt that the U.S. government can have any useful impact on a market of that size by regulating, spending, taxing, or crediting. Even if (say) one or two countries can spare 50 million fertile acres to grow corn and switchgrass, most of the world’s oil-consuming nations cannot.
The most obvious and sensible place to look for alternatives to oil is where they are already established and in widespread use—which is to say, in the 60 percent of our energy economy that is powered by other fuels. As we noted in our article, and as Mr. Gaffney and his colleagues acknowledge, the electric sector of our economy shifted decisively away from oil—not to corn and switchgrass but to coal and uranium—following the oil shocks of the 1970’s and 80’s.
Mr. Shinnar objects that we will run out of coal. Sure we will, but not until the year 2834, give or take a few centuries; the U.S. has truly vast deposits of the stuff. Mr. Shinnar also states that we are running out of natural gas; but what we are really running out of is drilling permits and gas-transportation facilities. We have placed most of the Rockies off-limits, we refuse to build docking facilities for liquefied-natural-gas tankers, and we make it very difficult to build new pipelines connecting fields with gas to cities that need it.
Is uranium “scarcer than coal,” as Mordecai Shelef contends? Ton for ton, it certainly is—but per unit of energy supplied, uranium deposits are, for all practical purposes, infinite. It is true, as Mr. Shelef writes, that all non-oil sources of energy “have their own constraints,” as no one is more keenly aware than the nuclear industry. But those constraints arise mainly from domestic politics and perceptions, both of which may evolve quickly as Americans come to grips with the thoroughly nasty politics of foreign oil.
Looking forward, we join Mr. Gaffney and others in applauding the coming convergence of the electric and transportation sectors of our energy economy. More energy moves through our electrical grid than through the drive shafts of our cars; hybrid engines and batteries are coming that can bridge the divide; and gasoline at three dollars a gallon creates strong market incentives to bridge it. Also helpful, as we argued in “Getting Over Oil,” would be a more rational regulation of the price of electricity and flatter energy taxes across the board. (Contrary to Mr. Shinnar’s supposition that we see hydrogen as an alternative fuel, we believe only that it could serve as one possible bridge between the electric and transportation sectors.)
As for our preference for market solutions over government intervention, is today’s “rapid adoption” of hybrid technology a product of such intervention in the form of tax credits, as Mr. Gaffney and his colleagues believe? No serious student of the matter would agree. Hybrid drives were incorporated into diesel locomotives and monster trucks as soon as the high-power semiconductors at their core matured. Falling prices and rising performance are now moving those same technologies into our cars. Without benefit of tax subsidies, all car manufacturers use them to electrify valves, brakes, steering, and radiator fans. The rest of the drive train will follow because it is now cheaper to build cars that way, and the cars perform better.
So much for the supply side. The other way to depress the value of Persian Gulf oil is to lower global demand. But how? According to Mr. Shinnar, fuel-economy standards have reduced gasoline consumption by 30 percent. If he truly believes that, he must be measuring against some imaginary curve 30 percent above current levels of consumption. U.S. gasoline consumption has in fact been rising inexorably since the days of Henry Ford. The curve has flattened only occasionally, and very briefly, in times of serious economic slowdown. No such flattening is imminent in today’s vibrant global economy.
The simple, direct, and invariably effective way to curb demand for oil is to raise taxes on its end products. Principled conservatives who really believe in the need to control demand should have the political courage to back such increased taxes. It is timorous and unprincipled to continue to promise painless, government-prescribed, subsidized techno-fixes in the form of thousands of pages of regulation and tax-jiggering, all packaged in the name of “efficiency” and “conservation.” As a review of the historical record confirms, that approach has never—never—worked in the past.
It fails not because consumers hate efficiency but because they like it so much. The faster we build more efficient engines, the more of them we build, and the more we use them—and the faster our energy consumption rises. Mr. Shelef complains that we are willing to consign the masses of China and India to “the use of hybrid rickshaws but not of Hummers.” Quite the opposite: exotic and expensive new technologies invariably become cheaper, and any energy-consuming technology that begins as an expensive curiosity in San Francisco will end up as a staple in Shanghai. They will get the hybrid Hummers, too.
The experience of the past 40 years, Mr. Shelef writes, teaches that there is no “facile possibility of ‘getting over oil.’” But what the 1960’s and early 70’s taught was in fact very different: a huge ramp-up in production of Persian Gulf oil in those years made it politically painless for the U.S. to ban almost all new drilling off the Florida and California coasts, and then in much of Alaska. As for the ensuing 30 years, what they have taught is that the pundits who kept telling us that we’d run out of oil were wrong, and so were all those who assured us we could slash demand by turning to the sun, wind, fusion, efficiency, and conservation.
Oil does present serious problems—which makes the position of the oil hawks doubly depressing. However well some of them may understand the world’s political pathologies, they do not know more than the market does about supply and demand when it comes to oil, coal, gas, uranium, heat, shaft power, electricity, passenger miles in cars, freight miles in trucks, air miles in planes, hybrid-electric drive trains, and lithium batteries. So, to keep it simple, they tell us to grow corn and switchgrass.