Simple Answers to Energy & Economy

The simple answer to our energy challenges & our lackluster economic performance (Obama doldrums) are the vast energy reserves in gas and oil that new technologies have recently made available to us right here in America. This will even help keep us safer, since bad guys control much of the exportable oil and gas outside North America; the less we give them the better.

First let's talk about our biggest challenge. Overcoming the old-fashioned ideas we learned in the 1970s. These were a time of shortages. Experts used pseudo-science terms like "peak oil" that frightened and impressed the credulous. Many thought up plans to "manage our decline." We have less, they told us. Our intrepid President Jimmy Carter put on his sweater and told us to get used to it.

The pessimists were right in the short term given their unimaginative straight line projections of resources used, obtained & projected. But they lacked the capacity to understand innovation or when they did they thought only in terms of big government investments and a managed energy economy.

So let's dispense with that. ALL those energy challenges that defeated Jimmy Carter and perplexed the pessimists have been overcome by human ingenuity. We have access to more oil and natural gas than we did in 1980 and it seems like we will have even more in the future. In the 1970s, government regulators controlled the price of natural gas and then outlawed the building of new power plants that used that clean fuel. This was logical based on their flawed information. As far as they thought, we ran out of natural gas about ten years ago. If we had listened to these experts, we would have run out, BTW. Planners have a way of creating their own worst case scenarios.

Supposed shortages of gas and oil playing into the world-view of some folks and they will scream when I assert they were way wrong, but they were/are. What we have today is far beyond any best-case energy scenario envisioned by the luddites of the 1970s. Carter would not have believed it.

Business Week has a cover story about natural gas and how it could bring the economy out of the Obama doldrums. Cheap AMERICAN energy supplies would provide a REAL stimulus to the economy. There are some environmental challenges, but fewer than with any of the other forms of energy we currently use on a large scale. They can be managed.

The creation of a whole new world of energy using gas is a heroic story of individuals and small firms fighting against the experts, Federal regulators and powerful interests in places like the coal industry. They also had to fight the ridicule of experts who said that it could never be done. It is a story that shows exactly why big government programs in energy fail and often cause harm. They were going to do what they said couldn't be done. And they did. Maybe that is why so many people STILL don't get it.

President Obama ostensibly supports energy exploration for gas in the U.S., but does nothing to champion it.

And there are places where he actually stands in the way. President Obama, for example, is against the creation of 20,000 blue-collar construction jobs and perhaps 118,000 spin-off jobs that would go to mostly union Teamsters, plumbers and pipefitters who would supply the parts. This comes from his delay of the Keystone pipeline that would allow energy from Canada to better serve the U.S. Canada is still a foreign country, but our most reliable neighbor and has an economy largely integrated with ours. What will happen if the Keystone pipeline is not approved? The Canadians will build another network, over and through the Rockies, taking the energy to ports in the West where it will go to China.Does this make sense to anybody?

So let's sum up.Technological advances have "created" vast new supplies of American natural gas that can stimulate millions of American jobs. The extraction and consumption of this fuel is more ecologically benign than any of the forms of energy it is likely to replace. What do we do? Well some people react like we have discovered sin itself. Similar technological advances have made available vast amounts of oil in Canada, but also in places like North Dakota. This will give us a North American alternative to oil from unstable countries in the Middle East or Africa. So what do we do? We dither and oppose the infrastructure that will bring it to us.

The great Ronald Reagan said, "They say the world has become too complex for simple answers. They are wrong. There are no easy answers, but there are simple answers." The simple answer is to just say yes to inexpensive, available American energy, which will create American jobs, give us cleaner air and help us pull free of the Obama doldrums in our economy. What are we waiting for?

Posted by Christine & John at November 5, 2011 2:32 PM
Comments
Comment #331527

C&J ask…”What are we waiting for?”

The next election. I, along with you, have been promoting the use of our expansive natural resources for years.

Posted by: Royal Flush at November 5, 2011 5:19 PM
Comment #331536

The imposition of natural gas restrictions in the 70s was based upon the technology available at that time and the available supply. It wasn’t a “flawed” decision, it was reality. The technology wasn’t available to exploit the resource. Sort of like your arguments against solar today.

Your criticism of Carter for championing energy efficiency is misplaced. If there was one element of the Carter energy program that was effective, it was energy efficiency measures. It is unfortunate that the impression Carter portrayed of energy conservation was that of having to live with less comfort in the effort to conserve energy. The fact of the matter is that building code changes, improved insulation, more efficient appliances, more efficient autos/trucks due to federal CAFE standards and private market sector initiatives, improved electrical grid management, etc. proved to be highly effective in reducing energy consumption from fossil fuel and other sources. It is the lost child in all these debates. It is ironic that the measure proved most effective approach, hands down, receives the least publicity, debate and funding. OK, the light bulb thing sparked some debate.

As for natural gas, you agree that Obama is on board in principal. I might add, that he has repeatedly said that there is no single silver bullet, that only through research and development of a mix of energy sources can the future energy needs be met. So, he is also on board as to your point that the government should not be picking and choosing winners and losers in this area.

The issue of the Keystone pipeline presents an interesting political challenge to Obama. His State Department has basically approved the application but there is strong opposition from part of his base (environmental groups). He has assumed personal responsibility for the final decision as a consequence. My guess is that he will eventually approve the application with some additional environmental safeguards thrown in. We will see if he can finesse this through.


Posted by: Rich at November 5, 2011 10:04 PM
Comment #331540

Rich

“The imposition of natural gas restrictions in the 70s was based upon the technology available at that time and the available supply. It wasn’t a “flawed” decision, it was reality. The technology wasn’t available to exploit the resource. Sort of like your arguments against solar today.”

You are right about the current tech. Aren’t you glad that the bureaucrats and “experts” didn’t have the last word. I am not saying the experts were dumb. They just lacked the imagination to see the possibilities.

Maybe you are right in solar. If so, we will see such advances soon. Remember, the gas explorers didn’t get a special government help. In fact, they acted IN SPITE of government.

The beauty of the market is that it doesn’t have to put too much on one bet.

Re Carter - I remember Carter well. Speaking of mistakes, I voted for him the first time I ever voted. He was a disappointment.

Posted by: C&J at November 5, 2011 10:40 PM
Comment #331545

“Aren’t you glad that the bureaucrats and “experts” didn’t have the last word. I am not saying the experts were dumb. They just lacked the imagination to see the possibilities.”

C&J,

In reality there was strong government involvement in developing unconventional natural gas resources during the late 70s. It involved vigorous DOE R&D programs and tax incentives (Section 29 tax credits of the Oil Windfall Profits Tax Act of 1980) to develop unconventional natural gas. http://www.netl.doe.gov/publications/proceedings/01/carbon_seq/1a3.pdf

http://media.godashboard.com/gti/1ResearchCap/1_5EandP/1_5_1_AreasOfRsch/Section29StudyUnconvenGas.pdf

Posted by: Rich at November 6, 2011 8:35 AM
Comment #331546

Rich

Government is involved in almost everything. There are good and bad ways. The good way is to help sponsor R&D. The bad way is massive management. That is why the idea of the massive “green jobs” initiative Obama proposes is so scary. It won’t work, will cost us big bucks and will misdirect resources.

I wrote a post about those differences http://www.watchblog.com/republicans/archives/007708.html

I don’t know if you saw it.

The bottom line is that we should not piss away money picking winners, which also leads to corruption.

Government has the responsibility to create conditions where the people can create prosperity but not try to create the prosperity itself.

Posted by: C&J at November 6, 2011 8:49 AM
Comment #331549

“Remember, the gas explorers didn’t get a special government help. In fact, they acted IN SPITE of government.”

C&J,

I was responding to the above comments in pointing out the significant involvement of government in the R&D of gas exploration in the late 70s. The “gas explorers” did indeed get special help in R&D and tax credits which spurred investment.

Lets agree that the model followed for natural gas development worked. From the DOE article, it was a partnership R&D effort with tax incentives.

Posted by: Rich at November 6, 2011 10:52 AM
Comment #331555
The simple answer is to just say yes to inexpensive, available American energy

It only seems inexpensive if one is able to externalize the costs of CO2 emissions and the damage to groundwater caused by fracking. Until a system is in place to make sure these costs are properly included in the price, these new sources of natural gas are not ready for prime-time.

Posted by: Warped Reality at November 6, 2011 1:35 PM
Comment #331559

Warped

The ground water problem is manageable. Look at the linked article.


CO2 remains a problem but it produces less of it than the types of energy it will replace.


I understand the fear the cheap natural gas will postpone the day when truly renewable energies are cheap and available. But R&D is and will continue on those things too. There is only so much that can usefully be done at a given time. Some things just need time to develop. Crash programs usually crash.

The choice is not between gas and future technologies #1 or 2. The choice is between gas, oil, coal or nuclear. Of these, nuclear is cleaner and may be the “technology of the future” we are seeking, but it has very high capital costs. Coal and oil are dirtier in pretty much every way. Gas can be used now, today.

Posted by: C&J at November 6, 2011 6:31 PM
Comment #331567
The ground water problem is manageable.

I’m sure it is. I don’t mind taking on a little risk, I just want to make sure that the price accurately reflects those risks. Today, energy prices do not take these considerations into account.

Posted by: Warped Reality at November 6, 2011 8:28 PM
Comment #331622

Warped

There have been few actual cases of ground water contamination. These have been caused by simple factors like defective cement.

Thing like lighting your tap water is often caused by nature methane seepage, unrelated to any kind of drilling. Just as you can light swamp gas.

Compared to other forms of energy extraction, this one is very safe.

Posted by: C&J at November 7, 2011 4:42 AM
Comment #331624
Compared to other forms of energy extraction, this one is very safe.

I’m not denying that natural gas is the safest conventional energy resource (although nuclear fission might come close if done properly). I’m just expressing a desire that we end all the baloney with externalized costs. Let’s implement a system to estimate the risks posed by fracking and to include those risks in the price of natural gas. No matter how many safety precautions you take, someone will still inevitably get hurt. I want the costs of that damage to be borne by the natural gas industry and not whomever was unlucky enough to live near one of those drilling operations.

We still do not have a method for pricing the costs of climate change into hydrocarbon combustion, which means fuels such as natural gas are indirectly subsidized when compared to renewable energy sources such as solar. When solar, natural gas and nuclear fission can compete with each other on a fair playing field, then the markets can work their magic and we’ll end up with the energy resource of the future.

In this case, simply shrinking government’s size leads to the sort of top-down approaches more commonly found in statist regimes. Only it’ll be a small number of corporations calling the shots instead of our elected representatives. This is a situation that requires a truly Liberal approach to governance in order to remedy the problem.

Posted by: Warped Reality at November 7, 2011 9:01 AM
Comment #331632

Warped

We have courts, which are very good at awarding provable damages.

Re carbon - tax it.

re smaller government being Stalinist - I don’t see that. Stalinism requires a really big government.

Beyond that, firms can still operate and develop new technologies and methods. Government is rarely a source of innovation and often a barrier to it. Government should help with basic research but stay out of the way otherwise.

There is a good article in the Economist re solar power. Maybe I will use it to write something.

BTW - still no answers to your questions in Brazil. You see what I have been doing. Very busy, but in a unspecific type of way. Great work if you can get it, BTW.

Posted by: C&J at November 7, 2011 2:16 PM
Comment #331663
We have courts, which are very good at awarding provable damages.
When it comes to environmental damages, it is very difficult to use our current courts. Usually the perpetrators and victims of these damages are quite diffuse, which it makes it hard for any court to award damages. It’s much better to simply estimate the cost beforehand and to collect those costs in the form of a tax. This is what you propose we do with carbon; similar things can be done with other issues.
Re carbon - tax it.
The Carbon Tax should come first. The lifting of drilling regulations should come second. Otherwise, we are only asking for unsustainable exploitation.
re smaller government being Stalinist - I don’t see that. Stalinism requires a really big government.
I said statism, not Stalinism. Perhaps central-planning is a better term. My point is that when we limit our political government we often just end up growing our corporate government. Sometimes the relationship is not zero sum. The corporate government can grow faster than the political government shrinks. If our political government simply eliminates restriciotns on Natural Gas extraction without taking any other actions, I will regard it as statist central planning (picking winners and losers). In this case we have the government picking natural gas as winners when we have so many alternatives that might be better (carbon sequestration, nuclear fission, solar, wind etc).
There is a good article in the Economist re solar power. Maybe I will use it to write something.

BTW - still no answers to your questions in Brazil. You see what I have been doing. Very busy, but in a unspecific type of way. Great work if you can get it, BTW.


Don’t worry, I’m a pretty patient guy. I’ve never been very good at learning foreign languages; I’d much rather solve a differential equation. I don’t think the State Department has many differential equations that need to be solved. Or do they? In any case, I really enjoy my current job (atmospheric chemistry research). Research never ceases throwing curve-balls at you. Many times things just don’t behave the same under experimental conditions as they do in a textbook. Posted by: warped reality at November 8, 2011 1:15 PM
Comment #331672

Warped

Re statist - sorry, I read too fast. But my response also works coincidentally for that.

I still don’t see how limiting government creates more. The private market is naturally competitive. Government has the rare proactive duty to break up monopolies, but generally if government just enforces the rule of law and does not create monopolies through regulation, things will be okay.

Re State - everybody should do things they do well. I am largely talent free, except that I can talk and write. Languages have not been a big problem for me, although I don’t retain them when I don’t use them.

Re restrictions - if you look at the linked article, many proponents of gas exploration welcome good regulations.

BTW - the difference between good and bad regulation usually has to do with purpose. Regulations that work for health and quality are usually okay. Those that work to regulate markets or establish “just” prices are usually bad.

They tend to mix in practice.

Re waiting on gas - Gas is significantly more environmentally benign that the fuels it will replace. This includes the whole life cycle of the product.

Gas and oil will be produced by others. Many of whom are dangerous clowns like little Hugo or crazy Mahmoud. Or dangerous masterminds like Vlad. American natural gas will help us tell them to go to hell (although little Hugo will probably get there sooner by himself)

Gas will help get us out of the Obama doldrums.

So gas is not perfect. Nothing is perfect. But it is better than what we have now. In addition it is American. And it will help us put a thumb into the eyes of crooks and bad guys around the world.

Posted by: C&J at November 8, 2011 3:27 PM
Comment #331690
I still don’t see how limiting government creates more. The private market is naturally competitive. Government has the rare proactive duty to break up monopolies, but generally if government just enforces the rule of law and does not create monopolies through regulation, things will be okay.

We have both a government composed of elected politicians and appointed civil servants as well as a government composed of bussinessmen & bussinesswomen across the nation. By seeking to limit the former, you can sometimes increases the power of the latter.

This issue with the natural gas is one example; by “shrinking” government, you cede power to the other governments. The corporate government does not have the public’s intrest, it is only interested in profit. Often the public’s intrest and the profit intrest intecect, but this is one examlple where they don’t. Corporate governmnet will anoit natural gas the winnter in our energy economy simply do to the fact that it enables to externalize their costs in ways that solar or other sources cannot.

Gas is significantly more environmentally benign that the fuels it will replace. This includes the whole life cycle of the product.
I don’t care. It’s not our job to pick winners and losers, let the free market decide.
Re restrictions - if you look at the linked article, many proponents of gas exploration welcome good regulations.
Is the natural gas industry lobbying for a carbon tax? I think not. GOP politicians constantly whine about current governmental regulations regarding fossil fuel extraction and combustion; why in the world should I believe that these natural gas proponents would welcome more governmental regulations?
Regulations that work for health and quality are usually okay. Those that work to regulate markets or establish “just” prices are usually bad.
I’m not entirely sure what you mean here. Justice is always the goal whenever we establish regulations. Posted by: Warped Reality at November 9, 2011 11:57 AM
Comment #331696

Warped

I would disagree that the government always has the common interest at heart v business which is profit oriented. Government is run by bureaucrats and politicians, each with their own motivations, good and bad. Beyond that, government regulation is often captured by special interest groups.

On the other hand, business must satisfy customers. It works to businesses detriment if their products harm or kill customers. It also is hard to do business if the people around you dislike what you are doing.

I recall speaking to radical environmentalists in Norway. They told me that they much preferred dealing with private firms as opposed to those owned by government or heavily political and regulated. Why? They said that they could pressure private firms with loss of customers. The government was largely immune to this.

I think you are on the right track re “governments” but I think you are wrong about who represents whom. When the official government is not much involved, it does not mean people are not making choices. On the contrary. People are acting all the time.

Nobody makes decisions for pure reason, either market profit or political altruism. Most firms do many things because the leadership wants to or they think it is right. I do forestry I do NOT maximize my money profit. Instead I take into account wildlife, water etc. And I work with lots of big firms and timber companies. NONE of them maximize their profits. They all have values based on their love of nature or at least resource work, which is why they went into the business.

Profit is the price of survival. If you don’t make sufficient profit you will disappear. But once you satisfy that, choices are made outside that profit matrix all the time.

The key to success is not politics or regulation per se. It is incentives. It is best to have incentives that are long term, or the word we like to use today – sustainable. We want firms that want to stay in business for a long time. They will be good stewards of their resources, which include customers and the larger society. Politicians and government, BTW, often do NOT have a long term perspective. They may make regulations w/o much thought of the larger system or the long term.

I will also point out that regulations that are too “strong” will produce bad results. I have an example from Brazil. In much of the Amazon, illegal logging makes up more than half the “harvest”. There are lots of bad actors, but the bigger problem is that honest people really cannot make a living following the strict laws. They leave the field to the bad guys, who wreck and ruin, which provokes stronger laws and leads in a circle.

In Virginia, we harvest timber responsibly BECAUSE the laws are good and not too strict. In Brazil they harvest illegally BECAUSE laws are strict.

Re gas and picking winners - I agree that gas should be regulated more or less as oil as it merits. How is that picking winners? Gas can compete with oil & coal on both price and environmental grounds.

Posted by: C&J at November 9, 2011 3:34 PM
Comment #331699
I would disagree that the government always has the common interest at heart v business which is profit oriented.

It’s probably not as black & white as I may have implied this morning. However, the primary motivation for our politicians will always be our vote in the next election. If we wield our votes wisely we should obtain better leaders.

business must satisfy customers. It works to businesses detriment if their products harm or kill customers. It also is hard to do business if the people around you dislike what you are doing.
If new customers can be found at a rate that exeeds the rate at which the old ones are killed the business can continue to be profitable. See the tobacco industry for an example. Also, it is very easy for a business to manipulate public opinion through mass media; this allows someone to continue harming his/her customers while keepings those same customers ignorant of what is going on. A decently skilled propagandist can convince the public that dangerous products are safe or vice versa.
I recall speaking to radical environmentalists in Norway. They told me that they much preferred dealing with private firms as opposed to those owned by government or heavily political and regulated. Why? They said that they could pressure private firms with loss of customers. The government was largely immune to this.
This isn’t surprising. Corporate government is organized informally, which gives it greater flexibility
Nobody makes decisions for pure reason, either market profit or political altruism.

Maybe so, but these exceptions only matter slightly at the margins. By and large, actors in the bussiness sector seek to maximize their profits and actors in the political sphere seek to maximize their popularity in the next election. Often the profit interest and the public intrest overlap, and many times the profit interest is more important/better than the public interest.

I agree that gas should be regulated more or less as oil as it merits. How is that picking winners? Gas can compete with oil & coal on both price and environmental grounds.
You are writing on the Repubica/Conservative side of the blog within the context of GOP attempts to rollback regulations on fossil fuel extraction. I read this as an endorsment of those GOP efforts (efforts which do not do anything to internalize natural gas’s external costs). You claim the mantle of limited government, but fail to consider the consequences of further empowering corporations to dictate our lives.

It’s kind of obvious; if you let natural gas producers to externalize some of their costs, you are providing them with a subsidy. By subsidizing natural gas you are picking winners. You are not providing the same opportunity to solar power (or fission, wind, carbon sequestration etc).

Posted by: Warped Reality at November 9, 2011 4:25 PM
Comment #331703

What people don’t like about Keystone is that the pipeline is there for one reason, and one reason alone: the Athabasca Tar Sands.

You probably couldn’t make up a more energy inefficient kind of resources extraction, or more expensive. As a matter of fact, it’s only truly economical IF gas prices remain high.

You basically have to bake the stuff out of the sands, (burning more natural gas) and you get this heavy fraction, sulfur rich stuff that you have to expend more energy to refine. Remember, gasoline is a light fraction hydrocarbon, so you’re having to break this stuff down and clean out all the sulfur junk in order to make it work.

Personally, I think your carbon tax idea is essentially antithetical to any notion of not picking winners or losers. Personally, I don’t mind picking certain categories of winners and losers, given what I know about the different alternatives. We can’t just what’s best for the nation merely on the basis of what’s best for the energy companies. We’re paying a cost for the current market leaders that’s not purely quantifiable in their bottom line.

Posted by: Stephen Daugherty at November 9, 2011 4:44 PM
Comment #331707
You probably couldn’t make up a more energy inefficient kind of resources extraction, or more expensive. As a matter of fact, it’s only truly economical IF gas prices remain high.

You basically have to bake the stuff out of the sands, (burning more natural gas) and you get this heavy fraction, sulfur rich stuff that you have to expend more energy to refine. Remember, gasoline is a light fraction hydrocarbon, so you’re having to break this stuff down and clean out all the sulfur junk in order to make it work.

Those are issues for the free market to handle. If it isn’t profitable, it won’t be done (unless conservatives get the government to subsidize the extractors).

Posted by: Warped Reality at November 9, 2011 4:54 PM
Comment #331708

Let me pause for a moment here, and say this: If Tar Sands Oil and Fracking/horizontal drilling were the simple answers to the economy and energy, they’d have been done years ago. These are more expensive methods that are ultimately more inefficient. We’re having to resort to them now because the resources we can easily find are tapped out.

It’s not pseudo-science to talk about Peak oil. There is a limited amount of oil in the world, and because of technological and cost issues, a limited amount we can actually get to at current oil and natural gas prices. It’s not really accurate to act like new discoveries can meet demand, which is steadily increasing, forever.

Meanwhile, Solar Power is getting cheaper and cheaper as an alternative, and it’s power source is clean, so even if the initial production of the solar cells is somewhat dirty, it isn’t doomed to be continuously dirty like fossil fuels are, which much continually create pollutants in order to create power. Pretty soon, within the lifetime of most of the projects your people propose, it’ll be cheaper to take in the light from above than burn the fuels from below. Some might take Paul Krugman to task for saying there’s a Moores law involved in making solar power cheaper, but in this case, There’s plenty of evidence from scientific sources to back him.

If you want to hitch your wagon to a power source that is only destined to get more expensive, be my guest. But it’s pretty bad form to claim that your approach is simpler and more economic. There’s nothing simpler, in operational terms. than directly absorbing light from the sun.

Posted by: Stephen Daugherty at November 9, 2011 5:12 PM
Comment #331756

Obama’s simply answer - pass the buck.

POLITICO Breaking News
————————————————————————-
The State Department has confirmed that a decision on the proposed Keystone XL pipeline will be postponed so that it can “undertake an in-depth assessment of potential alternative routes in Nebraska.” In a statement, the department said it is “reasonable to expect” that the extended review process “could be completed as early as the first quarter of 2013” - pushing off a contentious issue for President Barack Obama until after the 2012 presidential election.

Posted by: C&J at November 10, 2011 4:38 PM
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