Power: Commentary: How Myths Distort Energy Policy

Have you ever read something and had a gut feeling that what you were reading was somehow distorted or flat out untrue? Well part of CARE's mission is to provide the public with an accurate picture of the important role that abundant and affordable energy plays in our lives. To help our readers understand how myths distort energy policy in the United States, CARE has enlisted the aid of Thomas Tanton, an Environmental Fellow with the Pacific Research Institute. In the blog posting below, Mr. Tanton dispels numerous myths including: The perception that foreign oil provides most of our energy, renewables will replace conventional energy sources, the United States is a disproportionately large polluter compared to other nations, and energy efficiency reduces energy use. Mr. tanton also establishes a fact that is seldom mentioned in America's energy debate - inreased oil production can yield environmentally friendly results!

Energy is a complex issue but thanks to contributors such as Thomas Tanton, everyday people have the chance to get an accurate picture of the energy debate. We here over at CARE encourage you to read on and to let fact rather than fiction guide your views on energy policy.

Power: Commentary: How Myths Distort Energy Policy
Congress and various states are considering a fundamental restructuring and regulation of our energy policy. Any such effort should be based on facts, but legislators, unfortunately, incline to myths, such as the notion that most of our energy comes from oil.

Myth: Foreign Oil Provides Most of Our Energy
According to the U.S. Department of Energy and the Energy Information Administration, oil represents less than 40% of our energy use. A full two-thirds of that oil comes from North America, primarily Canada, not the Middle East. According to another prevailing myth, alternative energy sources will reduce the use of petroleum. Such sources may first reduce domestic production, but they will not affect production in unstable regions. Renewable technologies are subject to import and price security concerns as well.

Myth: Renewables Will Replace Conventional Energy Sources
A correlated and persistent myth is that increasing wind- and solar-generated electricity will reduce our dependence on foreign oil and thus boost our energy security. Less than 1% of our electricity is generated using petroleum, so any renewable generation will have no appreciable effect on petroleum demand. Activists and regulators believe that energy companies will not invest in clean reliable energy, so we need government programs to do so. This ignores the reality that energy companies are investing huge sums of money to develop cleaner and more reliable sources of energy.

The U.S. faces a 19% increase in energy demand over the next two decades. To meet that demand, U.S.-based oil and gas companies from 2000 to 2007 invested an estimated $121.3 billion on emerging energy technologies in the North American market. This expenditure represents 68% of the estimated total of $180 billion spent by U.S.-based companies. Renewable energy sources, however, will not soon replace most conventional energy sources. Despite considerable publicity on their behalf, renewables will remain a small fraction of our energy mix for the foreseeable future.

Myth: The U.S. Is a Disproportionately Large Polluter
From all sources, the U.S. consumes large amounts of energy. But does the U.S., as mythology has it, emit a disproportionate amount of the world’s greenhouse gases? It should be kept in mind that the U.S. produces a large portion of the world’s goods and services. Energy-related emissions of man-made greenhouse gases represent more than 80% of all anthropogenic emissions. Emissions and energy use are linked.

In 2008, goods and services produced in the U.S. accounted for 30% of all of the world’s production as measured by gross domestic product. In the same year, the U.S. share of global greenhouse gas emissions was only 19.3%. Richer countries are actually cleaner and healthier countries. It is the affluent society that does not want to be the effluent society, as various environmental analysts have noted.

Myth: Energy Efficiency Cuts Energy Use
Prevailing mythology also favors federal mandates for higher-mileage cars in the belief that this means less energy consumption. This ignores the reality that increased energy efficiency leads to increased energy use. In the case of vehicles, the fuel efficiency, as measured by Corporate Average Fuel Economy (CAFE), has led to increased driving, and — along with changing land-use patterns and increases in population — to increased consumption. Some hold that forcing drivers to use alternative fuels will help solve global warming. Such fuels, unfortunately, do not necessarily result in lower greenhouse gas emissions.

Fact: Increased Oil Production Can Have Green Results
Meanwhile, it is not a myth that expanding domestic oil production would reduce imports and even help improve the environment. Less than 1% of all oil found in the North American marine environment comes from offshore oil and gas development. According to the National Academy of Sciences, 60% of oil in the marine environment is the result of natural oil seepage through the ocean floor. In many places, it is even higher.

For example, all of the tar on the beaches of Santa Barbara is from natural oil seeps. Reducing oil reservoir pressure through extraction of petroleum will decrease oil pollution from natural seepage. New drilling technology, developed by private energy companies, has greatly reduced the risk of oil spills.

Seeking an Energy Policy Based on Reality

"It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so." That adage, attributed to Mark Twain, applies in particular to energy. Energy myths have consequences their advocates prefer to ignore. Policy based on myths could easily curtail our energy supply, drive up prices, and even increase pollution, all without an increase in energy security.

On the other hand, a common-sense energy policy based on facts stands the best chance of increasing our supply, lowering prices, trimming emissions, and boosting our overall energy security. If that is indeed their goal, policy makers, the media, and the public should reject energy myths and stick to the path of reality. That way alone leads to energy abundance and security for America.

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Thomas Tanton is an Environmental Fellow with the Pacific Research Institute.

Barrel of Oil Cost to Increase by End of 2009

With uncertainty in the air about the future cost of a barrel of oil, CARE contacted our good friend Michael J. Economides, a nationally energy analyst, to provide us with some foresight. As a regular contributor to national TV and radio programs and PhD petroleum engineer that has performed technical and managerial work in more than 70 countries; Dr. Economides has both the credibility and expertise to predict how much a barrel of oil will cost in months ahead. With both international political calculations and oil-producing nation's economic policies guiding the future price for a barrel of oil, things can get confusing sometimes and it takes an expert to provide clarity. Below is Dr. Economies's case that the cost of a barrel of oil will soon increase from $80 per barrel to $100 per barrel.

$80 oil on the way to $100 by the end of 2009
Oil has been flirting with $80 per barrel and from the start of this year I have been predicting $100 oil before the end of the year. Almost all other analysts were predicting $40 to $60 oil. I am not quite ready to declare that I was exactly right and they were wrong but it looks like increasingly so.

There are obvious and real underlying reasons for the escalating oil prices which we will expound upon below but news headlines have ruled the price of oil since at least 2004. There was no real rational economic reason for almost $150 oil (which for people with short memories may seem to have happened last century – it happened a year ago, July) nor was there any reason for below $40 oil, which happened right after the late last year "crises" such as the economic crisis, the credit crunch crisis etc. In fact had it not been for those events delegating oil announcements to the seventeenth page of newspapers, a report by the International Energy Agency in Paris last November, which showed that world oil production from operating wells has been declining by 9.1 percent per year, the largest ever, would have shot the oil price to over $200. In fact, even now, there is a lingering possibility that a strike by Israel on Iran may close the Straits of Hormuz and will shoot the price overnight to the stratosphere.

The headlines started in 2004 and included the Abu Ghraib photographs, which increased enormously the fear factor in the Middle East, the re-Sovietization of Russia’s oil industry following the assault on Yukos by then President Vladimir Putin and the re-nationalization of Venezuela’s oil industry by the Hugo Chavez government. That perfect storm of headlines created one of the most telling and repeatable events from 2004 to last year’s economic collapse. With escalating energy and energy product prices, every quarter ExxonMobil, the largest multinational oil company, would announce the biggest profits of any company in the history of the world and "Big Oil" would be in the mouth of many politicians in many countries as the devil-incarnate himself. And yet that very same day, mystifying to many people, their stock would plunge because in smaller letters they would announce that their oil production and reserves were declining. Shut out of reserves in some of the most prolific oil provinces of the world, such as Russia and Venezuela, international Big Oil was, and is, in trouble.

Recent hints of economic recovery and the price of the dollar are offered now as the reason for the oil price escalation. They are real reasons but they hide others. There should be no mistake: oil producing countries love $100 oil and they have little incentive to shoot themselves in the foot by increasing production. Neither the price escalation of the previous four years nor the oncoming one have anything to do with "peak oil". This will eventually happen but not for decades. Physically but not necessarily politically, the world can produce 130 million barrels of oil per day, compared to the current 85 million, but with proper investment and management and will.

Many of the oil producing and exporting nations are run by regimes that want the oil revenue not for technological and even business re-investment and long-term resource management but to affect other internal political and geopolitical aims.

Let’s look first at Russia. From 1998 and the admittedly imperfect privatizations that involved Yukos and Sibneft when the country produced 6 million barrels per day to 2005 when production escalated to more than 9.5 million barrels per day (almost 10% increase per year) Russia was the brightest spot in the international oil business. There was talk of increasing production to 12 million barrels per day which some Yukos executives touted as very realistic. Since then Russia has vegetated to about the same production and the tax regime and government control of the oil business can mean only one thing: imminent declining production and no incentive to do any of the spectacular things that Yukos and Sibneft became legendary for.

Venezuela is an even bigger factor, considering its oil dominance in the Western hemisphere. Before Hugo Chavez took office in 1999 Venezuela was producing 3.4 million barrels per day and there were concrete plans to increase that production by now to 6 million. Instead, after the massive firing of practically all petroleum professionals and the re-nationalization and expulsion of international oil companies, Venezuela is producing 2.6 million barrels per day, the lowest volume since the first nationalization in the 1970’s.

And of course Iraq, with a demonstrable ability to escalate its oil production to 6 million barrels per day has been languishing at 2 million. It may have been quieted down a bit but the sectarian violence is barely beneath the surface and the risks are still great. In a recent auction for oil blocks the interest by international oil companies was abjectly disappointing.

Saudi Arabia is the only country with excess production capacity, estimated at 2.5 million barrels per day, and this is a role that the country found itself once more, in the 1980s, when at the prompting of then US President Reagan it overproduced. The ensuing oil price collapse contributed greatly to the demise of the Soviet Union which depended on oil for almost all its foreign revenues. Russia today depends pretty much at the same level on oil and gas and Saudi Arabia has the capability, if it chooses, to bring enormous hardship on that and other oil producing countries. There is no evidence they will do so, considering it will bring huge hardship on them as well.

Finally, the signs of imminent Chinese exploding oil demand are already here. After phenomenal economic growth in the first seven years of this decade, oil demand was growing by annual double digits. A short-lived slowdown lasted for a few months after the dire headlines of last year’s economic crisis. But Chinese economic growth has bounced back to more than 8 percent. So did oil demand which just came in with vengeance. Last January and February, Chinese oil imports stood at 3.1 million barrels per day, compared to an average of 3.87 million barrels per day in 2008. But from March to June oil imports averaged over 4 million barrels per day and in July they jumped to an unprecedented 4.6 million barrels per day, close to a 20% increase over the average of 2008. (Source: China Customs, August 2009.) This level of imports inch towards the two-thirds of total demand that the United States has been experiencing.

All signs point that oil is on its way to $100 very soon and it will not stop there.

Prof. Michael J. Economides, University of Houston and also Editor-in-Chief Energy Tribune Houston, TX.

Will America Run Out of Oil?

Most Americans live hectic lives and don’t have time in their day to pay attention to news reports about “peak oil”. But would more people pay attention to the supply of oil if the price for a gallon of gas at the pump skyrocketed in the near future? You bet!

Is there an oncoming energy crisis to be caused by peak oil production? Will global oil production become stagnant due to international political strife? Will humanity experience a global oil shock by the year 2012? Our CARE blog contributor and former conference call guest Byron King from the Whiskey and Gunpowder (an investment newsletter) thinks so. While we at CARE don’t necessarily agree, or disagree, with Byron King’s viewpoint on "peak oil," he offers a noteworthy perspective on the situation. You’ll want to note that he writes from an investment perspective.

Peak at 85 Million Barrels of Oil a Day
Eighty-five million barrels a day. That’s the most that can be produced. So when recession causes a temporary decrease in world consumption, it can seem like those 85 million barrels are enough. But consumption is bound to resume its upward climb, while those 85 million barrels a day are all we get. The day of reckoning has just been delayed for a little bit.

"Can’t we get more than 85 million barrels?" some folks are bound to wonder. Let’s look into that.

Those Stubborn "Peak" Curves
This week I was in Denver, attending the 2009 conference of the Association for the Study of Peak Oil & Gas (ASPO). Despite all the happy talk in the Big Media about how the oil situation is under control, I assure you that the oil situation is NOT under control.

The market meltdown and world recession of the past year has bought some time, or stolen some time may be a better way of saying it. All the "peak" curves are still out there, but are merely adjusted a bit to the right on the timelines.

As Marine Corps Gunnery Sergeant R. Lee Ermey likes to say on the television show Mail Call, "Wipe that smile off your face." We’re staring at an energy problem that’s coming down the tracks like a runaway freight train. It’s just astonishing that more people don’t appreciate the looming impact of Peak Oil.

Meanwhile, the politicians are fooling around with the health care issue. Hmmm... I have some news for them. If you screw up energy, health care isn’t going to matter very much.

Oil Output Not Increasing
It might be a comforting thought to believe that world oil output can increase. Indeed, many policymakers in the U.S. and Europe apparently dream themselves to sleep at night pondering how the current oil volume of about 85 million barrels per day could move upward to, say, 95 million barrels per day — "if only the world oil industry were more efficient."

Yeah, right. Except the global oil industry is not that model of dreamland efficiency. Sure, there are some bright spots. The big internationals like Exxon Mobil, Chevron, BP, Shell, etc. are good. There are some really good state oil firms like Brazil’s Petrobras and Norway’s StatoilHydro. Saudi Aramco is outstanding. These guys are all doing great work to keep the world’s pipelines and tankers filled.

But much of the rest of the world’s oil industry lacks the knack for capital discipline and crisp project execution. Venezuela’s oil industry is a basket case, what with the Chavez-led nationalizations and mass firings of recent years. Output is falling in Venezuela, and this from a nation with among the largest hydrocarbon reserves anywhere in the world.

Mexico’s national firm, Pemex, is nothing but a piggy bank for the politicians, who suck most of the investment capital away from the oil patch and into their own boondoggles. Thus is Pemex walking off a cliff of underinvestment, depletion and decline. According to Matt Simmons, Pemex may not be exporting any oil at all to the U.S. within 18-24 months.

Iran’s oil industry is in a slow death spiral, despite the occasional report of Chinese assistance with field development. Apparently, there’s a "Twitter Revolution" going on in Iran that includes people at the grass roots impeding the oil industry. Well, it worked to depose the Shah back in 1979. Perhaps the Iranians can rid themselves of their mullahs in a similar way.

Next door in Iraq, chaos reigns. According to Matt Simmons, the Iraqis "are in the dark about how to run their oil industry." The Iraqi oil legislation is so burdensome that almost all players within the international energy industry are spurning Iraq, including the Chinese. Wow. When the Chinese won’t invest in your oil fields, there MUST be something wrong.

And so it goes. The bottom line is that we should expect a global oil shock by 2012, or earlier if global economic activity kicks into high gear. It should go without saying that despite any calamities that may come from such a thing, you would be very happy if you’d taken advantage of lower oil prices to stock up.

Byron King--Prior to joining Whiskey and Gunpowder, Byron received his Juris Doctor from the University of Pittsburgh School of Law, was a cum laude graduate of Harvard University, served on the staff of the Chief of Naval Operations and as a field historian with the Navy. Our resident energy and oil expert, Byron is the editor of Outstanding Investments and Energy and Scarcity Investor.

Technology and the Peak Oil Myth

What a treat it was to read this piece by Byron King. His comments about the advancements in technology echo some of those made by CARE’s Executive Director Marita Noon at the Mount Taylor hearing May 15th in Santa Fe. But Byron’s comments are based on his fresh experience examining the new technology at the Offshore Technology Conference. It is exciting to hear about the new technology that is available to add hydrocarbon resources to the ever-increasing demand. That, too, is something we’ve been saying here at CARE regarding those who argue that we are going to run out of oil. Yes, the low hanging fruit has been picked. But through advances in technology, more and more keeps be found and being more easily recoverable.

Additionally, Byron artfully addresses America’s political climate and how old fears are allowing other countries to take the lead that used to be America’s.

As Robert Bradley addressed in his CARE Conference Call in December, the more of us that draw attention to these issues, the higher the likelihood of being heard. He called it the echo effect. Thanks to Byron King for shouting from a different roof-top, the roof-top of energy investments. Maybe he will reach a different audience.

Don’t forget, Byron is the CARE Conference Call guest this week: May 27, 2009--11:00 AM ET, 10:00 AM CT, 9:00 AM MT, 8:00 AM PT. E-mail info@responsiblenergy.org to participate.

Oil Don’t Come Easy
I was in Houston this month, attending the Offshore Technology Conference. I have to confess that I’m humbled. Really, for as much as I think I know about the energy biz after a mere 30-plus years… a walk (a LONG walk, to be sure) around the packed floor of the immense Reliant Center AND the massive Reliant Stadium reveals how much I have left to learn.

In previous years, I’ve attended the OTC on my own, or as a representative of Agora Financial. This year, the American Petroleum Institute paid for my trip to Houston and to the OTC. I extend my thanks to the API. I am, of course, free to report on anything that I believe is of interest. API has NO editorial control over what I report to you. As always, I observe, follow the facts and draw my own conclusions.

Wrapping Your Brain Around the OTC
Sometimes when 70,000 people head to Reliant Stadium, it’s to watch the Houston Texans play football. The spectators understand what’s going on down on the field. In true Texas fashion, they know the rules of football. There are 22 players moving back and forth, with the rest of the two teams and coaching staffs on the sidelines. It’s something around which you can wrap your brain.

But the OTC? How do you wrap your brain around the OTC, its several thousand exhibitors and many dozens of speakers?

Do you want to know how to do seismic work on the other side of the world? How to build work ships the size of aircraft carriers? How to anchor a 75,000-ton rig in swift-moving water, while dangling a 20,000-ton riser-string that’s nearly two miles deep? How to drill oil wells 250 miles out at sea? In 9,000 feet of water? Through 14,000 feet of rock? Through 8,000 feet of salt? Into fluids with pressures of 25,000 pounds per square inch? (By comparison, your household water pressure might be about 40 psi.) Into super-heated oil filled with poisonous gases? How to move that super-heated oil to the seabed from beneath four miles of the earth’s crust? Then how to move that oil across hundreds of miles of ocean bottom, and do it in the freezing waters of the deep ocean, even at the equator and, of course up in the Arctic? Do you know how to do that?

Where does the technology come from? Who builds the equipment? How do you pay for it? Where is the work force to accomplish these tasks? What about the government policies that influence it, for better and worse? How do you make 25- and 50-year plans — yeah, it takes THAT long — in a world where prices and policies change by the month? How about the national cultures that nurture (or suppress) the whole process?

Which Battle? Which War?
Let’s look at things from the standpoint of national cultures. When I attended the Naval War College a few years ago, going through a course for senior officers, one professor said something that stuck with me: “Your job is not to fight the last battle of the last war. It’s to fight the first battle of the next war.”

“The first battle of the next war?” Damn right. Sure, you’re going to study history. Sure, you’re going to read about the last war and its last battles. But you have to understand that things change. You have to realize that everybody else is studying the last battle of the last war. So you probably have no real advantage going into the next great effort. The other guy has read the same book.

Thus, if you want to succeed, you have to get ahead of the future. You have to write a new book. It’s YOUR book. Indeed, you have to invent that future. You have to decide what you want to do, and then acquire the people and equipment to get it done.

Brazil — Gearing up for the First Battle of the Next War
Where am I going with this? Let’s look at Brazil, for example. The Brazilians are gearing up for the first battle of the next war, so to speak. They intend to survive as a prosperous, industrialized country in the 21st century, despite intense future competition across the world for energy fuels and other natural resources.

Down in Brazil, they’re in something like national rapture at the prospect of drilling up the deep pre-salt hydrocarbon plays in the offshore basins. The estimates are that the deep basins off Brazil hold between 20-100 billion barrels of oil. Maybe more.

The entire nation of Brazil, apparently, revels in the prospect of investing over $120 billion in offshore development in just the next eight years. They have a plan. It’s their moonshot. The Brazilians believe that the offshore environment will bring their industries firmly into the modern era. Brazil wants to be a world power in the 21st century. And the oil? Well, of course they have plans for that oil.

As a nation, Brazil cannot wait to move ahead into its offshore realm. Just Petrobras, the national oil company, wants 40 new drilling rigs, each over 60,000 tons; and 32 new production units, each near 100,000 tons; and about 130 large supply vessels, each over 100,000 tons.

Petrobras has plans to emplace HUNDREDS of subsea systems on the deep ocean bottom to bring that oil into production. The Brazilians will lay thousands of miles of underwater pipeline, with all the associated ship-support and other equipment that entails.

The Brazilians are not living in the frozen past. They’re not hostage to paralyzing myths. The Brazilians envision a future for their nation, and they’re acting on it. They see hundreds of deep-water oil wells pulling petroleum out of the crust from many miles down and piping it ashore to their refineries and industries. Indeed, Brazil plans to win that first battle of the next war. And it’s cutting the steel with which to do it.

Meanwhile, Back in the US of A…
Meanwhile in the U.S., the policy battles rage endlessly over offshore development. Authorize? Don’t authorize. Explore? Don’t explore. Lease? Don’t lease. Drill? Don’t drill. Produce? Don’t produce.

Whenever the proponents of offshore development score a win, the opponents take it all to federal court for years on end. Years later, some judge makes a decision. Then comes the inevitable appeal. And then everyone goes back to litigate some more after the appeal. There’s no end. I’ve spent my adult life watching this ping-pong match play out.

What’s at the heart of the issue? A broken political process. Or you might call it a political “process” that works too well. Really, it seems that much of the U.S. energy mind-set is stuck firmly in the past. In essence, the debate is over how to fight the last battle of the last war.

Living in a 40-Year-Old Past
For example, again and again, the opponents of offshore development in the U.S. summon up their favorite bete noir — the images of the Santa Barbara oil spill of 1969. An event from four decades ago — before most Americans now living were even born — has become the iconic reason not to develop, say, offshore California. And this is despite the fact that the exploration, drilling and environmental technology of today is far advanced from what existed 40 years ago.

Think about it. Do you have a better computer today than 40 years ago — if you even used computers back then? A better television? A better car? Are there better airliners? Better heart transplants? You get the idea. But some people learn something and never let it go.

Along those lines, the other day, I visited the facilities of Cameron Intl., here in Houston. Cameron makes blowout preventers for deep-sea drilling, and a large host of other drilling-related equipment. Having been around the oil industry for over 30 years now, I can say that the new technology for safe drilling is beyond astonishing. Just the quality control alone is awesome. For example, EVERY HEAT of steel that goes into certain of Cameron’s subsea products goes through a rigorous quality-assurance check. Every heat.

Meanwhile, it’s not just California where the offshore is off-limits. Most of the rest of the U.S. offshore is locked up as well, except the western Gulf of Mexico and (grudgingly) some of northern Alaska. As one wag has put it, when it comes to offshore development, much of the U.S. political class is living in “The No Zone.”


The Future Is Right Now
But the last battle of the last war — the Battle of Santa Barbara — is over. The images of oil on the beaches led the U.S. to shut down much of its offshore drilling effort, and for many decades. Meanwhile, the mess got cleaned up. It’s history. The energy industry figured out what happened and fixed a lot of problems. Now where do we go? Because you have to go somewhere, sometime. You can’t live in the past — at least not for too long. Or can you? Well, you can try to live in the Good Old Days, but eventually, the future will overtake you. And in the world of energy, the future is right now.

Welcome to the Future
A year ago, the price of oil was $120 per barrel and rising. Indeed, by last July, the price was $147 per barrel. And when that happened, you might recall that the world economy didn’t work very well. It was oil prices; it was bad banks; it was a lot of things that went wrong. And then the economy cratered. That took down the oil price. So now the price of oil is in the $50s.

Look back. How did oil ever reach $147 per barrel? Was there really not enough to go around? That’s what some people thought. But then why did the price suddenly tumble, if not just plain drop off a cliff? Did people anticipate a demand crash? Again, that’s what other people thought.

Now we have oil in the $50s. What does that mean? With oil in the $50s, does it mean that the world has “too much” oil? Or not enough? Well, what’s your time frame? A day? A week? A month? A year? Five years? Fifteen years?

With oil in the $50s, yes there will probably be adequate supplies for the next few months. You can calm down. The oil you’ll burn in September is being loaded onboard distant tankers right now.

But with oil in the $50s, will there be adequate oil supplies in, say, 2012, if not 2020? I doubt it. At least not for the U.S. Because with oil in the $50s, some of that 2012 oil — and much of that 2020 oil — won’t see the light of day. There’s just not enough cash flow for the energy business to do its thing — like drill enough wells. Hey, the future is now.

Future oil production requires current exploration and development. Except we’re not drilling. We’re not developing. So welcome to the future. With oil in the $50s, it’s a no-brainer to predict future shortages.

For Now, Keep Drilling
One thing is certain. If the energy industry does not stay focused and capitalized, we’re in a lot of trouble — and I mean sooner, rather than later. That’s why a big trade show like the OTC is so important. The OTC embodies the new developments in offshore technology. It gets right into your face.

Almost every booth at OTC has some item on display that’s better than what used to be on display. Yesterday, for example, I saw a remarkable new invention from FMC Technologies that dramatically improves the safety and efficiency of the “fracturing” process (“frac-ing”) by opening up shale beds to yield natural gas. It’s what the late efficiency guru Edward Deming would have called an “incremental improvement” to an existing process. But it’s brilliant and elegant. And when this new equipment goes into widespread use, it will offer a dramatic improvement.

Ideas and improvements like this from FMC Technologies — and countless more on display at the OTC — will allow the energy industry to keep providing hydrocarbon molecules to us earthlings for as long as we want to burn them. (Burn them? That’s another story entirely.)

The OTC shows off what the U.S. has at its disposal, if it chooses to develop its offshore energy resources. Here are the tools with which to fight the first battle of the next war.

And the OTC also shines a light on how many U.S. policymakers and opinion leaders are living in the past, patting themselves on the back as they fight that last battle of the last war. Meanwhile the energy clock is running down, and other nations and cultures are shopping their wares.

Prior to joining Whiskey and Gunpowder, Byron received his Juris Doctor from the University of Pittsburgh School of Law, was a cum laude graduate of Harvard University, served on the staff of the Chief of Naval Operations and as a field historian with the Navy. Our resident energy and oil expert, Byron is the editor of Outstanding Investments and Energy and Scarcity Investor.

American Energy: A Cure for the Recession?

Forty years ago this month, a well blowout in the Santa Barbara Channel forever changed the way America looks at oil--and launched the anti-oil environmental movement.

The blowout was the only accident in over 45,000 US offshore wells where significant amounts of oil reached our coasts. The other good news is that the environmental impacts were temporary, and the accident initiated enormous advances in blowout prevention rules and technologies. The bad news is that the spill resulted in leasing and drilling bans that continue to this day, locking up an estimated 85% of our nation’s offshore oil and gas prospects, costing the United States billions in lost lease, royalty and tax revenues, and forcing us to import far more oil than would be necessary if we adopted more sensible energy policies.

Here frequent contributor Paul Dreissen analyzes the accident, discusses the aftermath, and offers policy prescriptions. His comments are from the perspective of someone who actually worked for the federal agency that regulates offshore oil and gas programs … and is one of a handful of people who has actually been scuba diving under the very platform where the infamous blowout occurred.

Paul's comments echo similar insights from some of the opinion editorials written by CARE's Executive Director Marita Noon that have been published in newspapers and online commentary sites nationwide.

Petroleum Production Bans Cost Us Billions That Could Pay For Stimulus Plans And Renewables
Plummeting stock and housing prices have triggered a painful recession, America’s worst job losses since 1945, and trillions in lost national wealth.

California is grappling with a $42-billion budget deficit. That’s more than the GDP of 112 countries. Maryland, Virginia, New York and other states likewise face billion-dollar budget shortfalls.

Congress and the White House want a $1-trillion “stimulus” for the banking, auto and steel industries, roads, bridges and ports, and “worthy” projects like water parks, parking garages and fitness centers.

They also support expanded renewable energy programs that will require tens of billions in subsidies and tax breaks – but provide intermittent electricity and deliver only 5-15% of their “rated capacity” during peak summer demand periods.

Many states have oil, gas, coal, uranium, and other energy and mineral resources, within their borders or off their coasts. Development would produce critically needed energy, reduce oil and gas imports, create millions of jobs, buttress our national security, and generate trillions of dollars in lease bonus, rent, royalty and tax revenues, to help pay these bills.

California could nearly double its offshore oil production within 12-18 months, without installing a single new platform, by using directional drilling technology to bore more wells from existing platforms.

But environmentalists vigorously oppose development. Many states increasingly restrict exploration and production. The US Senate is considering bills that would place more energy prospects off limits. Many legislators want a permanent lock on billions of barrels of oil beneath Alaska’s North Slope and America’s Outer Continental Shelf--despite support for drilling by two-thirds of voters.

Onshore, the usual justification is speculative or exaggerated impacts on wildlife, habitats and groundwater from drilling and production. Offshore, the most common rationale is the infamous oil blowout that occurred forty years ago this month, off Santa Barbara.

That spill is the only one in over 45,000 US offshore wells where significant amounts of oil reached our coasts. And it never would have happened, if it weren’t for the incompetence of a few federal regulators and oil company officials.

The guilty well was being drilled into brittle, highly fractured rock formations which sit atop a more stable zone that holds billions of gallons of gooey crude oil, mixed with natural gas under high pressure. It’s the same oil that’s been seeping out of the shallow formations and washing up on California beaches since long before Spanish explorers used it to waterproof their galleons.

But having drilled several wells without incident, company officials requested a waiver from normal regulations. Unbelievably, it was granted. The drill crew was allowed to install minimal well casing – steel pipes that go into well bores to prevent blowouts.

When oil and gas began to erupt out of the deep drill hole, the crew’s quick response stopped it only temporarily. Because the casing didn’t go deep enough, the pressurized goo surged into the brittle rocks, creating huge gashes that sent gushers of oil out around the platform. For six days, favorable winds kept the oil slick offshore. Then the wind shifted.

Oil inundated Santa Barbara’s gorgeous beaches. Thousands of sea birds died, along with seals and countless other marine animals. The anti-oil environmental movement was born.

Thankfully, dire predictions of permanent damage were wrong. Bird, crab, lobster, seal and other populations soon rebounded. Under the platform, the magnificent artificial reef ecosystem returned.

Enormous mussels, scallops and barnacles again cover the huge scaffold that holds the production platform above the waves. Gorging on shellfish, and having to move mere inches for their next meal, starfish grow to three feet across. Oriental carpets of white, pink and lavender sponges and sea anemones create firework displays of color, while crabs scamper about and thousands of mackerel, sardines and other fish cruise by.

I know this, because I’ve been there, up close and in person, in scuba gear, beneath that very platform and a dozen others in the Santa Barbara Channel and Gulf of Mexico. I joined biologists, wrote professional papers, and produced a documentary film about these towering steel reefs.

Even more important, the technologies, regulations and enforcement programs have changed. Today, instruments monitor temperature and pressure in wells 24/7. Blowout preventers, pipeline shutoff valves and other devices on or beneath the sea floor control the flow of oil and gas. Offshore operators conduct regular accident training and safety exercises. The efforts have paid off.

In 2005, Hurricanes Katrina and Rita pounded the Gulf of Mexico’s 3,000 drilling rigs and production platforms. Over 200 were damaged or destroyed. But virtually no oil or gas escaped.

In fact, according to the US Minerals Management Service (where I used to work), oil companies produced nearly 12 billion barrels of oil from OCS leases between 1980 and 2007. Only 102,000 barrels were spilled: 3,780 barrels a year, on average. That’s a 99.999% safety record.

By contrast, natural seeps like the ones off California leak 620,000 barrels of oil per year into US waters. America’s oil industry has a pollution record 164 times better than Mother Nature’s!

And producing more US offshore oil has an added bonus. It means there is less seepage, and thus less oil in our oceans and on our beaches.

Our energy policies should recognize these facts.

America has been held hostage far too long by anti-oil ideologues and foreign “oiligarchs.”

Keeping our vast resources off limits won’t convince consumers to slash petroleum use. We will just import more, and be ever more indebted to foreign powers. (At $50 per barrel, imported oil costs the United States $235 billion per year; at $140 per barrel, we send $650 billion annually overseas.)

Oil prices are low at the moment, because world demand is down, due to the global recession. We could keep them down, by prolonging the recession – an unpalatable option. Or we can help keep prices at tolerable levels, by developing the domestic oil and gas that we have in abundance, but politicians, courts and greens for too long have told us we can’t touch.

We need the energy, jobs and revenues that offshore (and onshore) oil and gas development can provide. We can no longer afford to “just say no” to domestic petroleum, during the long transition to future energy technologies that we cannot begin to envision – any more than even Jules Verne could have foreseen the wondrous energy and other technologies that creative minds have made a reality today.

That’s the kind of change we can believe in. The kind America needs.

Paul Driessen is senior policy advisor for the Congress of Racial Equality and Committee For A Constructive Tomorrow, and author of Eco-Imperialism: Green power ∙ Black death.

Speculators: The Scapegoats For Our Energy Concerns

Everyone is looking for someone to blame for the current energy crisis. Surely there is one single entity that is causing all of us to suffer—a mastermind like in an Austin Powers movie. This is at least what some members of our Congress believe. Oil speculators have become the villains in this tragic tale.

It has been awhile since we’ve featured the insights of Byron King from Agora Financial--he is one of the contributors to their Whiskey and Gunpowder Newsletter. (If you enjoy this posting, please check out Byron's previous posting on CARE's Blog.) But we at CARE have been looking for some good commentary on the “speculators.” You can expect some more interesting posting on this topic as we are on the lookout for them. While oil speculation certainly is an important and influential area of our economy, Byron doesn’t think these speculators should not be painted with the brush they have been. Do you think speculation is to blame, or could there be other reasons for the tremendous price-rise?

It’s the Energy, Stupid
With the price of oil doubling in the past year, there are more fingers being pointed than solutions being offered. Unfortunately, one of the biggest “culprits” garnering much of the blame has been the oil speculators. Congress has decided to make them the scapegoat for our energy concerns, and unfortunately many under-educated members of the public are beginning to lap it up.

Speculators are speculating because there is something about which to speculate. (Let me thank my sixth-grade English instructor for teaching me how to compose that sentence.)

Remember when oil ran up back in 1979 and 1980, when the entire Iranian oil industry collapsed in the wake of Ayatollah Khomeini’s Islamic Revolution? About five million barrels of oil per day simply left the world marketplace. It was gone — poof! Not there. No tankers.

Even though five million barrels went away, people could still look to places like the North Sea, Alaska, Angola and elsewhere. And they could feel certain that sooner or later, there would be future oil supplies flowing down the pipelines.

But that’s not the case today. When people look ahead now, they don’t see from where the oil of the future will come. Most of the world’s current large oil fields are in decline.

As for the so-called oil speculators, they are just defending the value of their money. They are looking forward a few years. What do they see? All of the current energy development projects will just barely replace the oil that will NOT be coming from declining oil fields. So peering ahead, there’s no net increase in future oil output. We’re looking at a plateau in output, if not the backside of the Peak Oil curve.

But we are looking at growing energy demand, as well as demand for other resources. So investors have placed hundreds of billions of dollars into energy and other commodity funds during the past two years. They are both hedging against dollar inflation and anticipating future supply shortfalls.

Long term, this is great news for one of my Outstanding Investments recommendations, a Canadian tar sands company. This company is facing higher capital costs, as well as higher costs for inputs like natural gas. And it suffers from a raw political bias (suicidal, in my view) against synthetic crude oil because of the carbon dioxide emissions.

Along those lines, some politicians in the U.S. want to renegotiate the North American Free Trade Agreement (NAFTA) that includes Canada. Word to the wise: Don’t go there!

Really, if the U.S. renegotiates NAFTA with the Canadians, our friends to the north will have some surprises in store. The U.S. will rue the day that it tore up NAFTA with the Canadians, because that will just plain shut off many of the valves on a lot of pipelines.

Seriously, the Canadians have eager buyers for their energy resources, and they don’t need us Yankees. Just keep in mind that downstream, people will demand oil, and companies that have it will make money.

Getting back speculation, those “speculators” are not the problem. Speculators are sending a message that policymakers had better heed. American politicians better get serious about finding pathways through the “energy issue.”

Although I do have political opinions, I try to keep them private, especially careful not to hurt the feelings of any of my readers.

But that does not mean that I don’t have opinions within areas of my own expertise. If you are reading this, you must know that oil prices have doubled in the past year. There are profound supply issues looking forward. (I’ve been writing about Peak Oil and related issues for Agora Financial for four years.) And world demand is still rising, despite the very slight pullback in U.S. oil usage in the first half of 2008.

Whoever wins the race had better be ready to think in terms of energy. And I mean from day one.

Energy is not just “another issue.” It’s not as if a politician could “do energy” and then move onto other important items on the agenda — like appointing your friends federal judges and handing your political donors prestigious ambassadorships.

Energy will be the defining issue of the next president’s term of office. This is already baked into the cake. Nothing will change it, short of a major war. And even fighting a major war will be controlled by the energy issue (as was World War II, by the way — another long story). The U.S. won’t go to war over most things. But we’ll fight over energy. Or where have you been?

Every U.S. president has had something associated with his term of office. It might be good. It might be bad. But it’s the shorthand way in which we remember the guy. When I think of Lyndon Johnson, I think of the Vietnam War. When I think of Richard Nixon, I think of Watergate. When I think of Ronald Reagan, I think of him meeting with Gorbachev and winding down the Cold War.

The next president’s big issue is already on the table. It’s energy. It has been decided. The gods and fates have so dictated. Everything else is window dressing. Everything else is just the White House Easter egg hunt. Nothing else will control the outcome of the next president’s term of office. Energy, that’s it.

Energy. Take it or leave it. Except you can’t leave it. The nation needs to get energy right. We can have energy supplies for the economy. Or we can just decide to wind down the 232-year-old experiment called the United States of America. We can hop, skip and jump into James Howard Kunstler’s The Long Emergency. It’s that stark.

Here is the slogan for the next White House Situation Room: “It’s the energy, stupid.” Practice is over. It’s game day. It’s time to suit up and play. What’s your plan?

And we can’t just do 20 more years of energy research. Really, suppose that nobody ever filed another patent for a new and better invention in the field of energy. We could spend the next century just rewiring the nation based on what we already know how to do. The future is one of systems engineering. The future is all about taking the ideas and technology that’s already out there. Bring them down off the shelf and make them work to run the country.

So if the next president-elect is not ready to tackle the energy issues of this nation, he just ought to stay home on Inauguration Day. Don’t waste our time.

Byron King is editor of Outstanding Investments, a publication of Agora Financial, LLP. He studied geology at Harvard, where he graduated with honors. He also holds advanced degrees from the University of Pittsburgh and the U.S. Naval War College.

Barriers to Oil and Gas Supply

CARE’s primary mandate is to educate the public in energy and energy related issues. True, many of our website and blog visitors are from various segments of the energy industry who understand the intricacies of energy production. But, we hope that we also have readers from the regular population--the citizens for whom we advocate. This posting is for those who know little more about energy than how to put gas in the car or flip the switch on the wall. Here, in a simplistic overview--using an analogy we can all grasp, CARE Member George Sharpe offers an inside look at what is happening in the oil and gas business. If you are in the energy business, we think you’ll want to bookmark this page so you can send your friends and family members who don’t get it.

Killing the Sacred Cow

I'm going to tell you a story... one I hope will tell the whole story. It's a cow story, which is kind of weird, because I'm no cowboy. I'm the Investment Manager for Merrion Oil and Gas. My group puts Merrion's cash flow back in the ground trying to replace our production. In a time when record profits are being reported for the oil and gas industry, that might seem like a cushy position. In fact, it has never been more difficult.

Merrion Oil & Gas is like a mom and pop grocery store selling milk to the thirsty villagers. Because the masses in India and China have recently acquired a taste for milk, prices have shot up worldwide. Suddenly, the milk on our shelves is selling for twice as much as a year ago. Things are good, right?

The problem is, if we want to stay in business, we have to replace the milk the villagers are buying. But competition in the acquisition market is fierce, and the price of used cows has more than doubled. All the costs of a dairy farm have doubled as well, from leasing the land to cow feed to fence posts. And it is becoming extremely difficult to find places to put the cows. As much as people like their milk, darn it, they just don't want a cow in their back yard, or offshore, or even in the vast tundra of Alaska. Some milk drinkers don't want cows anywhere, anytime. I'm not sure where they think their milk comes from.

The regulators have jumped into the south forty with both feet. It now takes a year to get a cow permit. And there are many new rules in place as to how to have cow babies, what to feed them, and how to contain and monitor cow pies, and on and on. All of this drives the cost of producing milk through the roof. The bottom line is, our little grocery store is certainly making more money, but most of it is going back into the cost of keeping our shelves stocked.

Let's talk about the cow pies for a minute. Cows have been churning grass into meadow muffins for millions of years. It is still grass, just more compact, and at certain West Texas county fairs, more aerodynamic. But somewhere in New Mexico, a handful of the thousands and thousands of cow pies dropped in a stream. The answer? Now every cow must wear a diaper. They call it closed-poop milking. And we collect all these dirty diapers, put them into hundreds of air polluting trucks, and haul them off to be forever stored together at one site, where collectively they really might cause a stink. And that helps the environment how? It's udder nonsense.

Anti-cow advocates say that the milk industry is raking in the money, and can certainly afford to pay for whatever measures are asked, regardless of the cost. That may be true for the farmer raising big fat cows, but don't kid yourself, a lot of skinny little cows aren't going to make it. And that reduces the overall milk supply and increases the costs of the milk from the fat cows, which consumers will eventually pay for.

It is time to shift the story over to the mirror. Time to take a good hard look at ourselves... the milk drinkers. Man, we love milk. We like wearing the husky overalls, not some twinky pair of knickers. We Americans drink 3.9 gallons of milk per day each, while the Europeans drink only 1.2 gallons and the world averages less than a half gallon per day. The real environmental threat comes not from the cows, but from the gas we get when we consume all that milk, eh? We can and should start drinking more tea. The problem is, the kind of tea we need costs a lot, is hard to store, only grows when the sun is shining or the wind is blowing, takes up an incredible amount of land, and at this point, isn't an efficient source of nutrition. Nothing is easy.

Okay, my cow story is getting old. Time to moo-ve on. Let me summarize my points:
First, the high oil and gas prices are not set by the oil companies... they are driven by supply and demand. Second, there are more and more barriers to maintaining the supply. Many of the barriers have very little real environmental benefit, and only serve to drive up costs, which have been driven up already by their own supply and demand curve. The headlines are all about Exxon's record profits, not about the billions they are spending annually to keep their Superstore stocked for the masses. Finally, it is time to address the demand side of the equation. Reducing our demand will do far more towards bringing energy prices down (and helping the environment) than anything we can realistically do on the supply side. And as long as we demand it, industry will try to find a way to supply it. So don't kill the cow. It's just there because we want milk.


George Sharpe
Investment Manager - Merrion Oil & Gas

What is the Truth about the Federal Leases and Oil Production?

Rep. Rahall is calling for “Use it or Lose it” legislation that would fine oil and gas companies for not developing the leases they hold on federal lands. Perhaps you have heard the Democrats saying the oil and gas companies have leased 68 million acres for drilling and exploration but have done neither. Here at CARE a question came in asking for the truth. Please read the response from one of our energy counsel members, Paul Driessen--a geologist well versed in petroleum exploration.

Permit or Pay
The Democrats have been alternating between claims that these federal lands leased to oil and gas companies leases are either not producing or have not been “explored,” which in their minds means drilled. From my perspective, their claims amount to either inexcusably gross ignorance and incompetence on the part of these senators and congressmen, or a complete fraud on the American people in furtherance of an anti-oil, higher energy prices agenda.

The reality is hardly as sexy as their sound bites, but boils down to sound corporate and financial management, where millions of dollars are at stake. An apt analogy might be buying a new home when you are being transferred to a new city. One doesn’t just buy a place sight unseen, or buy several and later decide which one you like best, or send a broker out with no guidelines as to price, style or neighborhood, or pay no attention to loan terms and conditions. Senators Bingaman and Schumer, Congressmen Rahall and Pelosi might do so--judging from the way they want the oil companies to proceed with leasing, exploration, drilling and production--but I wouldn’t. (And for them to be in charge of the committees and legislatures that are in charge of our energy policies is really downright scary.)

Just buying a lease these days costs huge amounts of money--and that is always somewhat akin to going for what’s behind the curtain. Based on theory of where oil might be on a particular piece of land, geologic maps, nearby exploration and production work, and other data accumulated companies bid on the lease. Then they have to do seismic work, magnetic studies, 3-D mapping and other preliminary analysis. All this costs a lot of money--but has to be done before you spend a million dollars (to 10 or 20 million offshore) to drill a well. Just renting a drilling rig these days costs a ton of money--and if your lease is offshore, especially in deep water, you’re talking many millions to rent a drill ship. If you don’t do your homework before you spend that kind of money, you’re guilty of gross mismanagement.

Of course, even if you get lucky and discover oil, you still need more (expensive) wells to determine whether there are commercial quantities--and then have to build (expensive) pipelines and other facilities to get the oil to market.

Of course, every one of these steps requires permits from the federal government--and that means longwinded permit applications and approval processes. These procedures include environmental and cultural impact studies, and environmental protests and legal actions almost every step of the way over endangered species, habitats, nesting and breeding areas, and these days global warming (as though only oil produced in the USA causes catastrophic climate change, but not imported oil to replace the oil we can’t produce here in the US, because most of our energy prospects have been locked up by congressional, executive and judicial fiat, or by endless environmental protests and legal actions).

It’s strange that the Democrats haven’t mentioned any of this in their impassioned floor speeches.

My view is that--instead of some kind of bogus “pay more every month if you’re not drilling or producing” legislation--what we really need is “permit or pay” legislation. If the bureaucrats don’t issue the necessary permits, or if courts put applications and leases in limbo, the government has to pay the companies, on an escalating scale, for the time their leases, seismic permits, drilling permits, production and pipeline permits, and money are tied up in the approval or litigation process. That would really result in rapid drilling, rapid production and lower oil and gas prices.

It would be so much nicer if we would all start pulling together on producing more energy here in America, enabling consumers to pay less, and safeguarding the energy and economic civil rights of poor and minority citizens.

For more on this topic: Sen. Bingaman out of step on energy needs

Paul Driessen is author of Eco-Imperialism: Green power ∙ Black death (http://www.eco-imperialism.com/) and senior policy advisor for the Congress of Racial Equality and Center for the Defense of Free Enterprise, whose new book (Freezing in the Dark) reveals how environmental pressure groups raise money and promote policies that restrict energy development and hurt poor families.

Big Oil and the House Select Committee on Energy Independence and Global Warming

If you have been a regular reader of our Comments About Responsible Energy, you know that one of our big concerns is the impact seemingly altruistic initiatives regarding energy and global warming have on the unsuspecting consumers—the citizens who make up much of our membership. Last week the House Select Committee made much ado about bringing the CEO’s from the major oil companies to Washington to research the high gasoline prices. While all their posturing is made to look like they are doing something for the citizens, they may, in fact, do more harm than good. Note the comment about increased production costs raising the price at the pump.

With this insightful posting, we introduce you to a new voice. We believe you’ll want to hear more from his experience! Let us know what you think.

Massachusetts Congressman Ed Markey wants some answers from “Big Oil.” He had five oil company CEOs in front of his House Select Committee on Energy Independence and Global Warming, grilling them on high prices and high profits. Markey said, “This is not an April’s fools joke on Big Oil, because the prices at the pump are no laughing matter.”

He’s right. It’s not a joke on the oil companies.

The joke is on us.

Markey wants to revise the tax structure on U.S. oil producers, increasing their tax burden by some $18 billion. Of course, as Rep. Markey should know, increasing these taxes will simply increase production costs and further raise the pump prices that he’s so concerned about. It will make oil exploration in the U.S. even less competitive and force American companies to do more work overseas, further increasing our reliance on other countries.

All in all, a poorly thought out strategy from someone in charge of a committee with “Energy Independence” in the name.

Oil and natural gas companies don’t make any more on their investment than a lot of other industries. In fact, percentage-wise, they’re only around average.

Energy companies make big profits when prices are high, like they are at present. But in good times and bad, they must invest gigantic sums of money in exploration, production and infrastructure.

They’ve sunk $1.25 trillion into energy production since 1992 and it’s estimated that $6 trillion more will be needed to meet global demand over the next twenty years. If high taxes diminish oil company profits and discourage investors, where does the money for development come from?

As Exxon Mobil Senior VP Stephen Simon told Congress, "Imposing punitive taxes on American companies will discourage the investments needed to safeguard our energy security. The pursuit of alternative fuels must not detract from investments in oil and gas."

He’s right. Developing alternative fuels is smart. Diminishing our supply of traditional fuels in the process is not. Markey needs to rethink his agenda.

Jack Rafuse is the principal of Rafuse Consulting, and a former energy policy advisor for the Nixon Administration in the Office of Management and Budget and the Federal Energy Administration. Rafuse had previously worked at the Navy Department and the Center for Naval Analyses. He subsequently worked for Union Oil of California (Unocal), an international oil and gas company. Currently, Rafuse is an independent consultant on energy and trade. His areas of expertise are Global Energy Trade and Supply, and Energy Regulation and Policy. For more information, visit jackrafuse.com.

Comments on the State of the 2008 Union Address

One year ago, CARE’s Blog was launched when we asked various energy experts for comments on the 2007 State of the Union Address. We’d planned to use the comments received as an article for CARE’s Newsletter—and we did. But they also seemed to perfectly fit the vision we had for the Blog, so it was started ahead of schedule. Since then it regularly has visitors from an average of 12 different countries each month.

In celebration of this anniversary, we again asked our Energy Counsel for their comments. Below you will find their responses:

“It was a little disappointing to hear the President pander to alarmists on the subject of carbon dioxide. Despite the huge effort those people have made to present anthropogenic global warming as ‘settled science,’ the inconvenient truth remains that the scientific foundations of the hypothesis are very shaky indeed. There are serious grounds for doubt that human-caused carbon dioxide emissions are a problem. On the other hand, there is no doubt at all that efforts to reduce those emissions will be very expensive, and will divert our limited resources from other things which are much more important—such as education & health care.

It was also disappointing to hear the President once more making offhand remarks about reducing US dependence on oil. This is not a simple subject. It would have been better to say nothing than to make statements which could be misconstrued.

In the long run, there is no doubt that the US (and the world) will have to adjust to declining supplies of oil as we approach the finite limits of resources. However, in the next few decades, the world needs oil exporting countries to invest very large amounts of capital into oil field developments to ensure that oil supplies do not decline precipitously. European nations have foolishly been sending a very dangerous message to oil exporters by claiming that they intend to reduce their carbon output dramatically or even totally. Why should an oil exporting country invest $Billions to produce oil that customers say they won't use? It would be very easy to end up with a premature major shortfall in oil supplies, decades before the required infrastructure has been built to make modern society possible in a post-oil world.

It would have been better for the President to have criticized the Europeans for their dangerous shortsightedness, and instead to have reminded us that we all live in an inter-connected world. The oil exporters are as ‘addicted’ to the food & manufactured goods they import from us as we are to the oil we import from them.”

Gavin Longmuir

“I don't think I have missed a state of the union address in 25 years. I am a political junkie. Even when I lived in foreign countries I tried to tune in by TV or radio. I even bought cable in a country just so I could see it. But I did not see the one this week. This president has become the lamest of the lame ducks. Could he possibly say anything of consequence?”

Michael Econmides

Pollution Tariffs

Here we are at the end of this informative and entertaining four-part series. If you are just dropping in today, we encourage you to go back and read the first three parts. You’ll find, the author Jim Amrhein has quite a wry sense of humor in which we wraps the key issues—making them an interesting read.

We wish to draw your attention to two specific points the author makes in this installment. First, the element of from where disastrous spills come, and second, the length of time it takes to get a new energy source up and running. If you disagree--or agree--with his view point, we encourage you to voice your opinion here.

To trim the length of this posting, we cut all of the author’s comments regarding the e-mails he has received in response to this series. (Remember, the original postings occured over a period of several weeks.) If you have been enjoying these postings, we suggest you go to the original site of the source and read the full version of this posting (there you will also finds the charts and maps referred to in these postings). Better yet, subscribe to the free newsletter: Whiskey and Gunpowder, so you do not miss out on any future wit and wisdom.

With his e-mails in mind, we wish to share one such comment with you before you read on. “Thanks also to the gas/coal energy industry executive who wrote to me from China to report on the horrific environmental conditions there — and to give first-hand validation of my assertion that China’s energy costs are so cheap in large part because of lax enviro-regulation…”

Now to the conclusion!"

Carbo-geddon, the Conclusion
“What we’ve got here is failure to communicate. Some men, you just can’t reach…”
— Strother Martin, as “The Captain,” in Cool Hand Luke, 1967

The entire premise of this series is the supposition that the current trend of global warming IS caused by smokestacks and tailpipes — but that America is still doing the wrong thing by planet Earth with its carbon policies. Yet every time I write one of these pieces, I’m astounded by the percentage of mail I get from people wanting to contest man-caused global warming theory (as though I need to be persuaded that it’s bunk). I feel like I’m in Cool Hand Luke. I’m simply failing to communicate that what’s true doesn’t matter — only what people can be made to believe.

And the tragic, ironic bottom line is that in this day and age, any assertion about global warming can ONLY gain an audience if it’s compatible with the flawed assumptions that govern the dialogue. I realized a long time ago that trying to educate or challenge the global warming hysterics with things like facts and logic was a futile errand. The issue has simply become too symbiotic to America’s media-fueled collective guilt at being the most powerful and prosperous nation in the world…

However, I do want to point out one grand hypocrisy inherent to the America-bashers on the global warming battlefront: Critics of U.S. fossil-fuel policies claim that they’re taking a more balanced global view by calling for reduced American consumption. They say that we’re egocentric and arrogant for using as much oil as we do. However, these ignorant gadflies are JUST as arrogant and egocentric themselves for trumpeting that America alone has the power to eliminate (or even to reduce) global warming by curbing its consumption. It’s nothing but typical top-down American empire-think to believe that other nations’ contributions to atmospheric CO2 are insignificant compared to ours, that they’ll follow our lead — or that somehow, magically, they won’t scoop up and burn every barrel of oil we don’t.

As I’ve spent the last month attempting to prove, this is flatly contrary to the facts. In the very nearly zero-sum world oil supply scenario, the cleanest atmosphere results when the more environmentally conscious nations burn the MOST oil, not the LEAST. I don’t understand why I have to reiterate this simple point…

Oh, and one more note to the few critics who wrote in about the first three parts of this series: If you honestly think that a barrel of oil or pound of coal consumed in one part of the world results in the same release of GHG as in another, you really must have your head examined.

Do you actually think that power plants, refineries, cars, trucks, etc. in places like China, Korea, the Russian Federation, the Middle East and Africa are designed, built and held to the same stringent (and ever-tightening) emissions specs that they are in places that are closer to the environmentally responsible end of the spectrum — like Japan, the U.S., Germany, and France? If this were true, nations’ greenhouse gas output would precisely mirror their fossil fuel consumption in barrels-of-oil equivalent. Yet as anyone who can read a cartogram or data from the Pew Center on Global Climate Change will attest, this is not even remotely the case.

But enough volleys back at my critics. After all, some men (and women) you just can’t reach. Right now, I want to examine some of the things I think are driving U.S. energy policy…

Global Warming, Inc.
As populist and conspiratorial as this may seem, I really do believe that America’s petroleum policy has been shaped in large part by the avarice and selfishness of a few. Lately, this assertion is made flesh in the form of the world’s greatest global warming profiteer: Al Gore, Inc.

Despite his reception of the Nobel Peace Prize and incessant fawning praise from the mainstream media, the fact remains that before adopting climate change as his cause celebre`, Al Gore was nothing more than your run-of-the-mill American career politician whose run was over. And with only a degree in Government to fall back on after the 2000 election, he desperately needed a new gig…

This isn’t to say that Gore hasn’t been consistently at the vanguard of the climate-change issue since it first came on the scene, or rather, since he first forced it there. Indeed, this may be the only constant thread of rhetoric, and perhaps belief (you’ll see what I mean in a minute), in his political life. Gore held Congressional hearings on CO2 and climate change in the late 1970s and again in the ‘80s, wrote numerous articles and editorials on the subject, published 1992’s Earth in the Balance — and of course, starred in 2006’s hugely successful “documentary” on climate change, An Inconvenient Truth, for which he also wrote a companion book in that same year.

However, I maintain that it’s easy to “believe” in something that’s profitable — either in terms of political image or in monetary terms. For me, the proof is in whether someone walks like he talks. You decide if The Reverend of Gaia (Gore actually attended divinity school in the early ‘70s) is “living the word” or just profiting from it:

* According to BusinessWeek and other sources, Al Gore’s 20-room, 8-bath Nashville mansion drained more electricity from the grid per month than 20 average American households combined in 2006 — the same year his book and “documentary” called on Americans to conserve electricity. This represents an increase in consumption of 13.5% over the previous year.
* Not ashamed enough at merely over-consuming electricity, habitants of Gore’s home and guesthouse sucked an average of nearly $1,100 a month worth of natural gas in 2006.
* Instead of walking to save greenhouse gases, Gore and his entourage drove five cars the roughly 500 yards from his hotel to the screening of An Inconvenient Truth at the Cannes Film Festival.

Aside from this kind of hypocrisy, Gore has leveraged his pet cause to morph himself from a public servant who, according to Newsweek, barely made the millionaire list on paper in 2000 into a “green” consulting juggernaut now worth an estimated $100 million or more. Consider also:

* Gore claims to offset his mammoth personal carbon footprint by buying carbon credits from a company, Generation Investment Management (an institutional asset management firm specializing in opportunities positioned to cash in on global-warming-driven policy changes), of which Gore himself is the Chairman and Founding Partner. To say he stands to gain financially, as this firm’s global clean-energy investments pay off, would be an obscene understatement. He’s not buying pollution absolution, he’s simply funneling that money into investments that are poised to ripen on the strength of his own hot air.
* Last November, Gore was named as a new partner in a famously successful venture-capital firm, Kleiner, Perkins, Caulfield and Byers, symbolically leading their “Greentech” division — a strategic alliance with Gore’s firm, Generation Investment Management. Though Gore has stated that his entire upfront salary will go to the non-profit Alliance for Climate Protection (which he Chairs, coincidentally), he stands to rake in tens, maybe hundreds of millions down the road as KPCB claims its 30% profit stake as “green” start-up firms that Gore helps them cherry-pick for funding go public or are sold.

If you look at all this from a certain point of view (an objective one), what we’ve basically got here is a politician with a flair for opportunism shrewdly pre-positioning himself to profit from climate change hysteria that he may or may not believe in — then collaborating with Hollywood big-shots in making a high-profile movie that, along with a willing media, pumps such hysteria to a fever pitch. Obscene profit, accolades, Nobel prizes and freedom-robbing legislation ensues…

What I want to know is when politician-made movies ceased to be called propaganda.

I must say that from a purely Machiavellian standpoint (damage to America’s economy and freedom notwithstanding), Gore’s flim-flam is really a marvel of vision, ambition, and execution. What a different nation this might be today had he exhibited some of these qualities while in office on behalf of America’s best interests.

Doom with a View
Another thing that has a huge affect on American petro-policy is the regulation of domestic oil drilling. And interestingly enough, I detect the fingerprints of a selfish, greedy few driving this policy — instead of the energy needs and environmental concerns of a nation…

First, some background. Currently, only about 15% of the United States’ Outer Continental Shelf — roughly, the seabed from around 3-9 miles from shore out to 200 or more — is open for underwater oil drilling, a practice which is far less likely to result in disastrous spills than the importation of oil by tanker. From what I could gather (it proved remarkably hard to find easy-to-interpret data on this), somewhere north of 80% of the world’s worst petro-disasters in terms of volume of oil released into the environment have been from tanker spills. Conversely, 97% of oil spills and accidental discharges from offshore rigs do not exceed one barrel, industry sources claim…

But I digress. I was starting to wonder aloud why such a small percentage of America’s coastlines are dotted with offshore oil rigs — until I looked at the locations of offshore drilling rigs in OCS waters of the U.S. Again, I didn’t have time to make an intensive study of this (it could be book-length if I had, I’m sure), but I’m pretty confident in postulating that there’s a strong correlation between the location of offshore drilling rigs and costal real estate values, or the comparative wealth and influence of states.

Perhaps the starkest example of this is Florida. Home of some of the wealthiest coastal zones in the U.S. (seven of the top 11 places with the country’s highest per-capita income are in the Sunshine State), Florida has been under a strict moratorium on offshore drilling since 1983 — despite no doubt being home to huge reserves of eastern Gulf oil…

Yet the coastal waters of neighboring (and comparatively poorer) Alabama, Mississippi, Louisiana and Texas are dotted with thousands of rigs, without which the U.S would be far more dependent on foreign oil.

Now, what do you suppose the reason is for why there are no oil rigs off Florida? Do you think it’s because there’s no oil there? Or could it be because a comparatively few rich people who live in Florida and can afford to buy gas and heating oil at whatever the price have decided that they don’t want their pristine horizons spoiled by a few speck-sized rigs?

It’s the same way in California — there are some offshore rigs there, but you won’t see them along the Monterey coast…

Currently, only a handful of U.S. states allow drilling in the waters adjacent their shores. And it’s my perception that the greatest concentrations of rigs seem to roughly cluster off coastlines where there are relatively few marquis beaches, and where relatively few rich people live.

I could go on and on about this stuff, but the simple point I’m making is this: Whether it’s increasing offshore drilling, judiciously tapping into the Arctic National Wildlife Refuge, or partnering up with Mexico or Canada (a lot of their future oil sands yields are destined by agreement for China), the United States has far more oil in its backyard than we’re extracting.

And these sources are one component of the energy policy I think we should be living by…

The End of Carbo-geddon
Here’s the real bottom line with this whole four-part series…

As a nation, we need to decide what we want: Cheap stuff or a cleaner atmosphere. We cannot have both.

If we really want to buy into unproven global warming theory and commit ourselves to what we think will be the betterment of planet Earth, we must reduce the demand for (or availability of) oil by nations that pollute with impunity. The only way to do this, barring warfare, is to compete with them — both on the world oil stage and in the manufacturing arena.

As it stands right now, curbing American importation and consumption of oil is a BAD thing for the global environment, all other things remaining equal. Every barrel of oil we leave on the market is a barrel of oil that hyper-polluting China will scoop up at any price (they have little oil of their own to extract) — and they both need it and can afford it, since we’re buying all of our stuff from them.

I believe that in the short term, America should ramp up its importation of oil and pour our national might into once again becoming a worldwide leader in manufacturing and production. This limits China’s access to oil (since we’d be buying comparatively more of it), their ability to buy that oil (since we’d be buying less of the stuff they make with it), and their need for it (since their manufacturing sector would lag without booming U.S. demand). Upsides are a stimulated American economy and comparatively less global GHG. The downsides are that we’d become even more dependant on foreign oil in the short term — and we’d have to pay higher prices for domestically made things…

I also believe that America should simultaneously, aggressively begin drilling and extracting what oil we have. It will be years, maybe decades, before such an effort could reach full swing. However, when it happens, we’ll be in far better shape in terms of our ability to sustain ourselves without foreign oil once we reclaim the former production glory that made us great (this will take years, too).

Finally — and as a lover of free market capitalism, it pains me to say this — I believe that we must find a way to generate some solidarity and resolve among the American people to buy only those products made in environmentally responsible nations, foremost among them the U.S.

Ideally, this should come from our leaders. Our politicians, were they truly ecologically conscientious (instead of hustling us for their own fortunes), would expose and propose solutions to the “dirty little secret” that America’s appetite for cheap, foreign-made goods may be speeding the warming of planet Earth — and that it’s our duty to our fellow man to produce and choose more goods made domestically and/or in an environmentally responsible way. Even if they cost more.

However, hoping for objectivity and a greater-good mentality from politicians who, by and large, are motivated by their own enrichment and bound (somewhat) by the selfish wants of their individual districts is perhaps even more futile than hoping for some reason and sanity in the global warming debate. Therefore, I don’t think it would be out of line to slap the hard-goods made in major polluter nations with a hefty tariff. It’s not like there’s no precedent: We’ve enacted economic sanctions before over human rights violations — and what’s rampant greenhouse gas pollution, if not a violation of our basic human right to a clean, cool Earth…

The real question is: Do hyper-consumptive, stretched-thin, credit-addicted Americans have the fortitude to pay more for their principles — even if they’ve been falsely sold on them by the greedy and corrupt?

Jim Amrhein

Freedoms Editor, Whiskey & Gunpowder

The Key to a Cleaner Earth in the Future

Thanks for coming back. Hopefully you have been enjoying reading these installments as much has we have in bringing them to you. Here is the third segment, though titled part II. As you read this, think about California and their desire to have a carbon neutral position. They need electricity, but they want to be “green” so they encourage the building of power plants on nearby states who can export electricity to California. The same amount of carbon goes into the air, but California can claim they do not produce…

Just a thought.

Another item we encourage you to note, is the impact environmental regulations have on the cost of products made in America. Jim Amrhein does not dwell on this, but rather he mentions it in passing. No, we do not advocate having no regulations and becoming a polluter like the developing nations mentioned. We just hope you’ll realize that these regulations do have a financial cost to the consumers’ bottom line. Think of this as you vote for candidates you promise tighter restrictions.

Now, enjoy this next installment of Carbo-geddon.

Carbo-geddon, Part II
We head into 2008 with what’s looking to be a shaky year economically for the U.S., oil futures hit the dreaded $100-per-barrel mark, like just about everyone had been predicting. I’m far from a genius for having seen that one coming…

I seem to be one for knowing why, however.

Now, perhaps it’s because I’m a simpleminded half-rube without intensive education in economics that I can see the reason so clearly — I’m simply not close enough to the trees for them to obscure my view of the forest, so to speak. The Associated Press and other sources claim that violence in major oil-producing Nigeria is what drove crude over the C-note mark. That’s not what did it, though…

While it may be true in the most literal sense that this recent upheaval in Africa resulted in the particular spike in oil prices that crested the legendary $100-per-barrel mark, the actual reason crude’s spiraling upward is because America is sucking down a big batch of killer green Kool-Aid — instead of the oil we should be guzzling for the betterment of planet Earth.

Yep, you read that right: For the betterment of the Earth.

Crude Economics 101
This essay was intended as a conclusion to my Carbo-geddon series, but the historic $100-a-barrel mark for crude has given me an opportunity to shoehorn in another essay which underscores the main cause of not only skyrocketing oil and gas prices, but also levels of atmospheric greenhouse gas (GHG). Knowing this is important to understanding my rationale for what should be America’s energy policy (I’ll spell that out in my final installment).

Now again, and for the record, I’m not saying that I believe — or that the bulk of evidence supports — that man-caused CO2 and other gases are responsible for the modern trend of global warming (which does indeed exist). I’m merely using that supposition as a framework for my arguments, since it’s as obvious as a case of Tourette’s Syndrome that just about everyone else in the country is sold on the theory of man-caused global warming.

This has caused some confusion among readers — many have written in to chastise me for what you perceive as my buying into the mainstream’s stance on global warming. I hope, with this, I’ve cleared up any misconceptions. Trying to argue about the causes of global warming is like whizzing into the wind, so I’ve been making the case for consumption using the cleaner-Earth arguments everyone else is using to defend crude conservation.

Now, bear with me if I’m covering ground you already know (I’m sure I am) but one basic truth warrants repeating if you’re going to understand my “global” point with this essay: With a few caveats, the price of any commodity goes up when demand for it outpaces or approaches the limits of supply.

In the case of oil, there are some other factors. Firstly, and as we see right now with the Nigeria situation and a few years ago with Katrina, the price of petroleum products are to some degree at the mercy of certain external forces — things like third-world political strife, weather events, oil spills, pipeline sabotage, mad dictators setting whole oil fields on fire and price collusion or manipulation within oil cartels. However, these kinds of factors typically only cause temporary changes in the price of crude.

Secondly, oil’s price is itself a major driver of production. The profit a company can make on a barrel of oil must justify the time and expense of finding it and extracting it. In order for new petroleum reserves to be tapped — and their yields finally brought to market years down the road — oil’s price per barrel must be high enough to warrant it, and with no price decline in sight. Otherwise, the anticipated profits won’t justify the costs…

Thirdly, and perhaps the most significant to my argument, is that unlike supplies of a lot of other commodities (corn, wheat, etc.) — which can typically be increased to meet demand relatively swiftly — the world’s flow of oil can’t be ratcheted up very quickly. There are a bunch of reasons for this: Exploration costs, new site infrastructure expenses, R&D costs of new technologies for the extraction of oil from dwindling fields or alternative sources (like oil sands or shale), and about a million other things…

But enough Crude 101. Like I said before, underneath ALL these ancillary factors is the very simple economic truth that rising demand is what really drives sustained increases in oil prices over time. And for the foreseeable future, world demand for oil will increase at a pace that’s far greater than the rate at which new supplies could come on line (you’ll see why in a moment). Hence, the recent $100 price-tag for oil futures — which, I predict, won’t end up being the commodity’s high-water mark.

Yes, this skyrocketing demand for oil is America’s fault. But not because of our rampant consumption of it.

How Consumption = Conservation
As you learned in Part 1 of this series, America’s thirst for crude has actually declined in recent years, despite steady increases in both population and GDP. We’re now using less oil per capita and unit of wealth created than at any point in recent history. Continuing this trend is exactly what many in the environmental relig-, er, movement, would claim is the key to a cleaner Earth in the future, since we’re the world’s biggest consumer of fossil fuels…

Their smarmy, capitalist-guilt-driven belief is that if the largest petro-consumer (the big, bad U.S.A.) consumes less, that just HAS to result in less global pollution and GHG. Now, this would be true if every nation on Earth consumed its oil with similar outputs of GHG/pollution per unit consumed. But as I’ve spent 20,000 words or more showing you over the last three years, this simply isn’t the case.

To recap a bit: Measured in terms of GHG-per-unit-of-oil-consumed, America burns its crude with less than half the greenhouse gas output of Russia or India — and with around one-third the atmospheric GHG as pollution-belching China. In fact, according to a report released last June by the Netherlands Environmental Assessment Agency, China became the world’s largest gross emitter of CO2 in 2006 — by a decisive 8% margin over the next-closest nation, the U.S. This, despite consuming ONLY 37% AS MUCH OIL and around 72% as much total energy as the U.S. did…

But did you read about this on the front page of the big papers — or hear the talking heads trumpeting it on the evening news? Not likely.

A scarier question, one I’ve asked before, is: How do you think the global GHG/pollution picture is going to look once China consumes as much oil as we do — or more?

Bottom line: If the pervasive mainstream GHG theory is correct (whether it is or not isn’t today’s topic), the U.S. is directly responsible for accelerating the warming of the planet. In the name of cutting our own consumption — and in our quest for ever-cheaper shelving units, blenders, shavers, towels, clothes, sporting goods, rubber balls, Happy Meal prizes, lead-painted toys, killer pet-foods and shoddy tools — we’ve sold our manufacturing soul to a nation with no environmental conscience whatsoever.

And in so doing, we’ve outsourced nearly three times the pollution and GHG that we’d have produced had we made these things ourselves…

THIS is what’s really driving the price of oil upward: The fact that China is now factory-to-the-world (instead of the U.S.), and it takes that nation several times more fossil fuels to produce the same stuff that America could have — plus the fact that we’re lining up in droves to buy as much of their cheap, often-hazardous and always wastefully-produced junk as we can.

So you see, high oil (and gas) prices ARE America’s fault. Seduced by all manner of cheap stuff — and bamboozled by our own politicians and the media into believing we need a cleaner “Earth-print” — we’ve facilitated the rise of the Chinese manufacturing juggernaut. And now they’re putting pressure on world oil supplies, which can’t ramp up fast enough. Prices are soaring as a result.

Now, with all this in mind, I repeat the same question that I’ve been asking you in so many words for three years: If your primary concern is the environment — and you believe that man-caused global warming is ruining it — who would you rather have consuming fossil fuels to make the things you need and want: China or the U.S.?

Here’s another way of looking at this: If the world oil supply spigot is wide open and still not meeting demand (it must be, since oil prices have gone nowhere but up for more than a year), and if Chinese consumption of oil yields 2.8 times more GHG than American consumption, doesn’t it make for a cooler Earth if the U.S. consumes more of the oil coming out of that spigot — and China less?

Once again, folks, the blunt, inconvenient truth is that America’s increasing consumptive restraint and ongoing transition from a manufacturing-based economy to a services- and finance-driven one only serves to fuel an exponentially growing, hyper-industrial monster that cares nothing for the Planet — except as a market for its inexpensive products.

Think about that as you look at the “Made in China” labels on just about everything on the shelves in Target, Wal-mart, Toys-R-Us, PetSmart or even Home Depot.

The Carbon Catch-22
But hey, that Chinese-made stuff is really cheap. If the Reverend Owl Bore turns out to be right (again, I’m not saying he is — just that most people seem to believe he is), we’ll all be able to afford sunscreen, melanoma treatment and inland real estate with the money we’ve saved by paying China to cook the planet…

Indeed, the data show that what China does best from an industrial standpoint isn’t efficiency or quality or eco-consciousness. They’re the masters of doing things cheaply. But that’s only by virtue of their inexpensive labor and a lack of costly environmental regulation to comply with — not any true innovation in manufacturing or design. That kind of stuff is left to the Japanese, Americans and Germans (not coincidentally, Nos. 1, 2 and 3 in the low-GHG use of fossil fuels)…

Therein lies the quagmire, the Catch-22.

Imagine what a shock it would be to the U.S. economy if people all of sudden had to pay, say, three times as much for everything that’s currently made in China.

Let’s just say, for the sake of argument, that it somehow dawned on everyone in the U.S. at 8:00a.m. tomorrow morning that Chinese-made goods were contributing to global warming at a far greater rate than if those same products were made right here in America…

And lets also say that by 9:00a.m. tomorrow morning, everything on every store shelf in the country with a “Made in China” label was situated right next to a similar product made in the USA, with far less waste, pollution and GHG…

However, owing to our democracy — which regulates how polluting our manufacturers can be, forces them to pay their workers a decent wage and enacts standards for product safety and quality — all that Earth-friendly American-made stuff was three times the money. Do you think people would spend the extra cash to (maybe) help keep the Earth a degree or two cooler?

Would you?

Democracy’s Crude Awakening
All this should make you wonder: WHY does the U.S. consume its oil/coal/whatever so much cleanlier than China, Russia, Korea, et al? (Hint: It’s the same reason that products made in the U.S. are more expensive). It’s called democracy.

As a system, democracies are at a distinct manufacturing disadvantage in a global free-market economy. That’s because they’re beholden (theoretically, at least) to the interests of concerned citizens who won’t tolerate waste, pollution, near-slave-labor and low standards of living.

However, democracies (where costs of living and taxes tend to be higher) thrive on cheap stuff. In America, we depend on a tide of it from China, Taiwan, Sri-Lanka, Bangladesh, etc. Ergo, the real price of economic globalization is a dirtier global environment — since the countries that can produce things the cheapest are those with the least constraints on pollution, quality control and wages (usually non-democracies).

Now, don’t get me wrong. I’m not knocking democracy. It’s the least crappy system of government ever tried — and ours in America, as flawed as it may be, is still the least wretched among major world democracies. However, democracies, when not properly led, can be the victims of their own majorities. I’m seeing evidence of this right now with the global warming debate.

Instead of leading and educating the American people about the environmental pitfalls of outsourcing more and more manufacturing to the developing world, politicians from each side of the aisle are simply testing the winds of public opinion (which blow according to the biases of the media and the hot air of guru-celebrities), then kowtowing to it for votes.

It doesn’t matter that they’re crippling our economy in the name of fuzzy-math ecology.
So what’s the answer, you’re asking? Is it economic isolationism or protectionism? Is it hording up the world’s oil? Is it regulation of the media? Is it sanctions against China?

I’ll tell you what I think it should be in the conclusion to my Carbo-geddon series. Stay tuned…

Doing my part to consume and conserve,
Jim Amrhein
Freedoms Editor, Whiskey & Gunpowder