Tuesday, February 21, 2006

Saving us from foreign oil "dependence"?

In his latest follow-up to a State of the Union Address that extolled the fallacial virtues of big government, President Bush struck again:
Bush: U.S. on Verge of Energy Breakthrough

MILWAUKEE Feb 20, 2006 (AP)— Saying the nation is on the verge of technological breakthroughs that would "startle" most Americans, President Bush on Monday outlined his energy proposals to help wean the country off foreign oil.

Less than half the crude oil used by refineries is produced in the United States, while 60 percent comes from foreign nations, Bush said during the first stop on a two-day trip to talk about energy.

Some of these foreign suppliers have "unstable" governments that have fundamental differences with America, he said.

"It creates a national security issue and we're held hostage for energy by foreign nations that may not like us," Bush said.

Bush is focusing on energy at a time when Americans are paying high power bills to heat their homes this winter and have only recently seen a decrease in gasoline prices.

One of Bush's proposals would expand research into smaller, longer-lasting batteries for electric-gas hybrid cars, including plug-ins. He highlighted that initiative with a visit Monday to the battery center at Milwaukee-based auto-parts supplier Johnson Controls Inc.

During his trip, Bush is also focusing on a proposal to increase investment in development of clean electric power sources, and proposals to speed the development of biofuels such as "cellulosic" ethanol made from wood chips or sawgrass.

Energy conservation groups and environmentalists say they're pleased that the president, a former oil man in Texas, is stressing alternative sources of energy, but they contend his proposals don't go far enough. They say the administration must consider greater fuel-efficiency standards for cars, and some economists believe it's best to increase the gas tax to force consumers to change their driving habits.

During his visit to Johnson Controls' new hybrid battery laboratory, Bush checked out two Ford Escapes one with a nickel-metal-hybrid battery, the kind that powers most hybrid-electric vehicles, and one with a lithium-ion battery, which Johnson Controls believes are the wave of the future. The lithium-ion battery was about half the size of the older-model battery. In 2004, Johnson Controls received a government contract to develop the lithium-ion batteries.

On Tuesday, Bush plans to visit the Energy Department's National Renewable Energy Laboratory in Golden, Colo., to talk about speeding the development of biofuels.

The lab, with a looming $28 million budget shortfall, had announced it was cutting its staff by 32 people, including eight researchers. But in advance of Bush's visit, Energy Secretary Samuel Bodman over the weekend directed the transfer of $5 million to the private contractor that runs the lab, so the jobs can be saved.
And it gets worse from there. The article was supposed to have been written this Monday, but from something it said, I would have thought it was from November or so. It mentioned Americans have only recently seen a decrease in gasoline prices. Strange, because in my area (and gasoline down the road is quite expensive compared to elsewhere), pump prices started decreasing significantly about four months ago.

Isn't it so easy to "invest" in new ventures when it's not your money, especially when the money comes from people who have no control over how it's invested, and when it's all but impossible for them to hold you accountable for mismanagement and outright fraud? Isn't it so easy to "save jobs" when it's not your money? Isn't it equally stupid when it's just for the sake of jobs, a basic Keynesian principle? When it's not your money, though, you need not give a damn whether the company can operate profitably, or whether its scientific goals are at all feasible. Since the money government spends is never its own, it's no problem for government to award another lucrative contract, or give another tax break, so a company can develop a new battery that, subtracting whatgovernment poured in, actually loses money on net.

The best and only way the federal government (and any level of government) should promote a "breakthrough" in new energy sources is to not promote any source whatsoever. Governments at all levels must stop their interference in market processes, and let the competitors battle it out. Cease all subsidies, like those given to ethanol manufacturers. Cease special tax breaks for oil industries, too. Cease the subsidies for alternative fuel sources like wind and solar energy, which are extremely inefficient. Cease the unfair hindrances on nuclear energy. People use the phrase "level playing field" all the time, and many don't realize a true "level playing field" is when government neither assists nor hinders anyone.

That some of our Middle East oil-buying dollars go to terrorists is a very valid concern about free trade. I'll get to that later, but right now let me say that President Bush has to emphasize it because the Democrats have been. Neither side is doing it out of genuine concern, though. The Democrats certainly didn't care about "energy independence" until recently, but they've created the myth because they don't have much else to make an issue of. Bush has no choice but to follow suit, and sadly, a serious economic matter gets reduced into more partisanship.

Congress is deeply concerned about dependency on Middle East oil. So deeply that, in a vote this last December, it again rejected allowing drilling in ANWR (most of the blame we can put on Democrats), let alone other rich oil fields in Alaska. More than any subsidies or tax breaks, more than any promotion of "democracy" abroad, drilling in ANWR would have the greatest effect on reducing our "dependence on foreign oil." It would also immediately reduce oil prices on the global market. Effects on price would occur once appropriate legislation passed (or even rumors it would pass), before any drilling commenced, because prices do not just reflect current supply, but future expectations of supply.

Critics say it's only enough oil to supply the U.S. for two years, but that is a lot. Imagine that you and your family suddenly found a two-year supply of food in your back yard, and that you are your grocer's biggest customer. Wouldn't he suddenly be very conciliatory if before he demanded high prices? Perhaps he has a lot of savings to carry him through two years, until you consume all of your finite supply. But what if you look a little more and find an even greater supply, or you find a way to make the food yourself for a cheaper cost than your grocer's prices? Worse, what if in that time, you find a grocer who will sell for really cheap prices? (Here I refer to tar-sand oil deposits in Alberta, Canada, which are a promising source once the technology gets going.)

I recently had a discussion with a close friend about Middle East oil and Sino-U.S. trade. Is it wise that we send so much money to potential enemies in actual warfare? No, but we trade with Saudi Arabia, Iran and China because the benefits outweigh the costs. Benefits and costs aren't always monetary, remember. So by measuring trade flows, we can actually approximate how much Americans, collectively, are willing to save by accepting the risk that Middle East terrorists eventually will harm us and our interests, using some of the dollars we paid for Middle East oil. The same goes for China using some of our money to modernize and expand its military, with the single goal of conquering Taiwan.

Admittedly it is not an absolute that free trade promotes peaceful relations. After all, we certainly cannot trust Iran, at least not with its current leadership. Peaceful relations can still be very cold, after all, and free trade isn't a guarantee of permanent peace, but it does maintain peace in the present. The trade will continue until one side decides, or both sides decide, that it prefers the destruction of war, and the risk of losing, instead of peaceful trade.

If Iran really wanted nuclear weapons, couldn't it just buy technology from renegade Soviets? Perhaps, but I would think not. It's far more noticeable than Iran's nuclear projects, which they claim are covert, but we know about them, and the Iranians know that we know, and we know that the Iranians know that we know... Besides, once Western intelligence learned of Iran's acquisition of a nuclear weapon, it would play into the United States' hands: such a discovery would invite UN Security Council action (severe sanctions). Moreover, Israel would undoubtedly begin military strikes against all possible nuclear sites in Iran. Madman Mahmoud, therefore, will continue playing the stall game.

I would suspect India is doing everything to ensure that none of its nuclear technology, at least that which could be used to develop weapons, reaches Iranian hands. It's benefiting far more from peaceful trade with the United States than it could ever get by selling nuclear technology to Iran. Similarly, for all the anti-West violence, Pakistan as a nation likes warm relations with the United States. China and North Korea are a different matter, especially North Korea, because Kim Jong-il, aka He of the Supposedly Infallible Memory, is a madman.

If we right now cut off all trade with Iran, that may force its hand before we can deal with it. Iran might then seek out the nearest available nuclear warheads and lob a few toward Israel, and its missiles could potentially carry warheads to southern Italy. I do believe we will eventually have to assault Iran with our military might, which will be much easier until Iran has a working nuclear weapon. Right now Mahmoud & Co. think they have time to develop nuclear weapons on their own.

China is also stalling. I think its leaders look far into the future and are willing to exercise the requisite patience. As I wrote last March in my "How libertarian are you?" entry:
Someone best described as a neo-con once told me that China is merely a paper tiger and nothing to worry about. Perhaps so. Vietnam, however, taught our enemies that we can be beaten if they make it too costly for us to win. I worry that China will become a serious threat in a couple of decades, as it continues to strengthen its military and modernize its society. At some point, China may be able to capture Taiwan because they'll make the blood price too high, and if anti-war sentiment sufficiently ferments over the years.
It's important to remember that not every dollar in China's trade surplus is a dollar it can spend. China needs some of those dollars to buy petroleum, and because it must import many different types of raw materials, it doesn't have much of an overall trade surplus compared to that with the United States. Also, it returns many of the dollars to the U.S. Treasury and receives U.S. Treasury bonds, which are not just an investment, but collateral for China's insolvent banking system.

There's still a lot of money that China can allocate for its military expansion, though, but even in a couple of decades, it could not hope to approach, let alone defeat, the United States. But again, those fellows in Beijing aren't looking to win: they just want to make the fight over Taiwan so decreasingly worthwhile that we'll give up.

Meanwhile, we continue to trade with China. Free trade means that neither side is more dependent on the trade than the other is: free trade is symbiosis, not parasitism. China's communist leaders have embraced some market reforms as the key to prosperity, with the clear goal of modernizing China into a formidable superpower. Are they really selling us a rope to hang ourselves with, a twist on what Lenin mockingly said of capitalists? Or are they embracing a snowball (the free market) they formed themselves and will never hope to stop?

I don't think free trade, and the market reforms it encourages, are the answer to ending tyranny in China. I think that, like in the United States, it will take an armed revolt by the people. My own ideas on how to accomplish that, however, cannot be publicly shared.

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Blogger CaptiousNut said...

Also fallacious in that ABC story;

"...at a time when Americans are paying high power bills to heat their homes this winter."

I thought we just had a global warming induced January - the warmest on record (8 degrees above normal). And the price of natural gas has gone down 50% in the last two months.

I wouldn't say that Bush's yammering about alternative energy means in any way that the energy debate has been reduced to "partisanship". I would instead characterize it as rhetorical popularism.

Instead of capitalizing on the moment to lead and edify the public on economic and energy realities, Bush and invertebrates like Bill Frist have made a political calcluation. They figure that any public support of oil companies would be damaging and thus have adopted the Clintonian tactic of rhetorical lip service.

Remember when Bill said, "Save Social Security first" and then did absolutely nothing about it?

Tuesday, February 21, 2006 5:18:00 PM  

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