A Simple Government (16 page)

And while we can be horrified by the oil usage-related unnecessary deaths reported by Friedman, let’s not forget about the national-security threat that we face every day because of our dependence on foreign oil. Countries, like Saudi Arabia, that make billions from us like to showcase glittering new public works projects and the like. But behind the walls they are also funding the very schools, or madrassas, that recruit, radicalize, and then train impressionable children for what is essentially the Future Terrorists of the World Club. At the same time, their so-called charities funnel money to terror cells. How can we, for even a moment, let ourselves forget this evil connection? It is expensive enough to pay for our side in the war on terror; we have to stop paying for both sides. In short, oil has not just shaped our foreign policy over the years; it has basically deformed it.

Perhaps more benign, but no less troubling for our economy is the well-known law of supply and demand as demonstrated by the stunning growth of China in the last few years. It probably seems like a good thing to many that the communist country has been slowly opening doors in carefully limited ways to free-market capitalism. As we’ve been saying for hundreds of years in the West, capitalism works! But guess what? As the ancient Chinese proverb says, “Be careful what you wish for.”

One consequence is that the energy demands of China’s population of 1.3 billion (and counting) are becoming increasingly voracious. Add to that the similarly mounting demands of industrializing India and other developing countries. It has been projected that the global demand for energy will triple by 2050. Where on earth, in a manner of speaking, will this supply come from, and what will it cost? Will the United States have to haggle over the counter with countries that are growing powerful and wealthy and do not necessarily have our best interests at heart? This would not be pretty.

This is the simple truth: Our current economic prosperity and superpower status depend upon readily available, reasonably priced energy. It logically follows that the future belongs to countries that have adequate, reliable sources of energy under their certain control at prices that won’t impoverish them.

When prices at the pump soar, people wring their hands; when they drop, most of us return merrily to our wasteful habits. What is not often discussed is that, in addition to the direct cost of oil-related products like gasoline and heating oil for the home, each price fluctuation affects indirect costs. The price of food is affected, for example, since energy is required to produce and ship most items. America has become so prosperous and powerful in part because our fuel, our food, and many other necessities have historically been relatively cheap. As a result, we’ve been able to invest and spend our money on other things. If those days end, our standard of living will be at great risk.

Unfortunately, we now take our good fortune for granted. The richer we’ve become, the more wasteful. Our parents and grandparents, literally believing in “waste not, want not,” compulsively turned off lights and turned down thermostats. Do you? Used to cheap commodities, our society seems to live by the creed “Why not waste? We’ll never want.” For the moment, our individual wallets may be able to afford our profligate ways, even during this time of recession, but our national security and hope for long-term prosperity do not have that kind of economic cushion.

After 9/11, instead of saying, “Go shopping,” President Bush should have advised, “Cut your energy consumption. Conservation is patriotism.” A decade later, we can and should do just that. If we make a conscious and conscientious effort, serious and substantial conservation can happen today, not years from now. Will this country necessarily have to pay more for energy as worldwide demand rises? Not if we all recognize that conservation is the one way to pay less.

Put another way, we have to decide what energy will represent for the United States in the twenty-first century: a path to our decline or to our continued dominance? Right now, there is a five-trillion-dollar market for energy worldwide. Every minute, the world produces sixty thousand barrels of oil and consuming countries spend four million dollars on that oil. At nineteen million barrels a day, we are by far the biggest consumer, importing two-thirds of that total. China is second at about nine million barrels. But we ain’t seen nothing yet, in terms of either the demand for oil or the concomitant hunger for other energy sources.

But that’s where opportunity lies. We can make ourselves both richer by selling new energy technology at home and abroad and more secure by creating alternatives to oil. The potential rewards are tremendous for those who can think outside the barrel. Innovation has always been an American specialty, what we have always done better than anyone else. We meet the challenges; we win the races.

And energy entrepreneurs, encouraged by the enormous market size and profit potential, do
not
need assistance and encouragement from the federal government (meaning you, the taxpayer). The feds have quite enough problems to deal with and pay for, I think. Just let the market and consumers decide what makes sense.

I agree with Stuart Butler and Kim Holmes, who addressed this subject in an article for the Heritage Foundation, “Twelve Principles to Guide U. S. Energy Policy”:

On the other hand, as these writers go on to explain, there may well be good reasons for the government to put in place a regulatory system “that creates the best climate for private-sector innovation.” They suggest tax-free enterprise zones that would give a new company seven years of breathing room in which to develop and grow. That seems a fair trade-off to me.

During the cold war, America hustled frantically into the space race after the Soviet Union stunned the world with the launch of the firstever satellite, Sputnik, in 1957. We were caught napping; we put the pedal to the metal. And so, a little over a decade later, we won by becoming the first country to put a man on the moon. Why was it so important to outpace the Russians? Some people still don’t get it, but the victory was important on two fronts: America produced amazing new technologies in order to win the contest, and we also asserted our place as the dominant force in the global economy.

Today, without quite so much fanfare and public understanding, we are engaged in a very similar race, an energy race with China. As her control over the world’s resources grows exponentially, we face a simple question: In a decade, will we have won this critically important race? Will we again, in other words, produce amazing new technologies in order to win and also prove ourselves still the dominant force in the global economy? Well, here’s the simple answer: No, unless we make a priority of unapologetically committing our nation to being second to no other in the creation and use of renewable, reliable, environmentally friendly, inexpensive, and domestically produced energy. I make no apologies for arguing that to do so we need to return to being unabashedly American and much less “globalist” in our national character. Cooperate with other nations of the world, when it makes sense? Of course we should cooperate, but never capitulate. Letting ourselves lose the energy race would be, undoubtedly, a form of capitulation.

I believe that’s what David Pumphrey, senior fellow at the Center for Strategic and International Studies, meant when he wrote, “There is little doubt that China’s growing consumption changes what ability we have to control our own destiny within global energy markets.” Translation: When China becomes a huge energy customer able to pay whatever the market demands, it will jeopardize the ability of the United States to retain its position as an unchallenged superpower.

Here are some specific hints of what’s likely to come. Just recently, in 2009, China outpaced us as the country that uses the most energy, 2.25 billion tons of oil equivalent (meaning the total of all sources of energy in play) versus our 2.17 billion. For the hundred years before that, the United States annually used more energy than any other country. Not surprisingly, that period coincided with our becoming the richest and most powerful country in the history of the world. This milestone is even more significant, and startling, when you consider that just a decade ago China used only half as much energy as we did.

But the entire picture is a little more complex. On a per-capita basis, we still use five times as much energy as the Chinese. But as more of them begin to demand the kinds of high-energy products that we take for granted—cars and trucks, large appliances like dishwashers and washing machines, central heating and air-conditioning in homes, workplaces, and shopping malls—the result could be a level of control over the world’s resources that could grow to unimaginable heights.

Already the astonishingly speedy switch from bicycles to automobiles in China has produced another milestone: In the first six months of 2010, the American automaker General Motors sold more cars there than here at home. Even though the company has been doing business there only since 1997, China now represents 25 percent of all its sales throughout the world. Remember, the federal government spent fifty billion dollars of your money to bail GM out (and keep the assembly lines rolling). By the way, in a somewhat similar vein, the feds gave $150 million to the Koreans to make batteries for the muchheralded Volt. What’s up with that? Why aren’t we producing those batteries? I mean, have I missed something, and workers in the Midwest are overemployed now? This is just another example to prove that the current tax structure and rigid regulation of the development of new technologies have combined to thwart our efforts here, while the Chinese are going full throttle in their ambition to become the world’s number one economy.

Back to the energy race: China is a major producer of battery technology for cars and is also forging ahead to dominate the market in all kinds of renewable energy. As we keep seeing, the upward curve of development is steep: In 1999, the country produced merely one out of every hundred solar panels manufactured worldwide, but by 2008 it was making one in three, and it now exports more panels than anyone else. On another front, in 2009 China became the world’s largest producer of wind turbines, passing Denmark, Germany, Spain, and (you guessed it) the United States.

Rest assured that China’s motivation in this energy revolution is economic, not environmental. It’s all about producing jobs and amassing money, not about saving polar bears or rain forests. The Chinese leaders believe that this is their moment to lift their people out of poverty while also increasing their world stature both economically and militarily.

One possible consequence of the rise of China for America was explained in early 2010 by Keith Bradsher, chief Hong Kong correspondent for the
New York Times
: “These efforts to dominate renewable energy technologies raise the prospect that the West may someday trade its dependence on oil from the Mideast for a reliance on solar panels, wind turbines, and other gear manufactured in China.” That sounds to me like a trade we definitely don’t want to make. Instead, we should trade our current situation for complete energy independence.

In fact, President Richard Nixon set out the guidelines for just such a goal back in 1973. His initiative, known as Project Independence, aimed for national energy independence by 1980, or about thirty years ago. Boy, did that not happen. Back then, we imported about 20 percent of our oil; now, as I pointed out earlier, it is almost 70 percent, at a cost of one billion dollars a day. Unfortunately, the politics of “right now” blew away the principle of protecting subsequent generations. Instant Gratification 101: When the oil-producing countries eased up on prices, we eased up on the urgency.

Since Nixon, every other president, whether Democrat or Republican, has urged us toward energy independence. So why has each one, including Obama, failed so far? Former CIA director James Woolsey summed it up in one colorful sentence in the
Wall Street Journal
on April 15, 2010: “OPEC sets oil’s price at a level that exploits our addiction, but it is generally not high enough for long enough that we go cold turkey.” You certainly know exactly what he means. Time after time, the alarms over Middle Eastern oil have sounded in the form of price increases and supply shortages. But instead of heeding these wake-up calls, we’ve always rolled over and gone back to sleep.

Aside from the other energy alternatives I’ve talked about here, there are exciting new possibilities in natural gas and clean coal. President Obama dismisses natural gas, as he does oil and coal, as just another fossil fuel to be shunned rather than embraced. But not all fossil fuels are the same. Natural gas releases half as much carbon as coal and is much cleaner than oil. It is also versatile, capable of being used to create electricity, fly planes, power cars and trucks, and heat our homes.

Moreover, huge quantities of natural gas have recently been uncovered in shale thanks to horizontal-drilling technologies. Consequently, the projection of American gas reserves was 60 percent higher in 2008 than in 2004, suggesting that we have enough to last almost a century. At the same time, as oil has become more expensive, gas has gone down in price.

For all of these reasons, a recent MIT study predicted that natural gas will provide from 20 percent to 40 percent of our energy over the next thirty years or so. As with every other resource, there are challenges, and we can’t let the exploration companies have unrestricted free rein, since careful attention must be paid to any pollution of adjacent water supplies and other potential environmental impacts caused by the hydraulic fracturing that is used to release the gas.