Ezra Klein

In my earlier post noting Nancy Pelosi's apparent emphasis on energy legislation, Tom Veil wrote:

Her focus on energy may just be a sage division of labor. The Senate has, collectively, been pretty clear that it is going to run things on the Health Care side. So Pelosi decides that the House will just go along with whatever compromise the Senate reaches.

That frees up Waxman to put his time into climate change, an issue on which the Senate is so sluggish that Lieberman is considered a visionary. The House's hope is that the Senate, seeing that the House is putting more resources into climate change than it could possibly hope to, will sense the urgency and treat the House's climate change bill as an anchor, rather than as something to be watered down and fiddled with.

It'll be interesting to see if it plays out like this.

To add to Tom's comments, Waxman's insurgent campaign to wrest the chairmanship of Energy and Commerce from John Dingell was entirely about climate change. Dingell is fine -- good, even! -- on health reform. But energy policy is driving the politics of the House right now. I don't get the sense that that's an intended division of labor. I doubt Pelosi and Reid sat down to divvy things up. But, as Tom perceptively observes, it does seem to be the emerging division of labor.

Posted by Ezra Klein at 1:33 PM | Permalink | Comments (4)

Brad Plumer assesses the administration's cap and trade proposal. So does Dave Roberts (and here, and here). Here's the relevant section of the budget (pdf).

Two thoughts: Insofar as the criticism goes, this really seems a case where the administration is on the cutting edge of the political conversation, but the political conversation is lagging far behind the severity of the crisis. Second, connecting the cap and trade revenues to the Making Work Pay tax credit seems an odd choice. The connection is only obvious if you read the budget. The cap and trade revenues should be funding a Clean Energy Tax Credit, or a Greener America tax credit, or something that makes the link more concrete.

Posted by Ezra Klein at 10:27 AM | Permalink | Comments (0)

The comments to my earlier post on David Frum suggest that some folks are pretty confused about the difference between a cap-and-trade plan and a carbon tax. The simple answer is that cap and trade fixes the quantity of carbon and a carbon tax fixes the price of carbon. So imagine you want to reduce carbon emissions by 80 percent in 2050. Using a tax, Congress would decide the price of carbon but the market's response would decide the total change in emissions. A cap is the reverse: Congress sets the total change in emissions and the market decides the price.

That, at least, is the difference in a perfect world. There's also the argument that a tax is, in theory, simpler, and less likely to get mucked up with exemptions and off-ramps and so forth. For a good discussion of the relative merits, see this roundtable from the Bulletin of Atomic Scientists.

Posted by Ezra Klein at 1:25 PM | Permalink | Comments (12)

Speaking of good interviews with important environmental appointees, via James Fallows comes a long and substantive chat with Steven Chu.

Good stuff. Fallows also makes a point I haven't heard before, saying, "in karmic terms it doesn't hurt that Chu, who was born in St. Louis of Chinese parents, will head the very department that, under then-secretary Bill Richardson, was involved in the Wen Ho Lee imbroglio in the late 1990s. (In brief: Lee, who was born in Taiwan and who worked at Los Alamos, was accused of massive theft of U.S. nuclear secrets on China's behalf. The NY Times loudly trumpeted this story. Eventually nearly all the charges were dropped, and the presiding federal judge apologized to Lee for government excesses.) Again, this is not a reason to have chosen him, but it's worth noticing." Fallows doesn't quite come out and say this, but there was a lot of latent anti-Chinese sentiment embedded in that controversy, as if his ancestry rendered Wen Ho Lee inherently suspicious.

Posted by Ezra Klein at 5:35 PM | Permalink | Comments (2)

I've argued before that I'm a bit of a pessimist on the likelihood of passing serious cap-and-trade legislation, but from a question of simple political sequencing, we're entering a very propitious moment indeed. The central weakness of cap-and-trade is that it will raise certain energy prices. The most politically salient of these is probably gasoline. The CBO has estimated that a carbon price of $28-per-metric-ton, which is around what we're likely to see, would raise gasoline prices by about 25 cents per gallon. That's not huge, but it's not popular, either. Six months ago, when gasoline was sitting above $4 a gallon, I'd have told you it was utterly impossible. But we're entering the right season, and the right economic climate, for cap-and-trade. Demand drops during the Winter. And it drops much further in recessions, during which global demand for oil slackens. As such, you're seeing prices around $1.65, and they may go even lower. Gas prices won't be terribly salient for the next few months, and so something like cap-and-trade might not be impossible.

To be sure, a carbon price like $28 wouldn't do that much to change driver habits. 25 cents a gallon might matter next time we hit $4, but it probably won't matter all that much. But it would act as a large tax that could support incredible levels of investment in green technology, new infrastructure, and so forth. In other words, it might not force the green revolution, but it would fund it.

If you wanted to use the tax to change behavior rather than fund investment, however, you'd have to make it much larger, and then you'd probably want to look at ways to offset the impacts on low and middle income households. Luckily, the CBO examined exactly this and found that "if the government chose to sell the allowances and used the revenues to pay an equal lump-sum rebate to each household in the United States...the size of the rebate would be larger than the average increase in low-income households’ spending on energy-intensive goods." That said, I imagine it will still be a bit hard to explain that the government is going to make the price of energy much higher, but will give people checks for yet more money than that, in the hopes that the high price tag triggers an irrational response to use less energy even though the lump sum check could actually cover the average family's fossil fuel habit. But whatever Obama decides to do, he's best try it quickly. Recession+Winter is a rare alignment for this particular policy.

Posted by Ezra Klein at 11:49 AM | Permalink | Comments (13)

Rather smartly, the green movement has aggressively positioned itself to tap into America's deep-seated futurism and adoration of technology. Vision of our green future, and even our coming green jobs, often dwell on hydrogen and hovercrafts, solar cells and humming turbines. But the short-term reality is that many of the most significant gains will come in simple conservation. Buildings need copper wires. Roofs will be painted black. Windows will be sealed to cut heat loss. The work will be mundane, but it will matter. Cue Elizabeth Kolbert, and the story of the refrigerator:

This past summer, Steven Chu, the Nobel Prize-winning physicist who currently heads Lawrence Berkeley National Laboratory—and who has been tapped to be the next Secretary of Energy—delivered a talk on climate change and how to combat it. Consider, Chu said, the refrigerator.

Refrigerators consume a lot of energy; all alone, they account for almost fifteen per cent of the average home’s electricity use. In the mid nineteen-seventies, California—the state Chu now lives in—set about establishing the country’s first refrigerator-efficiency standards. Refrigerator manufacturers, of course, fought them. The standards couldn’t be met, they said, at anything like a price consumers could afford. California imposed the standards anyway, and then what happened, as Chu observed, is that “the manufacturers had to assign the job to the engineers, instead of to the lobbyists.” The following decade, standards were imposed for refrigerators nationwide. Since then, the size of the average American refrigerator has increased by more than ten per cent, while the price, in inflation-adjusted dollars, has been cut in half. Meanwhile, energy use has dropped by two-thirds.

The transition to more efficient fridges, Chu pointed out, has saved the equivalent of all the energy generated in the United States by wind turbines and solar cells. “I cannot impress upon you how important energy efficiency is,” he said.

Expect a lot of that sort of industry anger. A lot of dire warnings that if we indeed legislate efficiency, we will be ensuring deprivation. We Californians have heard that a lot. We heard it with appliances, and with zero emissions cars, and with the building code. Indeed, a recent study found that "California’s energy-efficiency policies created nearly 1.5 million jobs from 1977 to 2007, while eliminating fewer than 25,000." So remember the refrigerator.

Image used under a CC license from Jason Rogers.

Posted by Ezra Klein at 10:18 AM | Permalink | Comments (14)

Consider this: For most of the last eight years, the American government has been unwilling to forthrightly acknowledge the science on global warming. Indeed, it edited much of the science out of government reports, calling it "not sufficiently reliable." Bush's Department of Energy director wanted to abolish the agency one year before he was asked to run it.

Now, reports suggest that Steven Chu, director of the Lawrence Berkley National Laboratory and a Nobel prize winning physicist, will be tapped to head the DOE. We've gone from an administration that has lobbyists edit the words of scientists to an administration that appoints scientists to regulate the industries that fund the lobbyists. Even on a simply symbolic level, it's a tremendous change. And it won't simply be symbolic. Here Chu is breaking the issue down:

As Brad Plumer says, "great stuff."

Related: For more, read Joe Romm, a former DOE employee, on Chu, and Brian Beutler, who was not a DOE staffer, on the implications for the DOE.

Posted by Ezra Klein at 1:55 PM | Permalink | Comments (8)

Every gallon of ethanol produced costs federal taxpayers 51 cents in subsidies. That means the 9 billion gallons of ethanol the 2007 energy bill mandates for production this year cost us $5.1 billion in tax breaks to the companies that blend ethanol with gasoline. The Energy Information Agency reported in April 2008 that 79 percent of all federal subsidies for renewable fuels - including solar, wind and geothermal - went to support ethanol production.

Something like cap-and-trade, which uses market incentives rather than the legislative process to guide investment decisions, is substantially more promising. It makes sense for Tom Harkin to subsidize ethanol, but it doesn't make much sense for companies in need of cheap energy to invest in ethanol. Steven Teles, however, will tell you that a cap-and-trade plan will get gummed up, too, and so much will be exempted and rebated and set aside that it will, in practice, be nearly as bad. He suggests going even simpler, with a straight carbon tax in which you take the revenues and send everyone a huge yearly check, much like they do in Alaska.

Posted by Ezra Klein at 10:24 AM | Permalink | Comments (9)

Tom Laskawy -- whose blog Beyond Green is my favorite new blog that does not feature regular recipes -- makes an impassioned argument in favor of the GM bailout here. "We just elected the most progressive president since LBJ and now we want him to preside over the mass layoffs of up to three million workers at a cost to the government of, according to Bloomberg, up to $200 billion?" He asks. beyond the politics, he makes two points worth taking seriously:

1) The GM Might Save The World Argument: "The Chevy Volt...is a huge deal. Not only will it be the world's first commercially-produced plug-in hybrid, but it will use a lithium-ion battery. Today's hybrid's use nickel batteries. Nickel mining is highly competitive with coal as the worst, most environmentally devastating, carbon-intensive industry. As a result, every hybrid drives off the lot carrying a 'carbon debt' which, according to Wired Magazine, takes over 45,000 of driving to 'drive off.' Lithium ion is the acknowledged future of battery technology, and GM would be first out of the gate. But better to spite our faces, right?"

Just to add to that point, new technologies have long lead times. The Volt has been in development for a decade. Let GM liquidate and that work -- and any potential renaissance that could have emerged from it -- is trashed. Cohn and others swear that Detroit has been pumping money into next-generation technologies, and these cars needs a few more years to make it to the road. That may or may not be true, but it's not implausible.

2) The Green Opportunity Argument: "Has anyone been paying attention? Mileage standards have been stuck at around 27mpg for 20 years and will only need to go up another 8mpg over the next 12 years. In one fell swoop we could revolutionize those standards, thus breaking a decades long political logjam...And let's not forget Democrat John Dingell, congressman from Michigan, who has 'protected' the auto industry from reform since long before most readers of this blog were born, and would jump on any bailout bandwagon, no matter what the industry was forced to do. Heck, he'd probably eat his Energy and Commerce Committee chairman's gavel if an amendment that so required was attached to bailout legislation, rather than oversee the destruction of the industry."

Much like Democrats have begun arguing that the stimulus bill is more than crisis management -- it's a generational investment opportunity, it could be argued that the GM bailout is more than a hedge against job losses, it's a way to upend the political economy of climate change and force the auto industry into a constructive posture. If we're going to basically buy them, they can't be spending money to lobby against national priorities.

Similarly, Yglesias clarifies his earlier post to say that "if you want to actually get these conditions, you need to position yourself as much more skeptical of the overall merits of this idea. Once we accept the notion that letting these firms go bankrupt is unacceptable, then we guarantee that no conditions will actually be met." I think that's half right. An auto bailout isn't such an inescapably obvious policy that you can simply assume its passage and begin gaming its politics. It's entirely possible that Congress passes nothing here, and Detroit collapses. That said, you do have to be very clear, however, what you mean by "bailout." Indeed, "bailout" is probably the wrong word. GM doesn't deserve a bailout. But it's possible that liberals could conceive of a deal that furthers both their interests and ours. And that's probably how it should be presented.

Photo used under a CC license from Eric Castro.

Posted by Ezra Klein at 2:42 PM | Permalink | Comments (27)

Longtime readers know that I'm a pessimist on serious global warming action. It's hard to see how you sufficiently reduce the use of dirty energy without sharply raising its price, which is what either a serious cap-and-trade or carbon tax would do. And it's hard to see how the political system summons sufficient courage to do that given the fury that high gas prices continually generate. But if there's any hope, I think it's in policy ideas like this one by Jeff Frankels:

Take steps to raise future tax rates on fossil fuels, including gasoline.

This would accomplish lots of objectives:
a)raise much-needed revenue in the future (or else help finance reductions in tax rates on lower-income workers),
b) enhance national security by reducing dependence on imported oil
c) improve the trade balance
d) reduce emissions of greenhouse gases, particularly in the future by sending the right price signal today
reduce local air pollution, traffic congestion, and traffic accidents.

In the past, such tax proposals have always been considered political suicide. But here are two ideas to reduce political resistance: (i) put a floor under domestic prices of fossil fuels at current levels, by making up any future falls in world energy prices via taxes; (ii) respond to any future major national security setback, if it were to occur (god forbid), by asking Americans to do their part toward sacrifice in the form of energy conservation.

Posted by Ezra Klein at 2:34 PM | Permalink | Comments (14)

Responding to my post detailing the CBO's finding that cap-and-trade would do little to discourage driving, Anon writes:

Two related points:

One, your chart is about world emissions, not US emissions. In the US, we do a lot more driving then the rest of the world and we do a lot less burning of forests. Consequently, transportation (Airline, Commercial, and Consumer) account for about 29% of our emissions. This is about 10% air travel and 90% ground travel. So, while your point is important (that the slight increase in cost from a cap-and-trade scheme isn't likely to drastically reduce consumption), it is a little less true for the US.

Of course the implication of your point, then, is that including transport fuels in a carbon-tax/cap-and-trade scheme may do less substantive good than the political harm which comes from oil lobbyists and the GOP screaming about higher gas prices (we may not like them, but we ignore them at our political peril). A lower cap, as a % of emissions, focused on industrial and electricity generation, coupled with aggressive measures to increase the efficiency of the US vehicle fleet and eventually transition to electric vehicles may be a political winner without a marked substantive impact. But good luck convincing the environmental community of that.

Posted by Ezra Klein at 5:24 PM | Permalink | Comments (7)

The Congressional Budget Office has an interesting analysis showing that a carbon pricing plan like cap-and-trade would not primarily exert pressure by dissuading people from taking a drive. Which is largely to be expected. Folks tend to wildly overestimate how much of our fossil fuels problem is a result of driving. In part, that's a simple availability bias: The main place where we consciously interface with fossil fuels is at the gas pump, and so we assume that that activity, being carried out countless times a day by endless numbers of people, is responsible for the problem. But it's really not:

Now, that chart slightly understates the role of transportation in carbon emissions, as it also tracks gases like methane which aren't emitted by SUVs, but nevertheless. And of these various emission sources, vehicles are among the least sensitive to carbon pricing. "CBO has estimated that a price of $28 per metric ton of CO2 in 2012 would lead to a reduction of about 10 percent in total U.S. emissions compared with a no-action scenario. Vehicle emissions, though, would remain relatively constant in the short run, and even over time they would decline only by around 2.5 percent — much less than the 10 percent reduction in overall emissions."

Indeed, even as carbon pricing is mildly raising the relative price of gas, CAFE standards and consumer choices are going to be pushing towards cars whose increased fuel efficiency is enough to basically wipe out the price hike at the pump. Add in that driving has a heavy cultural and geographical and historical elements, and can only really be lessened with a large increase in alternative transportation infrastructure, and it's hard to see how it cuts down in the near future (Ryan Avent disagrees with this, but the CBO is evaluating a limited universe of legislation here, and so the possible impacts of stringent congestion pricing -- which has not seen much political success -- isn't really part of their analysis).

But that doesn't mean cap-and-trade won't be effective. Rather, carbon pricing will force sharp efficiencies in more price-sensitive sectors: Electricity, and construction, and industrial processes and so forth. Efficiencies, in other words, that will be much less obvious, and painful, for consumers than rising gas prices would be.

Posted by Ezra Klein at 10:55 AM | Permalink | Comments (13)

In all the talk of drilling, there have been far too few numbers attached to what drilling would actually mean for as prices. But that's not because the numbers don't exist. It's because they're not politically helpful to those who favor drilling. Elizabeth Kolbert reports:

The Department of Energy estimates that there are eighteen billion barrels of technically recoverable oil in offshore areas of the continental United States that are now closed to drilling. This sounds like a lot, until you consider that oil is a globally traded commodity and that, at current rates of consumption, eighteen billion barrels would satisfy less than seven months of global demand. A D.O.E. report issued last year predicted that it would take two decades for drilling in restricted areas to have a noticeable effect on domestic production, and that, even then, “because oil prices are determined on the international market,” the impact on fuel costs would be “insignificant.”

Posted by Ezra Klein at 8:46 AM | Permalink | Comments (15)

Matt Stoller is right about this. Obama's willingness to compromise on drilling is not a reversal in the way, say, his vote on FISA was. Rather, it's a simple statement of is political bottom lines: Obama might oppose drilling, but that opposition is secondary to the need to revamp the nation's energy policy. His statement was then a simple articulation of priorities: If drilling is the sweetener need for a bill that would have "85 percent of new vehicles on the road run on nonpetroleum-based fuels within 20 years," then he's willing to make that compromise.

The point of the liberal position on energy is that fossil fuel dependency is the problem. The point of drilling is that we make more fossil fuels available. That's why most folks oppose the deal: Because it moves us in the wrong direction. If it's instead part of a compromise that reduces total use of fossil fuels but slightly shuffles where it is that we pump the necessary crude, most liberals would consider that a win.

Posted by Ezra Klein at 1:47 PM | Permalink | Comments (16)

Sorry for the light posting today, I spent most of it hanging around outside Brian's hospital room. He, in turn, wanted internet access so he could catch up on blog reading. We got him his iPhone and everyone was happy.

But I did want to respond to this Dave Roberts post on cap and trade. Dave argues that cap and trade won't hurt the economy, and will certainly be better for growth than unchecked global warming and scarcity-driven volatility in energy prices. I agree with him. He thinks, however, that I don't. Which is peculiar. The point I made in my original post is very limited, and not, to my knowledge, controversial: A cap and trade carbon plan will raise the cost of carbon intensive products like gasoline. That's how it works to discourage carbon consumption. By capping emissions, and then lowering the cap, it makes carbon-intensive products relatively more expensive, which in turn increases the economic incentives to purchase, and develop, non-carbon intensive products.

This, in the short-term, makes gasoline more expensive. That's the point of it. There are a variety of ways to compensate people for making gasoline more expensive, but gasoline will still be more expensive. That's going to make cap and trade a tough sell. But that doesn't mean it will be bad for the economy, or bad for people in general. Money not spent on gasoline is money spent on other things. As carbon-intensive products become pricier, other products will become cheaper. Lots of good stuff will happen, and my sense is that a move away from oil will actually entail significant lifestyle benefits. That's why I talk about transit and food policy a lot. Transit is awesome. Not sitting in traffic makes people happier. Riding on subways is fun. Biking is a joy. Meat consumption is another major carbon issue, but here again, a diet where red meat was relatively more expensive and vegetables and grains relatively less would be healthier for us. It would mean fewer cardiovascular surgeries and less time watching loved ones breathe through a tube. It would free up health care money to spend on other things.

Cheap carbon has substantially shaped the evolution of our economy and national lifestyle. It's done an enormous amount of good. But some of the byproducts have been problematic. As we move away from a carbon-based economy, we'll have opportunity to rethink some of those issues, and possibly move forward in ways that make us happier, healthier, and freer. There's nothing to fear in that.

Posted by Ezra Klein at 5:34 PM | Permalink | Comments (33)

It's really complicated to accurately estimate the carbon emissions of your lifestyle. Trading your 1998 Taurus for a 2008 Prius sounds like a good idea, but for the amount of energy that goes into creating the Taurus. Eating food grown in the states rather than Chile seems wise, but for the fact that shipping is far more efficient than trucking. Which vegetables are the most energy intensive? Are shoes made from sustainable ingredients really better than shoes that are mass produced in startlingly efficient factories? Who knows? That's why we need a system for pricing carbon upstream, so a product's environmental cost is right there in the price tag. Individuals aren't equipped to figure out how much carbon is a candy bar. What they are equipped to do is buy more of things that aren't that expensive, and buy less of things that are pretty expensive. If carbon is priced, and carbon-intensive products become pricey, folks will gravitate away from them naturally. And that's what you want: You want a low-carbon lifestyle to be effortless, even natural. It can't be a complicated, virtue-based project. Emissions will start going down when we convince companies to change their price tags, not when we convince a fraction of Americans to change their lifestyles.

Posted by Ezra Klein at 10:06 AM | Permalink | Comments (11)

This is often confusing to people, so it's worth quoting Howard Gleckman when he says, "All three candidates have endorsed what has become known as a 'cap and trade' energy policy. Now, Cap’n Trade may sound like the name of a second-rate seafood restaurant. But it is really just Washington-speak for 'really big energy tax increase.'" As Gleckman goes on to detail, there are ways of structuring Cap and trade that advantage government and ways of structuring it that advantage energy companies, but when you move downstream, the effect is the same: Higher energy prices result in higher prices to consumers which result in less demand for energy intensive goods which reduces production of those goods and lowers total energy usage. Now, it's not all pain. It also pushes towards more investment in renewables and creates a larger market for non-energy intensive goods, so lots of new alternatives might be developed. But in the aggregate, cap and trade makes energy more expensive so that people can afford to use less of it. That's the theory, at least.

Posted by Ezra Klein at 2:24 PM | Permalink | Comments (16)

Greg points us towards a great article in The Guardian on Sweden's experience with a carbon:

Between 1990 and 2006 Sweden cut its carbon emissions by 9%, largely exceeding the target set by the Kyoto Protocol, while enjoying economic growth of 44% in fixed prices.

Under Kyoto, Sweden was even told it could increase its emissions by 4% given the progress it had already made. But "this was not considered ambitious enough," explains Emma Lindberg, a climate change expert at the Swedish Society for Nature Conservation.

"So parliament decided to cut emissions by another 4% [below 1990 levels]. The mindset was 'we need to do what's good for the environment because it's good for Sweden and its economy'."

The main reason for this success, say experts, is the introduction of a carbon tax in 1991. Swedes today pay an extra 2.34 kronor (20p) per litre when they fill the tank (although many key industries receive tax relief or are exempted). "Our carbon emissions would have been 20% higher without the carbon tax," says the Swedish environment minister, Andreas Carlgren.

When energy is cheap -- particularly when it's cheaper than its true cost because its externalities aren't factored in -- there'll be heavy investment in energy-intensive industries, which will, in turn, encourage growth and development centered around those sectors. When energy is pricier, investors will look for other opportunities, and direct their cash towards supporting less carbon-intensive projects. Point here is that the economy is a dynamic thing, and while a carbon tax will certainly harm carbon-based industries, the redirection of resources will also accelerate the growth and viability of alternatives.

Posted by Ezra Klein at 3:48 PM | Permalink | Comments (15)

The rest of the piece is a bit less convincing. Pollan mounts an argument in favor of individual, non-legislated action to fight global warming, because it's good for demonstrating political will, good for the environment, and good for us. On that, I'm skeptical. The problem is that, insofar as global warming goes, I'm not terribly good at calculating my own carbon footprint. I don't know how much carbon a particular combination lock required. And while I like shopping for local ingredients and feeling virtuous about my decisions, attempts to do so are invariably haphazard and poorly informed (as Pollan admits -- sometimes, well-shipped produce require less energy than locally grown goods; sometimes taking the bus is better than stopping off and getting a cup of coffee with milk). They're good for the soul, but of questionable utility to the environment.

Stopping global warming, in other words, should not be a question of virtue, much less of being able to mentally carry out incredibly complex energy usage equations with very limited information. It should be right there in the price. If I want to live virtuously, I should be able to do so. If I want to do some eco-sinning, I should have to sin responsibly, paying for the carbon I use. To be sure, I agree with Pollan that people should grow food -- I'm trying basil, thai basil, and habanero peppers -- and cook dinner and shop at farmer's markets and walk places. That sort of lifestyle need not be sold in terms of environmental virtue or self sacrifice. There's a lot of joy in it, and good food, and good health. It can be good living for its own sake. But insofar as fighting the energy wars goes, it's tremendously inefficient and complex and anxiety-producing if you take it seriously. Taking carbon into account should be an unconscious, unavoidable reality that's built into every price tag. Growing your own tomatoes should be a source of satisfaction and personal renewal. No need to conflate the two.

Posted by Ezra Klein at 2:54 PM | Permalink | Comments (10)

I can't find the article on the Mother Jones web site, but the new issue has a piece by Paul Roberts (author of the terrific book the End of Oil, and the forthcoming "End of Food")on the 7 Myths of Energy Independence. In it, he makes the point that one of oil's great advantages is that it exists in a sort of economic isolation. If you use more oil, you don't have less of anything but oil. Trying to replace oil with another energy source, however, has huge, rippling impacts. Biofuels, like ethanol, mean you suddenly have a whole lot less corn, which means you have less food. Windmills mean a lot less land, whole most solar strategies are chemically intensive. In other words, nothing really exists as an easy swap, because ramping up to a full energy economy will have huge, and possibly unexpected, impacts downstream. The only strategy that doesn't gave this particular tradeoff is conservation, but since that's neither very exciting nor obviously profitable, you're seeing relatively little in the way of coordinated efforts to cut -- rather than replace -- energy usage.

Update: Here's the Roberts piece.

(Photo used under a Creative Commons license from Flick user Jowo.)

Posted by Ezra Klein at 1:35 PM | Permalink | Comments (24)

I highly recommend Dave Roberts' comments on Nordhaus and Shellinger's critique of the environmental movement. I'm not so deeply immersed in that world as to have a particularly sophisticated take on all this, but I'm pleased to see that I agree with Roberts, and as such, feel much safer about my opinion.

In short, N&S argue that the environmental movement is too pessimistic, and too focused on solutions that require pain, like a carbon tax. What we need is more happy talk, and more public investment in disruptive -- which is to say, visionary -- energy research. In its weak form, this argument is right, but banal. Indeed, we're already getting a lot of that talk about the green economy, and the Apollo Alliance, and all the rest. In its strong form, it's wrong and dangerous. Public investment is great. But if you offer folks the easy, but insufficient, solution, and stop talking about the harder, but more necessary, steps, what you'll get is the easy, painless solution. And not only is a well-conducted public investment program likely to prove insufficient, but it's not likely to exist at all. Roberts explains:

In practice, "alternative energy" subsidies have overwhelmingly gone to things like corn ethanol, nuclear energy, "clean coal," and hydrogen; the way things are going we can expect liquid coal to hop on the bandwagon as well.

Those are not the investments I'd make, but I don't get to decide. Neither does Greenpeace or NRDC; neither do S&N. Congress decides, and Congress is heavily subject to the very power dynamics that have kept fossil fuels on top for so long. Perhaps green groups know this, and know that a massive push for public investment would likely be co-opted in ways that do more harm than good. Even a Congress acting in good faith is unlikely to prove particularly adept at selecting the technologies that will "break through."

Targeted subsidies are simply too easily converted into pork. It's one of those times when government failure likely exceeds market failure. And, in any case, you're going to get them one way or the other. But in the context of a larger bill, they can play an important role, becoming the pork which'll help grease a cap-and-trade plan so it can slip through Congress. Enact the subsidies on their own and you'll get nothing -- neither a really good public investment program, nor a carbon limit. They need to be part of the overall bill. But at the end of the day, everyone knows what the center of the policy agenda is, and you're not going to fool business into overlooking the carbon cap by talking about the subsidy program. Try, and you're liable to lose the cap, as business repurposes your rhetoric to argue that the subsidies are sufficient, and should be tried first.

Posted by Ezra Klein at 3:22 PM | Permalink | Comments (4)

I'm in New York for a week of multilateralism and do-goodery. Multilateralism in the form of a UN meeting on climate change today, and do-goodery as demonstrated by the Clinton Global Initiative. Night One was a dinner with some UN Climate Change folks who wanted to Meet The Bloggers.

Sadly, meeting the bloggers involved a lot of asking what a blog is and isn't, and whether we check facts, and how we differ from an op-ed page, and a lot of other conversational avenues that I thought were exhausted in early-2005. Dinner sort of hummed along in this agreeable-but-dull fashion till one of the UN types shattered the comity by angrily saying that none of us had asked passionate questions about climate change yet, and didn't we understand this would kill us all and it mattered!? And we did! What we hadn't been convinced of was that anything going on here mattered.

Here's the problem: When it comes to pressuring major nations to undertake policy initiatives they're not favorably disposed towards, the UN is rather toothless. It can quietly persuade or publicly shame. Up till now, it has sought quiet persuasion, with little to no effect on the behavior of America, China, or India. It has not sent Secretary Moon to forthrightly blast our apparent indifference, and the consequences our shortsighted sluggishness will have on the rest of the world. This is not something the UN feels able to do.

Continue reading "The UN Conference on Global Warming: Pre-Thoughts" »

Posted by Ezra Klein at 5:19 AM | Permalink | Comments (6)

by Nicholas Beaudrot of Electoral Math

In 2000, fomer Sen. Bill Bradley (D-NJ) gave Al Gore something of a scare with his 47-51 near-win in the New Hampshire primary. But seasoned political observers understood that Bradley would have a hard time competing in South Carolina, Wisconsin, and so forth. Why? Exit polls showed that Bradley could only muster a majority among liberals, voters with college degrees, and households earning more than $100,000 a year. That wasn't even enough to win a low turnout primary, even in a state with lots of affluent, socially-liberal Democrats. As the Democratic primaries moved to areas with more working class and culturally moderate/conservative voters, Bradley's fortunes would just get worse.

Which brings us to Ned Lamont.

Continue reading "The Bill Bradley Plus Coalition" »

Posted by at 11:53 AM | Permalink | Comments (13)

by Nicholas Beaudrot of Electoral Math

An Inconvenient Truth is almost certainly worth seeing, even if you're alreay a dyed-in-the-wool supporter of the Kyoto protocol. Matt Yglesias gets the movie's impact more or less right: "issue films" like this one will only cause political change if they fundamentally alter the current political landscape, by pushing the issue to the forefront such that political pain comes to any candidate who doesn't take global warming seriously. Whether Al Gore's vehicle can propel climate change to the top of the issue pile all on its own is unclear. To reach tens of millions of viewers, Truth will have to find its way into full-scale release in thousands of theaters across the cuntry; it's currently slated to reach about 300 theaters by the end of June.

Posted by at 12:12 PM | Permalink | Comments (10)

Man, I don't know what it is with this President. It's just like flip:

In 2001, Vice President Dick Cheney said, "Conservation may be a sign of personal virtue, but it cannot be the basis of a sound energy policy." Also that year, Ari Fleischer, then Mr. Bush's press secretary, responded to a question about reducing American energy consumption by saying "that's a big no."

"The president believes that it's an American way of life," Mr. Fleischer said.

And flop:

With fears mounting that high energy costs will crimp economic growth, President Bush called on Americans yesterday to conserve gasoline by driving less. He also issued a directive for all federal agencies to cut their own energy use and to encourage employees to use public transportation.

"We can all pitch in," Mr. Bush said. "People just need to recognize that the storms have caused disruption," he added, and that if Americans are able to avoid going "on a trip that's not essential, that would be helpful."

Nice to see him end up on the right side, at least. Now, if the no-pain President could cajole his corporate sponsors into letting him raise CAFE standards, I might even register an uptick of respect for the guy.

Posted by Ezra Klein at 10:38 AM | Permalink | Comments (7) | TrackBacks (3)

Matt's got a TAP column today laying out his objections to CAFE standards. Readers will be unsurprised to know I find it unconvincing. But who knows -- I may be wrong. So here are three objections for the gas tax, and maybe if advocated could answer there, I could better understand their case:

Continue reading "Three Objections" »

Posted by Ezra Klein at 3:54 PM | Permalink | Comments (12) | TrackBacks (1)

There's been a lot of CAFE bashing lately, and much of it, I fear, is a bit misguided.  Brad Plumer (who I don't mean to single out, he's just the most recent) joins in with a post blasting CAFE in favor of a gas tax, maybe with some means-tested rebates to ease up on the regressivity of it.  A few things:

• First, gas taxes are a very direct way of influencing fuel consumption, but it's not clear that, at attainable rates, they actually do influence fuel consumption.  Raising the tax by the small, incremental amounts that could (and by could, I mean in a hypothetical world where this was somehow a viable policy option) pass would likely do little to stem consumption.  That's because, as it turns out, gas hasn't even been near the top price folks are willing to pay.  Most simply bear the burden, preferring to pay more rather than disrupt their lifestyle.  The place gas taxes make a difference is, in the end, among the poor, but if we put in rebates like Brad is suggesting, it won't affect them all.  I'd like to have a gas tax because I'm all for the added revenue, but it's not going to do much against consumption.  If you can afford an Expedition, you can nearly always afford more at the pump.

Continue reading "Gas Tax vs. Cafe Standards" »

Posted by Ezra Klein at 5:23 PM | Permalink | Comments (58) | TrackBacks (1)

Fareed Zakaria has a spot-on editorial today on how much tougher oil makes our foreign policy. It's almost laughable how many sore spots and tricky situations our hydrocarbon dependence has landed us in. In the American drama, oil is the screenwriter and we're the hapless dunce who keeps stumbling into his prewritten traps.

It kinda sucks.

But it's not hard to rationalize that oil dependence was a necessary tradeoff for our modern influence and technological achievement. That's perfectly fair. What's so strange is that now, while we're on the cusp of new technologies that could end our addiction, while we control literally thousands of advances and options that could drastically reduce our dependence, we prefer instead to wait till crisis hits, till prices jump so high that oil becomes a curse and change becomes a necessity. We're demanding that the day come when our switchover will be instant rather than gradual, and that's going to hurt.

Some hyperrationalists on both sides of the aisle like to refer to market mechanisms now. When oil ceases to make economic sense, we'll cease to use it. The market will take care of us, tuck us in at night, read us stories, and make us breakfast the next morning. But the market fails. The many costs of oil, from global warming to geopolitical instability, aren't included in the pricetag of crude. And when they do come clear, they still won't get you at the pump. They'll nail us in emergency appropriations for wars and massive outlays to deal with rapid climatological change. We'll have long seen it coming, but the market won't have noticed until it hits. Zakaria's piece today is a good explication of one of those market-hidden prices, oil's irritating ability to prop up most everyone we want knocked down. Read it.

By the way, The Oil Drum, your goto blog for all things crude and peak, has moved. You can, and should, find them here.

Posted by Ezra Klein at 12:49 PM | Permalink | Comments (9)

Jamie Court has a good point here:

What's remarkable is that neither leading Democrats nor Republicans are discussing the oil company profiteering behind the jump at the pump? Maybe that's because both parties are feeding at the same well of campaign contributions and the federal energy bill that gushed from it failed to deal with the cause of the sky high prices.

July financial statements show oil companies making new world record profits on top of last year’s banner world record profits. Exxon Mobil’s second quarter earnings jumped 35 percent over last year, Royal Dutch Shell rose 34%, ConocoPhillips shots up 51%.

Poll after poll has shown that Americans are desperately worried over our oil situation. John Kerry's single best-received line was his acceptance speech swipe against the House of Saud -- the numbers spiked up. Maybe that's why, in fear of attracting supporters, he stopped using it. But there's no reason the Democratic Party shouldn't be hitting hard on this subject, particularly as we struggle to come up with a strong national security message that's more than Republican "me-tooism".

Continue reading "Slick Oil" »

Posted by Ezra Klein at 4:38 PM | Permalink | Comments (9)

Bush's energy bill is headed for passage, and thankfully so.  Save for substantive modernization of our electricity grid, an increase in CAFE standards, an actual stance on global warming, a coherent framework for reducing our oil consumption, a serious investment in natural gas, an actual interest in new technologies for alternative sources, and really anything that'd have any sort of worthwhile impact on our energy situation at all, this bill has just what we need.  Subsidies.  Giveaways.  Handouts.  Protection.  Guidelines.  Bureaucracy.  All sprinkled with liberal amounts of Corporate Love and put on the Senate's desk.

I've long thought the Energy Bill, more so than any other legislation, is the perfect metaphor for the modern GOP, both in substance and process.  The substance of it is a mash of giveaways to Big Business, pork, and policy that makes no sense.  And the process?  Well you'd think they were a bunch of liberal crusaders:

From the start, Bush and GOP lawmakers have sold their energy policies as a means of reducing U.S. dependence on foreign oil. "Our dependence on foreign oil is like a foreign tax on the American dream, and that tax is growing every year," Bush said in May. During the Senate debate on the energy bill last month, Majority Leader Bill Frist (R-Tenn.) said: "We must take steps to reduce our dependence on foreign countries and thereby enhance our energy security at home. When we rely on other nations for more than half our oil supply, we simply put our security at risk."   

Like the Medicare bill, this is a mess corporate cronyism sold using the language of serious progressive reform.  Listening to them, you'd think Jimmy Carter was passing his dream energy legislation.  That the reality has no increase in CAFE standards and was held up for a year while Tom DeLay tried to retroactively protect MTBE manufacturers from lawsuits is too perfect.  This isn't conservatism.  And it's only sold as progressivism.  In reality, it's modern Republicanism distilled, a perfectly pure mixture of incoherence and corruption publicly aimed at solving a serious problem but privately written to ignore the issue in favor of industry demands.

Posted by Ezra Klein at 10:49 AM | Permalink | Comments (16) | TrackBacks (5)

Posted by Nick Beaudrot

CBS News -- which I try to use as a barometer of what non-cable news is covering -- has this story on their gateway page: "Congress Nearing Energy Bill Deal". Let's pause for a moment about the thought of giving oil and natural gas extraction even more tax favored status at a time when Exxon Mobil literally has more money than it knows what to do with.

Now that that's over, let's get to the real news: "House and Senate conferees abandoned giving makers of the gasoline additive MTBE liability protection against environmental lawsuits on Sunday, removing the major roadblock to enactment of broad energy legislation". This is significant, because House Leadership, in the form of DeLay and his collegaue "Smokey" Joe Barton (R-TX) have had a monomaniacal obsession with protecting the poor small-market gasoline manufacturers from the big bad environmental groups. It seems strange for them to give up on their favorite pet rock when they are so close to victory. So are they now secretly plotting to scuttle the whole bill? Or has Tom DeLay just lost for the first time in years?

Posted by at 1:56 AM | Permalink | Comments (9) | TrackBacks (1)

Yesterday, Matt pointed to a Times article saying that new hybrid technologies were being pumped into the acceleration side of things rather than going to increase fuel efficiency. That's not going on everywhere, sure, but the Accord hybrid and a few others are using the increased power to, well, increase power. This is essentially what happened in the 80's when the advances that had been going to cut fuel consumption were, with Reagan's freeze on CAFTA standards, plowed into engine muscle, at least by American companies. The Japanese kept going for efficiency and, well, you know how that turned out.

Matt uses this as evidence for why we should let the market take care of oil or, if we insist on meddling, have something straight forward like a gas tax. I'm not so sure. As I've said in the past, gas taxes are enormously regressive, hurt those who (for reasons of employment or whatever) can't change their transportation patterns, and will make all manner of good more expensive because they cost more to move and produce, making it double regressive. And this is all in the platonic land where we could actually pass a gas tax.

What the study does show is that subsidies for hybrid purchases are no longer a good idea. So let's not have them. Don't subsidize hybrids. Subsidize fuel efficiency. 30mpg and over gets a small subsidy, 40 gets a larger one, 50 nets you even more cash, and 60 makes you rich. Because, in the end, what we want isn't technology itself, but better fuel efficiency. And we can incentivize that directly.

Posted by Ezra Klein at 3:26 PM | Permalink | Comments (24) | TrackBacks (2)

I'm not particularly concerned by the Chinese government's bid (through CNOOC Ltd., which they control 70% of) to buy Unocal. If they offer a better deal than Chevron, why not? Worries that Chinese ownership somehow compromises our national security strike me as way overblown. If we and China ever get to a point where we threaten each other, who owns Unocal and its relatively minor energy assets will be the least of our problems. Moreover, in wartime, business ownership is something less than an inviolable fact of nature. Stateside Unocal assets would be nationalized by America, not allowed to continue production for the hostile Chinese under some bizarre fetishization of property rights.

Further -- and this is really an important point -- we're not going to war with China. They do not threaten our national security. They are not our enemy. Purchases they want to make should not be subjected to a extra level of scrutiny as they are not a hostile, or even threatening, power. America certainly has the right to be annoyed at Chinese monetary policy, but a country attempting to keep their export industry at a comparative advantage is hardly unheard of and shouldn't be seen as a more aggressive move than it is.

China's growing. We all know that. They will be powerful. Many of us fear that. But we, and them, will be in infinitely better shape if we cultivate a constructive and friendly relationship rather than create a self-fulfilling prophecy by treating China as a threatening power. If they want to buy Unocal and are willing to outbid Chevron, more power to them. We want as many nodes of interconnection as we can have in order to ensure the disincentives to future hostility -- on either side -- are as significant as possible.

Posted by Ezra Klein at 2:35 PM | Permalink | Comments (12)

The nice thing about high oil prices is that they make new technologies more cost-effective. Take Cargill, a company that has figured out how to replace petroleum in manufacturing tasks with corns and biomass, and is suddenly able to do it on the cheap:

When Cargill launched its factory in 2002, its pellets were far more expensive than equivalent material made from oil. Wild Oats Markets, an early customer, paid 50% more for takeout containers made from the bio-plastic.

But over the last two years, the Cargill plant has gotten more efficient — and oil prices have soared.

The result: The "corn-tainers" in the deli now cost Wild Oats 5% less than traditional plastic, Wild Oats spokeswoman Sonja Tuitele said.

Huh. Maybe all our presidential candidates can promise to powercharge this process, thus paying tribute to Iowa's farmers in a non-useless manner. Huzzah!

Posted by Ezra Klein at 1:09 PM | Permalink | Comments (10) | TrackBacks (2)

This article, detailing the results of a simulation focusing on oil crises, is worth reading for an idea of why people are concerned about peak oil. My excellent guests from the Oil Drum gave you a nice rundown this week, but hearing it from Gene Sperling and former CIA directors James Woolsey and Robert Gates has an authenticity that's hard to match.

Incidentally, what really worries me are the arguments from folks like Tim Lee who seem to think that just because the worst case scenario is unlikely, everything will be fine. Their answer to peak oil is that prices will rise, people will stop using so much oil, and we'll figure out other ways to power our economy. Simple. And like most simple things, it's been thought of.

The reason we're all still worried is that the alternate ways of powering our economy are all far more expensive and the long-term solutions are still decades from technological maturity. Tim quotes a comparison of oil markets with a pistachio-loving kid whose parents give him a room full of pistachios and who, after eating 4 million and realizing that new pistachios are tough to find amid the discarded shells, simply strolls into the kitchen to find a new snack. Anyone who thinks the world's fuel consumption can be easily quenched by a new energy snack is ignorant of the issues involved in replacement fuels. A better comparison is the Irish potato famine. Sure the Irish could eat other things and live, but they didn't have access to nearly enough of those other things to replace the dwindling potato crop.

Continue reading "Why? Me Worry?" »

Posted by Ezra Klein at 4:32 PM | Permalink | Comments (8) | TrackBacks (8)

Prof. Goose here.  Dear Kleinians, you've been great. 

I hope you've seen from my posts that the issue of petroleum's imminent peak of supply matters and will matter more and more to your lives over time. 

I also hope you'll continue learning about this complex topic at the many news sources available (e.g., peakoil.com, energybulletin.net, flyingtalkingdonkey.blogspot.com) or even come by The Oil Drum (and add us to your blogrolls, if you are so inclined...) and pull up a comment box sometime.

Truth be told, I had planned a couple more posts, but we're having blogger problems over at the home base that need my attention.  And, I still have my headache to boot.

So, what I will prepare for you below the fold is a discussion of alternate energy sources and how they will likely not be enough to solve the problems of our dependence on petroleum and its wonderful energy density or EROEI (energy returned on energy invested).

Continue reading "What a Long Strange Trip It's Going To Be" »

Posted by at 10:31 AM | Permalink | Comments (2) | TrackBacks (1)

Hi there folks, Prof Goose from TOD here.  I woke up with a nasty allergy headache this morning.  So, I'm just going to put together a linkfest for you instead of shrinking and integrating articles for you today. 

These links include discussions of China's proposed acquisition of Unocal, gas taxes/prices, the Democatic New Apollo energy policy legislation, and oh so much more!

(Sorry to be so lazy, but I feel like I am peering through some broken glass, some of which is then going through my eyeballs.)

I hope you'll check them out.  Surely something down there below the fold will interest you.

Continue reading "A Policy Linkfest" »

Posted by at 10:31 AM | Permalink | Comments (5)

Hey, Prof. Goose from The Oil Drum here.  As I mentioned in my first couple of posts, there are many constituent parts of the peak oil/energy issue.  These parts include production, consumption, policy, mass psychology, environmental/green concerns, corporate/business interests, geology and exploration, and finally alternative sources of energy.

One of the things we've been doing at TOD is trying to talk about the little things that we can do to make the ride down Hubbert's Peak a little flatter, allowing society to come in for a soft landing.  If we can reduce the consumption of petroleum-based products, thereby lowering demand of petroleum, we can make the plane at least level out instead of go crashing into the ground at high speed.

The problem is what scholars in economics/political science/public choice call the free rider problem as related to the tragedy of the commons, the idea being that it is completely irrational for individuals to use as much of a public resource (the resource/energy pool) as possible unless they have rational incentive (deeply held societal norms or state coercion to govern the commons) not to do so.

Continue reading "The Small Changes in Consumption Can Make the Peak Flatter...For a Little While..." »

Posted by at 10:09 PM | Permalink | Comments (6) | TrackBacks (1)

Scott Lemieux asked a very good question in the comments a couple of posts ago:

"Roughly what percentage of energy consumption is taken up by the internal combustion engine, and what by energy production? The higher the latter, the more difficult the long-term problems (of peak oil) would seem to me, although perhaps it doesn't really matter much."

The first part of my answer comes from an interview with T. Boone Pickens who started Mesa Petroleum Company in 1956 with a $2,500 investment and built it into the largest independent oil and gas company in America and now runs one of the largest energy hedge funds.  T. Boone does a nice job of explaining why he thinks we are at the tipping point.  (In fact, today he had a couple of quotes about oil testing $70/bbl soon and a couple of other related topics.  He's been right so far.)

"Let me tell you some facts the way I see it. Global oil (production) is 84 million barrels (a day). I don't believe you can get it any more than 84 million barrels. I don't care what (Saudi Crown Prince) Abdullah, (Russian Premier Vladimir) Putin or anybody else says about oil reserves or production. I think they are on decline in the biggest oil fields in the world today and I know what's it like once you turn the corner and start declining, it's a tread mill that you just can't keep up with.  So, when you start adding the reserves in these countries, you're not even replacing what you're taking out..."

Continue reading "Understanding the Current State of Energy Supply and Demand" »

Posted by at 3:01 AM | Permalink | Comments (16) | TrackBacks (2)

If you didn't catch it, read my intro post below. There's also some links in there to primers, etc.

This post, however, will be an attempt to sum up a pretty complex topic.

Hubbert's Peak is reached when demand for oil exceeds production and supply.

Let's be clear, peak oil is not about running out of oil.  However, there is a finite amount of oil in the earth.  At some point, we will have taken half of it.  That is Hubbert's Peak.

So, peak oil is about the end of cheap oil.  Cheap oil has bred a lifestyle of convenience and excess, especially in America that is going to be difficult to maintain once the supply begins to shrink and will perhaps worsen the already growing class divide that exists in the United States. 

The less oil there is available, the more expensive and treasured it will be.  Competition, if not war, over resources is likely.

Combine this idea with increasing demand from modernizing countries like China and India, and you have the recipe for disaster. I am reminded of a quote:

"A third of humanity doesn't want to ride bikes anymore; that has profound geopolitical implications."
--Anne Korin, the co-director of the Institute for the Analysis of Global Security (May 1, 2005)

Continue reading "In Sum, PO in a Nutshell" »

Posted by at 6:36 PM | Permalink | Comments (22) | TrackBacks (1)

Rare as it may be, Tom Friedman's got it right today.  If GM does go down the toilet, and if Toyota does step forward with the plunger, it'd be a good thing for us all.  Pushing Toyota's hybrid technology into all manner of GM vehicles, arming all the GM brands with fuel-efficient engines, the end result would be wonderful for our dependence of oil.  On the other hand, it'd be reallty bad for universal health care as GM is the most powerful and important company begging for relief, and if they leave the scene, so will a lot of the business support.  So in that way, GM sets liberal priorities at war.  But as Kevin notes, guaranteeing business support is pretty tricky, so we'd probably be better off not worrying about it.

Posted by Ezra Klein at 11:54 AM | Permalink | Comments (6) | TrackBacks (1)

Matt's post on the new, highly-publicized study proving that hybrids aren't actually cheaper overstates the case a bit:

A lot of people I know seem to feel that car buyers irrationally underestimate the financial impact of fuel economy when making their purchasing decisions, and that this gives us reason to fear that market mechanisms alone won't make everything balance out in the long run. The fact that people are, in fact, buying hybrids even though they aren't worth the additional money seems to indicate the reverse -- consumers either irrationally overestimate the financial benefits of fuel efficiency, or else have non-monetary preferences (about, e.g., the environment or national security) that factor in favor of buying fuel-efficient cars.

The Edmunds study does not, in fact, say that hybrids are more expensive than other cars, just that they're more expensive than their non-hybrid models. So a Hybrid Civic is more expensive than a normal Civic, and a Hybrid Escape is more expensive than a normal Escape. But Matt's conclusion, that hybrids are thus more expensive, assumes too much. Car buyers probably aren't deciding between the Corolla and the Prius, they may well be deciding between the RAV4 and the Prius, or the Avalon and the Prius. Indeed, there's really no proof that hybrid buyers would otherwise be purchasing economy cars.

Continue reading "How Much is Hybrid?" »

Posted by Ezra Klein at 12:12 PM | Permalink | Comments (23) | TrackBacks (5)

I'm not sure why Matt thinks liberals should stick to environmental arguments when advocating for an end to fossil fuels, nor why he thinks that it necessarily leads to hydrogen, but I have to disagree. Making the environmental case against carbon is only really convincing from a global warming standpoint, and the right's ability to demonize and confuse that case is considerable (for more on this, see Chris Mooney's piece in the new Mother Jones). Last week, Dennis Miller took over the Daily Show with one of his now-tiresome rants, which included a nice little line about how his grandchildren are hardy enough to deal with a temperature increase of 1.5 degrees.

Global warming, because it's complex, weird, and arguing for massive impacts stemming from minor climate changes, is hard to sell on its own. But even if we could, that doesn't make the case for hydrogen, mostly because hydrogen can't yet make the case for itself. As a fuel source, it's simply not technologically mature enough to compete with oil, natural gas, coal, or anything else, really. The fuel cells we've been able to create are failures in both the power production and cost containment departments, and few feel they'll be working for decades yet (and remember, they were supposed to be powering our cars five years ago).

Folks know, at some level, that there's a finite amount of oil in the world. And as prices at the pump shoot skyward, they're primed to believe that we're on the wrong end of the supply curve. Explaining that the costs are only going to get worse, and that the more we use the faster they'll do it, is a great, pocketbook-based argument for why we need to start transitioning off oil. And that's an important point as well; too much hero-worship of hydrogen isn't good. We're likely to need some time on natural gas to give hydrogen time to mature (not to mention that natty gas utilizes our existing oil infrastructure), and we should be investing in wind, solar, biomass, and other research in the hopes of finding other bits for our energy quilt. With oil running down as quickly as it is and hydrogen as far from market as it insists on currently being, any move from oil is going to be a patchwork of power sources and conservation strategies. Arguing for such a strange reformatting of our energy economy simply because the world is going to get a degree or two hotter is, I fear, an almost hopeless battle. Arguing for it because you're not going to be able to afford fuel otherwise (and if we don't the earth'll heat up and we're all doomed) hits with more force.

Posted by Ezra Klein at 12:39 PM | Permalink | Comments (21)

John Cole's got a sensible post on the need for a new energy strategy, but I think he forgets that he doesn't have a sensible party:

It never ceases to amaze me how silly many on the left are about the prospect of drilling in ANWR. Any reasonable solution to our dependence on foreign oil should include:

1.) Domestic drilling
2.) Research for alternative fuel sources
3.) Increased Cafe standards
4.) Radical improvements to clean Coal
5.) Nuclear plant construction and research in storage of nuclear waste
6.) Tax credits and incentives for fuel efficient vehicles, energy efficient appliances, energy efficient homes
7.) Increased refining capacity
8.) Increase oil exploration and smart extraction policies
9.) Conservation campaigns

Exactly right. But here's the problem -- Bush's energy strategy doesn't include that. If Bush stepped forward with that energy strategy -- particularly an increase in CAFE standards -- I'd kill the goddamn caribou myself to help it pass. But he's not. There's been no increase in CAFE standards, no effort to promote conservation, no coherent effort to construct an incentive structure that values fuel-efficient vehicles over inefficient ones, and not enough money to research alternative fuels.

Our addiction to oil is a problem that gets worse the longer we keep it. So the worry of many liberals, myself included, is that ANWR is just another attempt to delay the energy reckoning, and in so doing we'll be make that inevitable day much harder. To complete the addiction comparison, if my friend's terribly addicted to cigarettes and wants to quit, buying him another carton so he can smoke a reduced number each day, if I do it in addition to counseling and gum-chewing and nicotine patches and whatever else, might make sense, but simply buying him another carton of cigarettes without any of the treatment aids that'll help kill his addiction makes no sense at all. ANWR, on its own, doesn't make sense, it's simply a way to feed our addiction. That doesn't mean I couldn't support it as part of a better package, but it does mean I can't support it now.

Update: To be clear, I don't think we should drill ANWR, and in a perfect world I'd prefer we didn't. But despite my opposition, I do realize that a workable energy package will need to satisfy those who believe we should still be drilling towards independence, not only those who argue for the end of fossil fuels. As such, I'd support ANWR in order to pass a larger, more visionary package. That package, however, has not materialized, and until it does there's no good reason to support drilling the ANWR.

Posted by Ezra Klein at 3:23 PM | Permalink | Comments (22) | TrackBacks (1)

The Oil Drum gets it right:

Simplistically there are two approaches a government can take to a crisis. They can do something about it, or they can do nothing. Back in the days of President Carter the nation tried the first approach when faced with an energy crisis, this time we are trying the second.

For a detailed analysis of why that is, check Michael O'Hare's analysis of Bush's energy proposals. The basic problem is that Bush is abandoning energy reform to the free market, which really isn't going to do the trick. The idea that we can simply drill our way to safety is flat insane, and here's why: No expert believes ANWR, or anywhere else in America, will provide the sort of superwell capacity that'd free us from foreign oil. It just won't happen. That means we've got to discover more foreign oil, even though discoveries are falling, the size of the discovered wells are falling, and many of the sites we currently rely on are slowing their production.

But let's bracket all that for a minute. New oil discoveries don't just need to sustain our mostly flat consumption -- they need to feed the growth of China and India. China, for their part, is using 850,000 more barrels per day. That means, every morning, China's need for oil is 850,000 barrels higher than it was the day before. So while we're trying to supply ourselves with petroleum in a world where discoveries are drying up and production is dropping, China is demanding an absolutely staggering, and ever-growing, amount of crude.

And this isn't just an energy issue, China's needs have serious, and seriously problematic, geopolitical consequences. Because they have to get more fuel, and because most suppliers are tied up meeting our demand, China's having to cozy up to providers who we've left alone, which means countries we've tried to economically isolate. So Iran is now a major trading partner and a key source of China's oil and natural gas. That means Iran now has a non-EU customer that allows them to blunt the economic pressure Europe and America can apply, making our efforts to kill their nuclear program essentially hopeless. Not only that, but China's got a security council veto, which has not only found itself working in Tehran's favor, but also in Sudan's, another important source of China's fuel imports.

Bush's efforts don't move us off oil, they just pretend we can find more. We can't. And even if we did, it wouldn't be enough. There's too much demand emerging for a resource whose supplies are falling -- the economics don't work out. So what we're doing, in the final summation, is essentially nothing. We're hoping things change, or that the market does the work on its own. But the market can't go drop because China and India ensure demand is going to continue skyrocketing. The only sane option is to try and reduce our oil usage, thus freeing up more stable providers for China; and to try creating technologies that can help both us and developing nations exit the oil era. Simply doing nothing, alternatively, is a very, very, bad strategy.

Update: By the way, want to know the easiest test around for judging the seriousness of an energy plan? Watch for whether or not it mentions an increase CAFE standards. If it doesn't, you have another "let the market do its magic" piece of politician pabulum. Bush's didn't.

Posted by Ezra Klein at 2:36 PM | Permalink | Comments (22)

Sigh. The Weekly Standard is right. The gas tax is actually a bad idea. I've advocated for it in the past, and many have done the same recently, but it's a poor way to deal with the energy crisis.

The gas tax fails because it penalizes folks for conditions outside their control. We generally imagine the tax as nailing those morons peering down from Hummers, but most of the affluent, insecure drivers who're purchasing a tank for their morning commute do so fully aware that the gas bill will sting. They can take the hit. But the gas tax disproportionately hurts two other groups who don't deserve it: the poor, and the rural. The former often drive inefficient, older vehicles, and are simply less able to use them when gas prices and taxes rise. The latter don't have public transportation options and often have to go much farther to complete basic tasks, like food shopping or taking their kids to school.

And all that'd be okay if there was some compelling evidence that a gas tax would seriously cut down on driving, but there isn't. Demand for driving is less elastic than we like to think, and it's been proving itself thus in the past few months. People's lifestyles revolve around the convenience of cars, and if they possibly can afford it, they will pay quite a bit to avoid slowing the odometer's daily advance. Unless we jacked fuel up to $7 a gallon, we're not going to seriously dent road habits. And since the only tax that's in any way possible a 25 or 50 cents, this'll be nothing but a regressive revenue raiser -- you're not going to solve the oil crisis.

But when trying to cut our crude consumption, it's important to remember that the problem is less how much we drive and more what we drive. The average consumer, when making a purchase that stretches far into five digits, doesn't usually think about lifetime costs. They're worried about the rebate they can get at the dealer, not necessarily a difference of five miles-per-gallon. So Explorers and trucks suffer very little -- normally, at least -- from their fuel costs because consumers are a bit near-sighted when evaluating costs. But that's what we need to be changing -- we can't wean ourselves off oil so long as Hummers and Explorers sell. And so the trick is incorporating long-term costs into the sticker price.

Now, your friendly neighborhood conservative will point to evidence that sales of gas guzzlers are slowing down already and tell you to sit back, have an iced tea, and let the free market take care of it. Not good enough, we need things to change now. If the government wants to do something to reduce our oil usage, start by slapping a serious feebate on auto purchases. Heavy cars and gas guzzlers get a $3,000 tax tacked onto the price, and hybrids and economy cars get a $3,000 rebate on theirs. Detroit gets a fat sack of money to move quickly and smoothly into the hybrid business, folks see the savings upfront and thus make more energy conscious car decisions, and we use way less fuel. No one, save those who need huge cars for their business, is hurt by circumstances outside their control. But even they'll only be temporarily penalized as the market will beg for fuel efficient trucks and SUVs (like the Ford Hybrid), and automakers will race to place them in showrooms.

So the Standard is right -- no gas tax. What we need isn't to penalize drivers for decisions they've already made or situations they have no control over, but to tweak the market a bit and bring long-term costs to the consumer's attention when they can still do something about them. A nice, fat feebate does exactly that.

Posted by Ezra Klein at 3:10 AM | Permalink | Comments (165)

So the new Bush energy plan (not, to be clear, the atrocious energy bill). It's not really bad, just kinda lame. I mean, yes, we do need to break through the impasses that are keeping nuclear energy plants and liquid natural gas terminals from being built. And the hybrid car subsidy is certainly a good thing. Neither am I really against constructing a few more refineries. But for a president who prides himself on bold strokes and towering ambition, this is kid's stuff. This is pecking your date on the cheek before drinking a warm glass of milk and going to bed. This ain't, in other words, shit.

The affordable oil's gonna run out, kids. Whether it's now or later, it's riding into the sunset as we speak. Bush says:

"Over the past decade, our energy consumption has increased by more than 12 percent, while our domestic production has increased by less than one-half of 1 percent," he added. "It's now time to fix it."

But even that overstates our abilities, Our production, after all, doesn't feed all our demand, we import vast amounts of energy. So 1% of demand growth is far larger than 1% of production growth -- so we're doing even worse than that quote lets on. Which is why it's so disappointing that, aside from building more nuclear plants and more LNG terminals (which really doesn't matter too much, as we're peppering Baja California with them anyway), Bush's plan does nothing to lessen our dependence on oil. Even the hybrid credit is minor, particularly when you consider the atrocious write-off businesses get for gas guzzlers when they claim them for professional use. Savings on a Porsche SUV top $33,000! Try getting that on your Honda Insight

There's nothing in Bush's speech about conservation, nothing about a major initiative to fund R&D, nothing about the need for Americans to try and cut their usage of gasoline, nothing, in fact, that'll have any long-term impact on the situation. What we have is a politician offering a pro forma response to a high gasoline prices, nothing more. There's no vision, long-term planning, or even new ideas in this proposal, and so it contains nothing to get excited over.

I've said it before, but liberals should be truly grateful -- from a political standpoint -- that Bush isn't a better politician. Where he smart, he'd schedule a major speech, announce that he's letting some of his tax cuts lapse and would be pouring the billions in savings into weaning us off foreign oil and pushing our economy towards a more sustainable perch. Massive subsidies for hybrids, financial assistance so Detroit can quickly develop hyper fuel-efficient vehicles, a well-funded R&D program, financial incentives for conservation, subsidies for renewables (like wind and solar), and so forth. If he did that, his numbers would shoot through the roof. As it is, he'll muddle along, with his deficiency in the vision department screwing not only the country, but himself.

Posted by Ezra Klein at 5:33 PM | Permalink | Comments (12) | TrackBacks (2)

The New York Times has a tidy little editorial on the train wreck that is the House Energy Bill. Read it. But midway through, the piece gives in to the sort of fresh-faced naivete that makes you wonder who put a newborn in charge of writing opinions for the nation's preeminent paper. Witness:

The House is moving quickly and with sad predictability toward approval of yet another energy bill heavily weighted in favor of the oil, gas and coal industries. In due course the Senate may give the country something better. But unless Mr. Bush rapidly elevates the discussion, any bill that emerges from Congress is almost certain to fall short of the creative strategies needed to confront the two great energy-related issues of the age: the country's increasing dependency on imported oil, and global warming, which is caused chiefly by the very fuels the bill so generously subsidizes.

And unless drug dealers take a stand against drugs, kids will continue to use! Watching the Times scratch the dandruff from their hair and wonder why the Republican-led House is pushing such a myopic snarl of industry giveaways and poor policy is bad enough, reading their pleas for Bush to sweep in and save the day is unforgivable. This bill may as well be authored by the President himself. He's not going to dive in and save it, hell, he probably thinks the environmentalists got too much out of the deal.

The editorial identifies two main problems in our energy use -- dependence on foreign oil and the onset of global warming. I'd change the first to "dependence on oil", but why quibble? Either way, for them to ask the heavens why Bush isn't demanding a bill that better addresses those issues is frankly insane. Here's a guy who made his fortune as an oil man, who's got a legendarily snug relationship with the Saudis, who's made no effort to wean America off oil and in fact helped kill the revised CAFE standards which would've done it. And as for global warming? Are you kidding me? The President is generally unwilling to admit it exists, and when he does allow for some form of it, he advises Americans to enjoy their increased Summers. He killed Kyoto and replaced it with a voluntary -- yes, voluntary -- policy that sought to reduce greenhouse gas intensity, not total emissions. So even if companies took his advice and stopped raiding the cookie jar because they're good folks, they'd still be taking cookies. That's because a reduction in intensity still means an increase in total emissions. Thanks, Dubya.

But I don't expect anything better from George. What I do expect is that the New York Times, which has offered excellent coverage of the policies in question, won't pretend Bush has an enlightened view of the environment when his actions have been troglodytic. Leave that crap to Greg Easterbrook, and do what you're supposed to -- hold Bush accountable for the tone he's set. If reasonable energy policy mattered to him, he'd force Congress to create it. It doesn't, he hasn't, and he should be held culpable for the failure.

Posted by Ezra Klein at 10:55 AM | Permalink | Comments (6) | TrackBacks (2)

America is very, very stupid if they keep opposing the natty gas pipeline between Iran and India. Aside from the points Perkovich and Prasad bring up in their op-ed (clean gas for India, cooperation between India and Pakistan, development of Iranian natural gas, rather than nuclear, resources), tying Iran to so much Indian revenue would create another point of pressure that can be brought to bear when Iran wants to misbehave. If we can make a deal with India that we'll throw our support behind the venture (and maybe help them out in some other venues) so long as they pledge to use their economic influence to keep Iran in line, we'd have a best of both worlds situation. India would have some clean energy that wouldn't destroy their -- and our -- environment and Iran would have a partner who they'd need to remain in good standing with and who could thus demand some degree of responsible behavior from them. Blocking this pipeline out of simple spite would be the most myopic, short-sighted move imaginable.

Posted by Ezra Klein at 3:12 PM | Permalink | Comments (19)

Matt Yglesias and Brad Plumer are talking about oil's impact on the collapse of the Soviet Union. Piffle. Those discussions are so 1993. The real cutting-edge blogger-alarmism is over natural gas, of which over half the known reserves are in Russia and Iran. Which is why we should be so remarkably unhappy that Tehran and Moscow have been slowly, carefully, and happily drawing closer to each other -- that's bad stuff. We're going to be needing natural gas, more than anything else it has the potential to soften the changeover from oil -- many call it a "bridge fuel". But America's natural gas reserves have already peaked, and while there's an enormous amount of the stuff out there, it is, if anything, in worse spots than oil. Concentrating so much of it in autocratic Russia and anti-Western Iran is really a recipe for trouble. It gives Russia cause to defend and protect Iran because the two together can dictate the market, and it gives Iran room to be, well, Iran.

In all the criticism of the Saudi-American relationship, few realize quite how well it's served us. By acting as guardian for the world's primary oil producer, we've been able to control, to a large degree, OPEC's vicissitudes, because the only country with enough oil to counterbalance the others believes their survival rests primarily on our good intentions. Replace Saudi Arabia and Kuwait with Iran and Russia and things get hairier. Neither country owes us anything, Russia is far too big to kick around, and Iran's government hates us with a fury few can match. So not only can't we push around the market but neither of the major producers have our best interests (even if for selfish reasons) in mind.

Better yet, watch China real close here. On oil again, we've always had favorable terms and the best deals because of our special relationship with Saudi Arabia. But hold just a second -- Iran and China, pretty chummy, no? Russia and China, no bad blood there, right? China's a massive customer who can be easily played of the US to enrich Russia, Iran and to force us to buy on their terms. Over the last few decades we've been such a crucial consumer of oil that the market reacted to us as much as the producers. OPEC had limited leverage (we broke them in the 70's) against the US because there was no massive buyer to run to if you stopped selling to us. With China's development moving ever quicker, they're going to want some electricity over there. Which means some natural gas. Which means a lot of it. Which means we're not the only game in town anymore.

Cheers!

Posted by Ezra Klein at 1:54 PM | Permalink | Comments (10) | TrackBacks (1)

Kevin Drum dismisses Kunstler's book The Long Emergency on the grounds that he tries to explain most everything through entropy. Well sure, the blatant misappropriation of physics concepts is one reason to dismiss the guy's post-apocalyptic predictions, but why stop at just one? How about the fact that Kunstler really isn't an oil expert? He was a staff writer for The Rolling Stone, published a string of (self-described) bad novels, and then wrote a few books on the crushing soullessness of suburban architecture. Hearing him confidently predict the end of civilization definitely has a crazy-guy-on-Venice feel to it.

But no, you say, Rolling Stone published excerpts from the book, and if RS thinks they have merit, they probably do. Or at least they would, if Kunstler hadn't worked for RS, thus pulling that appearance into question. But maybe pseudo-physics and lack of credentials aren't enough for you. Maybe you still need one last piece of evidence that it's not quite time to head for the hills. Well, here's how Kunstler ended his piece in Rolling Stone:

These are daunting and even dreadful prospects. The Long Emergency is going to be a tremendous trauma for the human race. We will not believe that this is happening to us, that 200 years of modernity can be brought to its knees by a world-wide power shortage. The survivors will have to cultivate a religion of hope -- that is, a deep and comprehensive belief that humanity is worth carrying on. If there is any positive side to stark changes coming our way, it may be in the benefits of close communal relations, of having to really work intimately (and physically) with our neighbors, to be part of an enterprise that really matters and to be fully engaged in meaningful social enactments instead of being merely entertained to avoid boredom. Years from now, when we hear singing at all, we will hear ourselves, and we will sing with our whole hearts.

It's like a Hallmark card to a luddite. There's plenty to worry about with oil, from economic turmoil to war over resources. But anyone confidently predicting the dispersion of the human species into a set of agrarian communities that survive only through hope and the uplifting power of song, well -- you can probably find yourself some better sources...

Posted by Ezra Klein at 5:01 PM | Permalink | Comments (21) | TrackBacks (2)

I realize you guys have been hearing about "peak oil" a lot lately -- kinda like when everyone began talking about Social Security bend points and wage-indexing and ZZZZzzzz. But though you might be bored, you don't have to be confused. At least, not if you go read this quick and dirty primner on the subject.

Via The Oil Drum.

Update: So long as I'm doing oil links, this tsunami analogy is pretty spot-on. As Grouch & Eligh would say: Time -- time is of the essence.

Update 2: I'm just going to condense today's oil-related posts into this thread, even though they're not all related. Matt, I think, misunderstands something in his piece on Cartel economics:

if every OPEC member cut production by 20 percent they'd all be better off. But any given OPEC member would be even better off if the whole cartel agreed to cut production 20 percent, but then your country went around and cheated on the quota. So if you cut the quota, everyone will just cheat, and everything will stay the same. This is easy to see if you look at how the quotas got so high in the first place. What happened is that they used to be lower, but everyone was cheating, so OPEC raised the official quota up to what everyone was, in fact, producing in order to maintain the illusion of control. So the profit-maximizing case for deliberately provoking a peak oil scenario is a non-starter.

No no no. The problem, now, is that other countries don't have the output capacity to undercut their competitors (partially because the quota, as Matt says, is so high). That wasn't true 15 years ago when Saudi Arabia could flood the market in cheap oil. Back then, a fair number of oil producers could counterbalance any spigot-tightening by their buddies. For instance, when Iraq tried to hike the price of oil to fill the coffers Saddam depleted fighting Iran, Kuwait flooded the market so as to keep their neighbor weak. That was the whole "economic warfare" thing Saddam used when justifying his invasion.

The problem is that the Saudis and Kuwaitis and the rest no longer have the ability to drown the oil market. Their production capacity has significantly dropped, the current output is too high, and their reserves are depleting. They're not going to try and deplete them faster so they can make less money on their crude, and they don't, in any case, have the pumping capacity to completely balance out a 20% cut by Iran or Venezuela. Worse, they may not even have the capacity they thought they had. The Saudi's superfields, which account for 90% of their oil, are depleting much quicker than was thought. That'd be okay if the Sadis were finding new superfields. They're not. In any case, the Saudis are pumping at 10.5 mbd. Over 12.5 will damage their fields. They just don't have the excess capacity to deal with oil shocks.

What that means is if Iran or Venezuela decided to cut production, the Saudis would be able to mitigate the shock somewhat, but Matt's wrong to think they have the pumping capacity to stop it. Further, increased concerns over oil scarcity would ensure that the skittish market proved itself resistant to Saudi comfort -- any major upset right now would roil the long-term valuation of oil, because oil, currently, is seriously undervalued. Markets know the peak is coming and future prices are going to soar, so any hint of instability is going to have an outsized effect on prices, as it'll take into account not just the current scarcity but also expectations of future, more serious, and unending production cuts -- in other words, the passing of the peak. So Kevin's right, it would be $100+ a barrel no matter what the other producers did.

That said, I still don't believe that Iran, Venezuela, or any other country will provoke an oil shock. But it's not because the OPEC cartel can undercut itself -- it's precisely because they can't. Read my post from this morning for more on that.

Posted by Ezra Klein at 1:44 PM | Permalink | Comments (4) | TrackBacks (1)

Kevin's explanation of why oil prices are cause for severe concern is vintage Drum: informative, well-written, and containing a graph. Read it. But I think he gets something wrong in his evaluation of OPEC's incentives:

OPEC has the capacity to supply about 30 mbd. Question: what incentive do they have to continue pumping this amount? Economically, they have very little. If they cut production by 20% (6 mbp), that would reduce global supply to 78 mbd. Prices would immediately double to around $100/barrel, maybe even higher, since there would be no other source to make up the shortfall. As a result, OPEC's revenues would skyrocket — not all at once, since most oil is delivered under futures contracts, but soon enough. In addition, most Middle Eastern fields are being overproduced right now, so cutting production would have beneficial long-term effects as well.

Kevin goes on to argue that Saudi Arabia used to be a buffer against this because they could simply flood the market with cheap crude, but they don't have such powerful production capacity anymore and so aren't as able to regulate the industry*. In addition, Iran and Venezuela could care less about a recession in the West, so they might go for the short-term profits over our economic stability. The counter-argument is our capacity for a military response, but we can't really do that right now thanks to our deployment in Iraq, so what's to stop them?

Well, lots. Despite the skyrocketing costs of oil, the market hasn't priced oil commensurately with its finiteness. That'll change reasonably soon (as Kevin notes, the question is whether that happens gradually or suddenly), but it hasn't yet. That undervaluation of oil has allowed most economies to stroll along without really worrying about what comes after petrol or getting serious about reducing their reliance on it. An oil shock changes all that. Suddenly, life after cheap oil becomes a policy reality -- which is the worst possible scenario for OPEC, though probably one of the best for America.

There are a lot of ways to reduce our economy's reliance on oil. We can't yet end our dependance (at least, nobody but Amory Lovins seems to think we can), but we can reduce our usage in a hurry. There's precedent for that -- when OPEC tried to jack up prices in the 70's, they, not we, turned out the losers. Between 1977 and 1985, we cut our oil usage by 17% while growing our GDP by 27%. Not too shabby. During that period, oil imports fell by 50%, and imports from OPEC by 85%. It hurt, sure, but them more than us.

Continue reading "Why OPEC Needs America Fat and Happy" »

Posted by Ezra Klein at 3:53 AM | Permalink | Comments (18)