Monday, March 14, 2011

Dilbert, Light Bulbs, and Oil

Like I sometimes do with the newspaper, let's skip over the serious stuff and go straight to the funnies.

This is, in a nutshell, the problem with our energy policy - the inability to weigh long term costs properly. Yup, it's going to cost a whole freakin' boatload of money and creative destruction to upgrade the electrical grid, bring renewables up to a very large fraction of the energy mix, scrap inefficient equipment with newer stuff, alter our whole infrastructure to not rely on cheap petroleum, and accept that leveling West Virginia mountaintops and shattering the bedrock is not actually a better alternative to funding up petro-dictatorships on credit. A fair bit of behavioral and attitude changes will be necessary, too.

Sadly, a whole pile of economic arguments, mountains of scientific data, the informed opinion of every regulatory body in the government, and most of the U.S. military doesn't seem to count for much against the overwhelming burden of ideology in Congress. The sooner we accept the big transformative changes that are necessary, the better off we'll be.

Most importantly: even if it costs a boatload of money and pain to start now, it will be a whole hell of a lot cheaper and easier than facing crisis after crisis when they hit. Our collective inability to internalize this notion, and demand that our elected leaders have this kind of long term policy, is a ruinous course.

Which brings us to my next exhibit of human irrationality: apparently there is some hubbub about the impending demise of the traditional 100-watt incandescent light bulb. I'll admit: they give off such pleasing color, and have been around for so long, that it's hard to let go. On the other hand, the engineer in me knows that they are only about 5-10% efficient at converting electricity to light and makes me eager to relegate them to the dust bin of history. Who actually likes being so willfully wasteful? If people were rational, we wouldn't need to worry about government intrusion. As a matter of national pride, we would have been dumping incandescents into Boston Harbor years ago and clamoring for alternatives.

And incandescents are wasteful not only of energy and the environment, but of the owner's hard earned money. Compact fluorescents, even the highest quality ones (indistinguishable from incandescents), can pay for themselves in a year or two. The LED lamp you buy today may well be the last light bulbs you ever buy for a particular socket. Yet there are people so worked up about an overbearing government that they are stockpiling 100-W incandescents for the upcoming end times (of Edison's little wonder). Do they not realize that they are spending roughly the same amount that it would cost to upgrade all their lamps to CFLs and LEDs? Or that their stockpile won't last as long are modern bulbs, and they'll spend 5-10x for the electricity over that lifetime?

And now for our third exhibit: rising gas prices. It seems to me that we've been here before quite a few times. Should we be surprised at this point? Outraged? If there is outrage, it ought to that nothing has changed since the last time three years ago. In fact, rather than repeat myself with much tedious typing, I'll just point you to what I said about it then.

The conventional wisdom, particularly from the wingnuts of the nut wing of the Republican party, is that if we just let the oil and gas companies pave paradise expand domestic production, everything will be fine. This position is, more or less, unchanged since the last gas price crunch. Remember Sarah Palin's big energy policy speech before the election? Neither does anyone else, but the echo chamber of "say it enough times and it'll be true" carries the message on to this day.

Here is a very simple calculus: the world consumes nearly 90 million barrels of oil per day. The U.S. consumes about 20. We produce about 6. 90-20-6. If we drilled everywhere and laid pipelines through everyone's backyard, we might be able to extract a few million barrels per day more...for a perhaps a decade, maybe two. Would that bring gas prices back to the heady days of $1/gal? Will we be less susceptible to the fickle nature of the global oil market? Probably not, because by the time we do all that drilling, worldwide demand will probably have expanded by just as much, leaving us more or less right back where we started. 100-25-10. What's worse, this is an energy policy (or, at least, a gasoline policy) that has a lifetime of a decade or two - less than a generation.

90-20-6. Before any politicians opens their mouth about energy policy, they should preface it with those numbers. Anything less is pandering, ignorance, or deception.

What's my solution: use economics. People are irrational in their behavior. Failure to weigh long term costs is just one example of that. But one lesson from the last gas price crunch that continues today is that when gas gets expensive, people use less of it. What cars are manufacturers and consumers most interested in today? Hybrids and electrics - even if they can't yet get behind the wheel of one.

If we ultimately want to use less oil, making it more available by increasing its supply is not the way to accomplish it. That is an axiom of economics. One way to use less oil is to make the alternatives less expensive, so that people choose to use less of it. That could work, but we would need to have at least one, and probably many, really cheap replacements for oil available today to make the compelling argument for a whole economy to switch over. I see nothing on the horizon to indicate that.

No, if we want to kick the habit, then make gas expensive. This, too, is an economic axiom, and it can be put in place quickly. It works with cigarettes: higher tobacco taxes lead to lower smoking rates. Turn gasoline into the latest vice, and tax it accordingly. The increased gas price can, and should, be offset by lowering taxes on a whole bunch of other things such as the income tax - possibly even making it revenue-neutral. It won't be the end of the world: Europe and Japan somehow manage to get by with gas more than twice as expensive as ours. Shorter commutes get promoted, importing from halfway across the world won't look so appealing, big agriculture's rapacious appetite for petroleum-sourced fertilizer will shift, the economics of alternatives become more favorable, and our road infrastructure gets less of a pounding. Conservatives always want to let the free market figure things out. Let it, but with the proviso that oil is no longer gets a free ride. And essentially it does: the federal gasoline tax is 18.4 cents per gallon, and hasn't changed in years. The price at the pump swings more than that in a week these days.

It would have one additional benefit: at times when the price of oil really is up, a high gas tax provides a way to immediately and substantially reduce the pain at the pump.

Although it may be good medicine, I'll admit the middle of a spike in gas prices is not the best time to introduce such a proposal. The time to do it was when we weren't facing a serious problem: a year or two back, when gas was $1-2/gal less than today. But might-have-beens don't count for much in debate, and even less in policy-making. We ought not to live in the past, even when history can be instructive. We are faced with the challenges of the present. What will we do about it?

If history is any indicator, we'll have another crack at lower gas prices eventually. But, alas, history also indicates that we'll probably skip that opportunity in the pursuit of more demagoguery and grandstanding. There's an election coming up, don'tcha know?

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