Truthi-Samuelson Strikes Again

Robert Samuelson has a real talent, a real expertise in turning fact into truthiness when it comes to the economics of energy and global warming issues. Whether arguing the futility of doing anything about Climate Change (see also J’Accuse, Robert Samuelson, J’Accuse!) or laying out a path for dealing with gas prices, Robert J Samuelson’s truthiness provide recipes for disaster rather than sensible policy concepts.

With Start Drilling Samuelson is pandering to George W. Bush’s sad parody of energy policy as enunciated in his press conference yesterday and providing a sad parody of sensible energy concepts on the opinion pages of The Washington Post.

In this OPED, as with any good truthiness attack on sensibility, Samuelson mixes fact, sensible comments, with near lunacy.  Let us take some time to deconstruct his words and thoughts.

What to do about oil? First it went from $60 to $80 a barrel, then from $80 to $100 and now to $120. Perhaps we can persuade OPEC to raise production, as some senators suggest; but this seems unlikely.

Not only does this seem unlikely but we should remind ourselves that this is their oil, their resources, their ‘money in the bank’ (so to speak).  They have no obligation to be pumping it for our benefit. With Peak Oil staring us all in the face (which suggests that they might not be able to pump faster), why give up better profits tomorrow for lower ones today?

The truth is that we’re almost powerless to influence today’s prices.

Basically true. Without a massive effort at demand destruction, with serious leadership behind it and spreading globally, there is little prospect for serious (and enduring) reductions in gasoline prices even as some politicians (McCain, Clinton …) seem to be pandering toward an electorate that doesn’t seem to understand this painful truth.

We are because we didn’t take sensible actions 10 or 20 years ago.

How about because, 27 years ago, a man named Ronald Reagan entered the White House and began the destruction of the paths toward Energy Independence that Jimmy Carter had begun?  Many “sensible actions” were begun in the face of the Arab oil embargoes.  Who, Robert, in US domestic politics, bears responsibility for stopping these moves?  Want to name some names?

If we persist, we will be even worse off in a decade or two.

That is right, we must begin actions to change our collective paths NOW or else the situation will only worsen.

The first thing to do: Start drilling.

No.

NO! 

NOOOOOOOOOOOOO!!!!!!!!!!!!!!!!!!!!!

The Energy world is a holistic system-of-systems.  While Robert wants us to focus on “supply”, this is not the arena of greatest opportunity.  Just as with Negawatts (demand destruction for electricity), reducing demand via efficiency, offering alternatives, and getting people to conserve is far (FAR) more cost effective than trying to deliver additional supply. 

This is not say that oil exploration cannot and should not occur, but the absurdity of arguing that this is the first step is truthiness moving to idiocy.

It may surprise Americans to discover that the United States is the third-largest oil producer, behind Saudi Arabia and Russia. We could be producing more, but Congress has put large areas of potential supply off-limits. These include the Atlantic and Pacific coasts and parts of Alaska and the Gulf of Mexico. By government estimates, these areas may contain 25 billion to 30 billion barrels of oil (against about 30 billion barrels of proven U.S. reserves today) and 80 trillion cubic feet or more of natural gas (compared with about 200 tcf of proven reserves).

As an an economist, Samuelson might have heard the term “reserves”.  Are not these areas “reserves” for future generations?  Samuelson (and George Bush) advocated bringing these areas on line years ago.  Yes, we could have pumped them out of the ground when oil was $30 a barrell. If we need these barrels in a few decades, when oil is $500/barrell, they will be truly welcome reserves.  If …

What keeps these areas closed are exaggerated environmental fears,

Reminder, Samuelson does not seem to believe in Global Warming and certainly does not (based on his writings) believe that we should be doing anything about it.  Thus, arguing that we should be trying to keep fossil fuel in the ground is a meaningless line of attack.  And, as for natural areas, oil wells are far more attractive than caribou and fish, no?

strong prejudice against oil companies

It is prejudice to question whether special tax deals given for exploration when oil was less twenty percent of today’s prices still make sense?  Is it prejudice to question these companies expenditure of resources to fight action to deal with Global Warming?  Is it prejudice to want these companies to act as better corporate citizens?  Is it prejudice to question their environmental and safety records?

and sheer stupidity.

Yup … us, them thar folks seaking a bedder futur ar dum.

Americans favor both “energy independence” and cheap fuel. They deplore imports — who wants to pay foreigners? — but oppose more production in the United States. Got it? The result is a “no-pain energy agenda that sounds appealing but has no basis in reality,” writes Robert Bryce in Gusher of Lies: The Dangerous Delusions of ‘Energy Independence.’

Well, this is basically true. We have an ill-informed electorate on energy issues. Ill-informed due in no small part due to misleading information and arguments from people like Robert Samuelson.

Unsurprisingly, all three major presidential candidates tout “energy independence.”

Well, I would prefer “Energy Security” but “Energy Independence” works.

This reflects either ignorance (unlikely) or pandering (probable).

Perhaps pandering, but perhaps also setting the stage for a serious change in direction when it comes to US energy policy. 

The United States imports about 60 percent of its oil, up from 42 percent in 1990. We’ll import lots more for the foreseeable future.

Depends what is meant by “foreseeable”.  With Peak Oil upon us, the potential for dropping imports in the face of competing demand with others who have stronger currencies might be a choice not of America’s own making.

The world uses 86 million barrels of oil a day, up from 67 mbd in 1990. The basic cause of exploding prices is that advancing demand has virtually exhausted the world’s surplus production capacity, says analyst Douglas MacIntyre of the Energy Information Administration. Combined with a stingy OPEC, the result is predictable: Any unexpected rise in demand or threat to supply triggers higher prices.

One of those times where EIA speaks the truth.  The situation is fragile and the fragility portends nothing more than increased prices if there are not some serious changes

The best we can do is to try to exert long-term influence on the global balance of supply and demand. Increase our supply. Restrain our demand.

“Restrain our demand.”  Nega-gallons.  There are paths to reduce our gasoline demand by 50 percent by 2020. Realistic paths. These, however, require real leadership that can be fostered by honest and forceful public discussion (such as on America’s opinion pages).  Want to join that discussion, Robert?

On the other hand, “increase our supply”?  In the face of Peak Oil?  By how much.

With luck, this might widen the worldwide surplus of production capacity. Producers would have less power to exact ever-higher prices, because there would be more competition among them to sell. OPEC loses some leverage; its members cheat.

Maybe, Robert, maybe. Do you think that

Congress took a small step last year by increasing fuel economy standards for new cars and light trucks from 25 to 35 miles per gallon by 2020.

“Small” is right.  Far smaller than it should have.  Want to talk about how the auto industry is sabotaging moves toward meaningful change?

(And yes, we need a gradually rising fuel tax to create a strong market for more-efficient vehicles.)

Okay, at times, in sentences, I simply agree.  Yes. Now, the follow-through: what to do with that tax?  How about fostering energy efficiency (nega-gallons) in the transport fleet and

Increasing production also is important. Output from older fields, including Alaska’s North Slope, is declining. Although production from restricted areas won’t make the United States self-sufficient, it might stabilize output or even reduce imports.

Okay, while I would prefer to see reduced CO2 emissions, Enhanced Oil Recovery (EOR) can both accelerate (deplete faster) and expand (get more oil out) production from existing wells. 

No one knows exactly what’s in these areas, because the exploratory work is old. Estimates indicate that production from the Arctic National Wildlife Refuge might equal almost 5 percent of present U.S. oil use.

Or, roughly about 1.25 percent increase in total global demand, as of now, below the annual growth in demand. And that 1.25%?  How long?  15-20 years?

Members of Congress complain loudly about high oil profits ($40.6 billion for Exxon Mobil last year) but frustrate those companies’ desire to use those profits to explore and produce in the United States.

Aha, the key issue is that Congress should get out of the way of the oil companies? 

Getting access to oil elsewhere is increasingly difficult. Governments own three-quarters or more of proven reserves. Perversely, higher prices discourage other countries from approving new projects. Flush with oil revenue, countries have less need to expand production. Undersupply and high prices then feed on each other.

Yes, they do, in a variety of ways. 

But it’s hard for the United States to complain that other countries limit access to their reserves when we’re doing the same.

This is an interesting point. Valuable even.  Again, however, maybe the move should be away from pressuring for greater production, faster depletion of a limited (and critical) resource, with far more attention given to demand destruction, negagallons.

If higher U.S. production reduced world prices, other countries might expand production. What they couldn’t get from prices they’d try to get from greater sales.

Again, interesting. Samuelson, however, is conveniently leaving out the question as to whether serious increasees in production are even possible.

By the way, one interesting point is that Samuelson conveniently fails to note, anywhere, that it would take years to bring this oil into the market.  How does oil flowing years in the future hit today’s prices?

On environmental grounds, the alternatives to more drilling are usually worse. Subsidies for ethanol made from corn have increased food prices and used scarce water, with few benefits. If oil is imported, it’s vulnerable to tanker spills. By contrast, local production is probably safer. There were 4,000 platforms operating in the Gulf of Mexico when hurricanes Katrina and Rita hit. Despite extensive damage, there were no major spills, says Robbie Diamond of Securing America’s Future Energy, an advocacy group.

The “alternatives to more drilling are usually worse on environmental grounds.”  What a connived comment and statement. Fuel efficiency?  Plug-In Hybrid Electric Vehicles?  Moving our rail system to electricity?  Electric vehicles?  Smart growth? These are worse “on environmental grounds”?

Perhaps oil prices will drop when some long-delayed projects begin production or if demand slackens. But the basic problem will remain. Though dependent on foreign oil, we might conceivably curb the power of foreign producers. But this is not a task of a month or a year. It is a task of decades; new production projects take that long. If we don’t start now, our future dependence and its dangers will grow. Count on it.

“If demand slackens …” In the face of Peak Oil and with the reality of Global Warming, this is what we must strive for, reduced demand. Whether we want it or not, our consumption of oil will fall since we’re using up the Earth’s supply.  The time for us to make choices about how to reduce is running out: choices will be forced upon US. 

“The first thing to do”, Robert?  Reduce Demand! 

And, a reminder to any who reached this far, as per normal, Samuelson has conveniently failed to address some critical realities: such as Global Warming.  Is “drilling” the best answer for this?

Back to George (who also has nothing meaningful to say on Global Warming) and his blame everything on Democratic Party control of Congress:

One of the main reasons for high gas prices is that global oil production is not keeping up with growing demand. Members of Congress have been vocal about foreign governments increasing their oil production; yet Congress has been just as vocal in opposition to efforts to expand our production here at home.

They repeatedly blocked environmentally safe exploration in ANWR. The Department of Energy estimates that ANWR could allow America to produce about a million additional barrels of oil every day, which translates to about 27 millions of gallons of gasoline and diesel every day. That would be about a 20-percent increase of oil — crude oil production over U.S. levels, and it would likely mean lower gas prices. And yet such efforts to explore in ANWR have been consistently blocked.

George and Robert unified in looking to production as the cure for the problem. When you’ve got an addiction, according to these guys, the cure is to find more product rather than do something about the problem?

PS:  For a much better OPED on energy issues, 30 April 2008, one should head to the New York Times and Thomas Friedman’s Dumb as We Wanna Be.

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4 responses to “Truthi-Samuelson Strikes Again

  1. Who would drill America, Samuelson? The multi-national corporations who would then sell to the highest bidder, Chindia – it would do nothing to our volume or security. Robert needs to think thru to conclusion. Just as ethanol – I pay the taxes for the ethanol plant and to the farm subsidy so that the ethanol can be sold to the oil companies who then set the prices. Anyone like Robert spouting dogma should have to follow thru to consequence. Renewable and sustainable is the key to slowing this addiction to oil.

  2. Higher prices will reduce demand.

    As usual, allowing people to choose how much they want to buy, based upon price, and choose what price they will require to sell oil that they already have is the best way to deal with this.

  3. Michael … There is a real problem with a laissez-faire, price-driven approach to dealing with the challenges of Peak Oil (let along Global Warming). The best analysis (Hirsch report) basically shows that this creates a ‘too late’ response, that the market doesn’t enable timely decision-making for optimum response.

  4. Pingback: Drilling the hole deeper! « Energy Smart

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