March 23, 2008
Oil: Worth Fighting For
What's more sexy than the secret conspiracy by Dick Cheney and the neoconservatives to trick us into going to war in Iraq so Halliburton can grab their oil, sending our boys to war for a couple less bucks per barrel? It's back in the news since commentators have been pointing out recently that we haven't grabbed a whole lot of Iraqi oil in the last five years, so let's clear up a couple points about the oil conspiracy theory:
1) The world doesn't run on conspiracies.
2) It does run on oil.
We'll tackle the small-minded, self-gratification of conspiracy theories elsewhere, and focus on the oil for now. Let's start with a few fun facts about oil and the economy it fuels:
1. We are always on the brink of system failure. Global daily supply exceeds global daily demand by only a few million barrels per day. That's about half the gasoline America burns in a day. So, if Nigeria (which could produce 3 million barrels per day) has a civil war, or Venezuela (which provides 13% of America's oil) won't sell to us, you might not be able to drive to work that day. Remember the Oil Embargo in the 1970's...the long lines at the pump? If those countries go off-line for long enough...
2. System failure would reduce us to cavemen. Manhattan imports its total daily consumption of food every day from food distributors, with much shipped by truck. Although there is some food in the fridge, a disruption of the food distribution system (like a sudden hiccup in the gas supply) would quickly send New Yorkers and everyone else scrambling for sustenance. There would be population movements, spikes in crime, riots, and a breakdown of other systems -- like management of your 401K plan, as Wall Street money managers spend their days driving to the country looking for farmers' markets. A gradual crisis - one that increased gas prices without crashing the system- would still have a serious impact on the cost of living and demographics. We are getting the first whiff of that now, with oil around $100 per barrel. The rest of the economy is as similarly fragile and oil-dependent as food being trucked into Manhattan, and also on a daily basis. Calling it an addiction does not adequately describe the urgency with which we must have that oil.
3. We must avoid system failure. Those GEICO commercials about the cavemen are funny. But if you drive through a slum in Manila and see a dusty, naked 8 year-old girl with four dirty cigarettes in her hand trying to sell them to motorists stuck in traffic (true story), you realize that you'll do damn near anything to make sure that isn't how your 8 year-old daughter makes her living. No one wants to live like a caveman. Does the phrase "nasty, brutish and short" ring any bells?
4. There is no other way. Say what you will about hydrogen fuel cells, cold fusion, solar power, ethanol -- nothing produces as much energy as cheaply and quickly as oil. Remember, we just stumbled across it in 1859, we didn't invent it. Oil itself-- it's inherent chemical and economic properties --are what made it so darn attractive. So just pay more for clean energy? You think you're up for that? You might be willing to drive a Prius and pay a premium on your electric bill for wind-sourced wattage, but China isn't. Nor is India, Indonesia, or Russia - developing economies dealing with severe economic and political pressures. Those four countries alone are nearly half the world's population. They can't afford it. And we might not want them to...
5. The world wants us hooked on oil. Look at the bottom of your coffee cup: it probably says Made in China. Your shirts were probably made in Indonesia. So although you may be willing to stop consuming all those cheap goods made in overseas factories that burn all that nasty oil, and get America off its dangerous addiction, the world needs your business. That coffee cup only cost ten bucks to you, but it's the financial survival of a Chinese family. When America goes into a recession, the world watches with great anxiety. And no, we can't make their factories switch to clean energy either - the investment costs are too high. Who's going to pay for it? You? There's a reason why the big, bad corporations make so much big, bad money: they invest by the billion to build the infrastructure that makes their profits possible. Any idea what it costs to build an ethanol distillation plant? Trust me - you're not up for it. With 120 million underemployed people (Japan's total population) roaming the countryside, China can't afford anything that will worsen its economic situation. And that's not mentioning the unemployed in China.
6. It's not our fault. No one --including the big, evil, multinational corporations-- planned for us to end up in this predicament. That diabolical forefather of the modern oil conspiracy, Henry Ford, designed the first car ever invented to run on ethanol, since at the time, corn was abundant and no one had heard of gasoline, let alone established a system to make it available. But oil was cheap, abundant, and easily recovered. It fueled the industry and economy that lifted millions of people out of poverty. It created jobs, and, long story short, fueled the growth of the wealthiest and most prosperous economic system the world has ever seen. What's not to like about that? (We'll talk about the evils of modern capitalism elsewhere - for now, just admit you that like having an education, health care, minimum wage, your Nikes, and cheap cable TV. Admit it!). It's kind of like the car itself: it's no one's fault that 40,000 Americans are killed by cars every year while fighting to get to work on time - we just got used to their speed and efficiency, and now we can't do without them. So we put in airbags and pass a seatbelt law -- but keep driving. For comparison, 800 American troops were killed each year fighting in Iraq.
7. It doesn't matter what you think about global warming. It's a natural cycle... it's man destroying the planet...it's too early to tell... either way, two things are certain: mankind will not stop burning oil until there is a cheaper alternative; and, we are scaring ourselves into alternative energy research. So, if you think we are destroying the planet, pray that the alternatives become economically viable to the developing world before carbon emissions push us over the tipping point. And if you're skeptical like Michael Crichton (whose book State of Fear details the skeptic's argument against global warming), pray that alternative energy technologies become economically viable to the developing world before politically imposed restrictions on oil push their economies over the tipping point. Remember: China has a Japan of underemployed people sloshing around, and they aren't happy. Global warming may or may not be the end of life on Earth as we know it; either way, the 21st Century is going to be a heck of a ride.
8. It's not a vast conspiracy. We buy the oil, we buy the world's goods, we are the world's police... it kind of seems like we are at the center of everything, so we must be in control of it. Right, Dick Cheney? Wrong. We are no more in control of the world's oil addiction economy than we are forcing people to use their cars for transportation. People make choices, and do what is in their interests. Just ask your state government how difficult it is to create incentives for carpooling, or mass transit. Even when you hold all the cards, you are not in control.
9. Government is big, dumb and slow. You can do a lot with regulations, laws, democracy, a well-regulated economy, but the sheer massive inertia of a powerful government --not to mention the diversity of competing interests in a democracy-- make change --any change-- extremely difficult. Meanwhile, populations (us) and markets (how we spend out money) are agile, responsive, and self-interested. We're a squirrelly bunch, and like to make money. Governments have their hands full just keeping up.
10. Oil reserves aren't the answer. Don't we have mountains full of the stuff in case of emergency? Yes - about 2 months' worth. Not enough to do anything except tinker with the domestic price of oil sold in the U.S. We suck it down as fast as they can pump it out.
11. Avoiding system failure requires cheap and reliable sources of oil. Minor crises, like oil at $100 dollars a barrel, will usually be sorted out by the market. But major interruptions of supplies (like Iraq invading Kuwait, a civil war in Nigerian, instability in the Middle East...) must be avoided to prevent real and substantial chaos in the U.S., Chinese, and every other economy. If you think the war in Iraq is bad, wait until China and India go to war over the last remaining oil fields, and the global economy crashes. No more GEICO commercials --but lots of cavemen.
So, let's summarize: the global economy is a vast but fragile web, all interconnected, and dependent upon a reliable source of energy - oil. There may be plenty of reasons to stop using oil, but we'll run out of it before we sort out all the arguments. In the meantime, fear of environmental crisis (real or imagined) as well as the realization that we will need new energy sources is driving us to develop new technologies. The systems of business, finance and government that make such research possible require that the current economy --the oil economy-- keep humming along productively. If an oil crisis comes on gradually, we can adapt. But if one comes suddenly, there will be chaos. The spigot must remain open, and we --all of us, not just the United States-- must keep the system running smoothly. System failure would be a global calamity that must be avoided. And that is worth fighting for.
Oil: Worth Fighting For
What's more sexy than the secret conspiracy by Dick Cheney and the neoconservatives to trick us into going to war in Iraq so Halliburton can grab their oil, sending our boys to war for a couple less bucks per barrel? It's back in the news since commentators have been pointing out recently that we haven't grabbed a whole lot of Iraqi oil in the last five years, so let's clear up a couple points about the oil conspiracy theory:
1) The world doesn't run on conspiracies.
2) It does run on oil.
We'll tackle the small-minded, self-gratification of conspiracy theories elsewhere, and focus on the oil for now. Let's start with a few fun facts about oil and the economy it fuels:
1. We are always on the brink of system failure. Global daily supply exceeds global daily demand by only a few million barrels per day. That's about half the gasoline America burns in a day. So, if Nigeria (which could produce 3 million barrels per day) has a civil war, or Venezuela (which provides 13% of America's oil) won't sell to us, you might not be able to drive to work that day. Remember the Oil Embargo in the 1970's...the long lines at the pump? If those countries go off-line for long enough...
2. System failure would reduce us to cavemen. Manhattan imports its total daily consumption of food every day from food distributors, with much shipped by truck. Although there is some food in the fridge, a disruption of the food distribution system (like a sudden hiccup in the gas supply) would quickly send New Yorkers and everyone else scrambling for sustenance. There would be population movements, spikes in crime, riots, and a breakdown of other systems -- like management of your 401K plan, as Wall Street money managers spend their days driving to the country looking for farmers' markets. A gradual crisis - one that increased gas prices without crashing the system- would still have a serious impact on the cost of living and demographics. We are getting the first whiff of that now, with oil around $100 per barrel. The rest of the economy is as similarly fragile and oil-dependent as food being trucked into Manhattan, and also on a daily basis. Calling it an addiction does not adequately describe the urgency with which we must have that oil.
3. We must avoid system failure. Those GEICO commercials about the cavemen are funny. But if you drive through a slum in Manila and see a dusty, naked 8 year-old girl with four dirty cigarettes in her hand trying to sell them to motorists stuck in traffic (true story), you realize that you'll do damn near anything to make sure that isn't how your 8 year-old daughter makes her living. No one wants to live like a caveman. Does the phrase "nasty, brutish and short" ring any bells?
4. There is no other way. Say what you will about hydrogen fuel cells, cold fusion, solar power, ethanol -- nothing produces as much energy as cheaply and quickly as oil. Remember, we just stumbled across it in 1859, we didn't invent it. Oil itself-- it's inherent chemical and economic properties --are what made it so darn attractive. So just pay more for clean energy? You think you're up for that? You might be willing to drive a Prius and pay a premium on your electric bill for wind-sourced wattage, but China isn't. Nor is India, Indonesia, or Russia - developing economies dealing with severe economic and political pressures. Those four countries alone are nearly half the world's population. They can't afford it. And we might not want them to...
5. The world wants us hooked on oil. Look at the bottom of your coffee cup: it probably says Made in China. Your shirts were probably made in Indonesia. So although you may be willing to stop consuming all those cheap goods made in overseas factories that burn all that nasty oil, and get America off its dangerous addiction, the world needs your business. That coffee cup only cost ten bucks to you, but it's the financial survival of a Chinese family. When America goes into a recession, the world watches with great anxiety. And no, we can't make their factories switch to clean energy either - the investment costs are too high. Who's going to pay for it? You? There's a reason why the big, bad corporations make so much big, bad money: they invest by the billion to build the infrastructure that makes their profits possible. Any idea what it costs to build an ethanol distillation plant? Trust me - you're not up for it. With 120 million underemployed people (Japan's total population) roaming the countryside, China can't afford anything that will worsen its economic situation. And that's not mentioning the unemployed in China.
6. It's not our fault. No one --including the big, evil, multinational corporations-- planned for us to end up in this predicament. That diabolical forefather of the modern oil conspiracy, Henry Ford, designed the first car ever invented to run on ethanol, since at the time, corn was abundant and no one had heard of gasoline, let alone established a system to make it available. But oil was cheap, abundant, and easily recovered. It fueled the industry and economy that lifted millions of people out of poverty. It created jobs, and, long story short, fueled the growth of the wealthiest and most prosperous economic system the world has ever seen. What's not to like about that? (We'll talk about the evils of modern capitalism elsewhere - for now, just admit you that like having an education, health care, minimum wage, your Nikes, and cheap cable TV. Admit it!). It's kind of like the car itself: it's no one's fault that 40,000 Americans are killed by cars every year while fighting to get to work on time - we just got used to their speed and efficiency, and now we can't do without them. So we put in airbags and pass a seatbelt law -- but keep driving. For comparison, 800 American troops were killed each year fighting in Iraq.
7. It doesn't matter what you think about global warming. It's a natural cycle... it's man destroying the planet...it's too early to tell... either way, two things are certain: mankind will not stop burning oil until there is a cheaper alternative; and, we are scaring ourselves into alternative energy research. So, if you think we are destroying the planet, pray that the alternatives become economically viable to the developing world before carbon emissions push us over the tipping point. And if you're skeptical like Michael Crichton (whose book State of Fear details the skeptic's argument against global warming), pray that alternative energy technologies become economically viable to the developing world before politically imposed restrictions on oil push their economies over the tipping point. Remember: China has a Japan of underemployed people sloshing around, and they aren't happy. Global warming may or may not be the end of life on Earth as we know it; either way, the 21st Century is going to be a heck of a ride.
8. It's not a vast conspiracy. We buy the oil, we buy the world's goods, we are the world's police... it kind of seems like we are at the center of everything, so we must be in control of it. Right, Dick Cheney? Wrong. We are no more in control of the world's oil addiction economy than we are forcing people to use their cars for transportation. People make choices, and do what is in their interests. Just ask your state government how difficult it is to create incentives for carpooling, or mass transit. Even when you hold all the cards, you are not in control.
9. Government is big, dumb and slow. You can do a lot with regulations, laws, democracy, a well-regulated economy, but the sheer massive inertia of a powerful government --not to mention the diversity of competing interests in a democracy-- make change --any change-- extremely difficult. Meanwhile, populations (us) and markets (how we spend out money) are agile, responsive, and self-interested. We're a squirrelly bunch, and like to make money. Governments have their hands full just keeping up.
10. Oil reserves aren't the answer. Don't we have mountains full of the stuff in case of emergency? Yes - about 2 months' worth. Not enough to do anything except tinker with the domestic price of oil sold in the U.S. We suck it down as fast as they can pump it out.
11. Avoiding system failure requires cheap and reliable sources of oil. Minor crises, like oil at $100 dollars a barrel, will usually be sorted out by the market. But major interruptions of supplies (like Iraq invading Kuwait, a civil war in Nigerian, instability in the Middle East...) must be avoided to prevent real and substantial chaos in the U.S., Chinese, and every other economy. If you think the war in Iraq is bad, wait until China and India go to war over the last remaining oil fields, and the global economy crashes. No more GEICO commercials --but lots of cavemen.
So, let's summarize: the global economy is a vast but fragile web, all interconnected, and dependent upon a reliable source of energy - oil. There may be plenty of reasons to stop using oil, but we'll run out of it before we sort out all the arguments. In the meantime, fear of environmental crisis (real or imagined) as well as the realization that we will need new energy sources is driving us to develop new technologies. The systems of business, finance and government that make such research possible require that the current economy --the oil economy-- keep humming along productively. If an oil crisis comes on gradually, we can adapt. But if one comes suddenly, there will be chaos. The spigot must remain open, and we --all of us, not just the United States-- must keep the system running smoothly. System failure would be a global calamity that must be avoided. And that is worth fighting for.
