"Keeping America competitive
requires affordable energy. And here we have a serious
problem: America is addicted to oil, which is often imported
from unstable parts of the world." - George W. Bush,
State of the Union address, Jan. 31, 2006
The price of petroleum continues to
reach new highs, with crude oil prices hovering around $75 a
barrel, and gasoline at the pump in the United States at $3
a gallon. The unrest in the Middle East threatens to push
prices even higher.
It is difficult to imagine
our modern economy without oil. For the past 125 years,
fossil-fuel energy has been as American as apple pie. The
automobile, airplane and much of our modern conveniences are
enabled by petroleum-based products.
But from a historical
perspective, shifts in energy and technology are inevitable.
What is the capitalist case for seriously planning for a
post-petroleum economy now?
• National security: Our reliance
on a consistently available and reasonably priced supply is
inherently risky. But the worldwide search for oil has a
secondary negative impact.
Underdeveloped countries
with sizable oil resources consistently react like vagabonds
winning the lottery, or a decadent hotel heiress. None has
leveraged oil wealth to become advanced industrial
economies.
Of the international trouble
spots, only North Korea is not directly or indirectly funded
by petro-dollars. If oil was worth less, these countries
might still be troublesome, but they'd be far less of a
threat.
• True cost of oil: Despite today's
higher costs, U.S. oil is inexpensive compared with prices
in most Western economies, and compared with historical U.S.
prices in inflation-adjusted dollars. But the pump price
does not include our indirect costs of militarily ensuring
stability in oil producing regions. If the direct and
indirect costs of oil from unstable regions were reflected
in consumer prices, many alternative energy sources would
become more cost effective.
• The environmental business case:
There is a sound business case for being environmentally
proactive. The rising expectations of middle-class consumers
worldwide are a potential strain on resources, but a certain
opportunity.
The essence of capitalism is
looking forward, not fighting to maintain the status quo.
Capitalism's success in spurring economic growth is rooted
in "creative destruction," as described by economist Joseph
Schumpeter.
The success of Toyota and
Honda versus troubled General Motors and Ford is partly
attributable to the Japanese firms' aiming for future
markets (subcompacts in the 1970's, hybrids in the present),
while the U.S. firms stubbornly focused on successful
profitable products (high-margin gas guzzlers in both eras),
and fought attempts to mandate higher mileage standards.
What are the building
blocks of the path toward a post-petrol future?
1. Market driven: Government cannot
effectively mandate disruptive shifts to energy sources of
the future. But it can play a leading role by seeding the
landscape, as it did during the Cold War era by funding
basic research, which became the foundation of Silicon
Valley.
2. Forward looking: Subsidize
future technologies, not current political dilemmas.
Congressional hearings considering using the Strategic Oil
Reserve to stabilize gas prices, or investigating oil
company "windfall" profits, are distractions, not solutions.
3. Non-ideological: Both liberals
and conservatives must become more rigorous yet flexible in
their approach to energy. For the right, glorifying SUV's as
a symbol of liberty is dangerous in an era when we are
threatened by oil-producing countries that fund a range of
toxic societies and ideologies worldwide. For the left,
serious consideration of unpalatable alternatives like
nuclear energy and Alaska drilling should be part of the
solution.
4. Evolutionary alternatives: It is
impossible to predict tomorrow's energy efficiencies
precisely. But a variety of existing technologies have the
potential to reduce oil consumption incrementally, and
together, they can put us on the path to the post-oil era.
Ethanol is one obvious example. And cellulosic ethanol --
made not from corn but from carbon-based waste products such
as switchgrass, sewage sludge and wood chips -- is
attracting a lot of investor attention.
5. Revolutionary
alternatives: Future generations will consider us
wise if we invest additional billions now in basic research,
pursuing radical advances in safer nuclear energy production
and disposal, cold fusion, batteries, and solar, wind and
water-driven energy.
150 years ago, the United
States was a rapidly growing economic and social force, in
the era when coal and whale oil were the energy foundations
of our economy, and petroleum was considered nearly
worthless. In 150 years, our energy sources probably will
make oil the curiosity that whale oil is today.
