Quick! What type of world did you imagine when you were a kid? Did you foresee yourself darting about in a hovercraft much like the cartoon family in the Jetsons? Vacationing on the moon? A lean, mean greener world? How is it that we find ourselves these many years, decades even, down the road and we’re still looking at a society that in so many ways is what it once was: the world that petroleum built? Decades after the Carter-era gasoline shortages, now with the prospect of $6 gasoline looming before us, we have little to show for our grand hopes and great visions. We’re still talking about moving off foreign oil even as the buzzword “energy independence” has become firmly entrenched in our lexicon. So little, so late.
What happened?
Enter another buzzword: “market ready”. This explanation commonly surfaces to explain why an innovation publicized in Popular Science back in the 1970s, test-marketed in the 1980s or touted by industry in the ’90s has yet to materialize. What’s so difficult for us to implement hasn’t been out of reach of others, however. The Japanese have been using bullet trains for over a decade to travel great distances in a matter of minutes, Denmark in the early 1990s harnessed the power-generation potential of cow manure, among other sources, and Brazilians were riding in alternative-fueled buses and cars more than a decade before the trend caught on in North America.
We here in the United States fancy ourselves on the cutting edge of innovation and invention — indeed that our proclivity to bring new tech to the market will keep us economically viable in a cut-throat global economy — so why is it that green technology is market ready for our international neighbors yet a largely unrealized aspiration for us? Worse yet, why are there rumblings that we’re less inclined to care?
The short answer is this: For all the talk of going green our values don’t allow for the accomplishments of the past. Part of the problem stems from a misread of our own history. We forget that major infrastructure improvements were government backed, from the Civil War-era government bonds that financed the first transcontinental railroad to the post-World War II interstate highway system and the subsequent space race that successfully launched us to the moon. In spite of our history — and apparently in place of our collective sense of pride in funding a modern, first-rate society — we have but one seeming priority, exemplified by yet another buzzword: Privatization.
Private investment is idealized, public investment demonized. In spite of the fact that we have universally benefited from the public-private partnerships of the past we’re preoccupied today with either/or solutions. Cautionary buzzwords define the debate for better or for worse. Don’t let government pick the “winners and losers” — Solyndra is the latest poster child for that no-no. Cable news networks and Internet discussion forums have popularized the notion: government doesn’t produce anything valuable, certainly not jobs. Never mind the apparent contradiction — that this notion poorly reflects how Americans working for defense contractors feel nor their predecessors who fed their families during the Great Depression building community colleges, among other things, as part of FDR’s Works Progress Administration.
Today’s debates aren’t characterized by nuance, reason or historical accuracy — they’re about taglines, talking points and buzzwords.
For all the nonsensical generalizations that preoccupy the public mind there are lesser appreciated reasons why there is more talk of change than change itself. Take the high cost of oil. The media blames geopolitical instability in Iran, specifically, and the Mideast in general. Conservatives blame environmentalists for prevailing against refinery permits and the Obama Administration. Overlooked in the scuffle is a clue to a far less appreciated explanation — one that appears in an unexpected place: “The Undefeated“, a documentary on Sarah Palin. Point Thomson, located on Alaska’s North slope, lay idle 30-some years even as the State of Alaska awaited lease-holder, Exxon Mobile, to tap its vast resources. The documentary credits Governor Palin for putting a stop to “petro hoarding” by threatening to revoke the company’s lease for failing to make revenue gains for the State. Then, and only then, did Exxon Mobile sink their drill bits.
So what does this have to do with hovercraft, high-speed rail and green energy — the lofty advances we think so highly of yet see so little of?
A lot.
It turns out we’ve been wrong in how we frame the debate. True, environmentalists — and just about anyone who doesn’t want a refinery in their own backyard — make it difficult to gain permits and to expand much-needed domestic energy production. And yet this too is true: Old energy benefits from such forces.
The very groups Big Oil demonize as “bad for business” are, in fact, good for profits.
The usual conservative versus liberal scapegoating would have us believe that each is the source of the other camp’s problem. Partisan infighting obscures a salient fact hiding in plain sight: Petroleum is more profitable when supplies are scarce. That’s true when scarcity is artificial — a consequence of deregulation-enabled asset bubbles and paper-based commodities speculation. It’s true when there is geopolitical instability in the Mideast or elsewhere. It’s true when mother nature extracts her revenge. It’s true when a man-made disaster occurs. It’s true when poorly crafted regulatory controls choke off competition. And if we are to believe that “peak oil” plays a role — real or imagined — that, too, contributes to scarcity. Whatever or whomever takes the blame, the result is the same: The more costly, dangerous or difficult it is to drill, refine, transport and sell petroleum, the more costs are passed on to consumers — and the higher profits potentially become.
Whether by greed, necessity or conspiracy we arrive at the same place: pain at the gas pump and the rising cost of everything else. In a word: Inflation. Most Americans reportedly believe the Obama Administration could do more to stop the cascading cost of gasoline while others point out that high gas prices benefit the president’s goal of reduced consumption. But why would the President take such a hit to his approval ratings with an election around the corner? Clearly the Administration has a number of tools at its disposal: reform taxation policy, release strategic oil reserves, ease drilling restrictions or renegotiate leases in much the same way Governor Palin did. And yet there’s a competing factor that can’t be ruled out: Just as high prices serve the interests of sustainable energy backers, it paradoxically serves the interests of Big Oil, strange bedfellows though they make.
The economic ramifications may begin at the pump but they don’t end there. Capital is another factor. Renewable energy, to the extent it is more efficient, represents less profit (certainly at a slower pace). Less profit or a longer-return-on-investment equals less interest on the part of private equity and venture capital firms. Without government subsidies or substantial tax breaks to sweeten the deal, investors are bound to shy away from substantial green energy infrastructure investments. Investors often desire large-scale returns, which may necessitate a large-scale project. This objective, in turn, may be at odds with the resource- and location-dependent characteristics of green energy — a patchwork of solutions consisting of wind, water, solar and geothermal technologies, which may not be up to scale or may add undesirable complexity and cost. And there’s yet another problem: Investors typically seek a relatively quick return on their money. Alternative energy lends itself to the perception that consumers are likely to pay less for a more plentiful resource — all of which spells less profit, particularly in the short term. In other words, the best way to hand Big Oil a brown energy monopoly is to privatize green.
If we wholly privatize progress we’re likely to see very little of it.
Solyndra has become a case study in what Big Government does to distort the free market: the wrong incentives, the wrong bets, the wrong outcome. Still, in the long view of history, success is on the side of visionary partnerships. Nations that get things done aren’t necessarily the oldest, wealthiest or the most resource rich: they’re the ones that set aside individual differences to enjoy cooperative achievements.
Whether our personal stake in the issue centers around losses from our own pocketbooks in the form of jobs, price gouging, taxation or inflation — whether we truly care about a cleaner, greener world or not — it will take a village and a vision to bring about change.
Business is people. Government is people. There is no special moral advantage to public or private interests and endeavors — rather a series of relative advantages and disadvantages that must be weighed on an issue-by-issue, case-by-case basis. Whether Big Business or Big Government helps or harms us is up to us — and the incentives we put in place.
We are the problem. We are also the solution.
When we strike a balance our children or grandchildren just might inherit the fantastical, opportunity-filled future they imagine today. Isn’t that all most of us ever really wanted anyhow?
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RESOURCES
History-Altering Decisions: Clinton Signs the Commodities Futures Modernization Act | Newsweek
Big Oil’s Banner Year: Higher Prices, Record Profits, Less Oil | Grist
Perhaps 60 Percent of Today’s Oil Price is Pure Speculation | Geopolitics-Geoeconomics
Speculation Behind High Gas Prices, Report Says | New York Times
America’s Transportation Infrastructure: Life in the Slow Lane | The Economist
Food Crisis: Causes, Consequences and Alternatives | International Viewpoint
Equitable and Sustainable Globalisation: Principles for Global Governance [PDF] | The Evian Group
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