Gasoline prices
have been rising for three months and according to the AAA, the average price
nationwide was $3.76 last weekend.
Rising gas prices prompted Newt and Rick to blast the Obama
Administration and promise that if the federal government would just get out of
the way, we could "drill baby drill" back to $2.50 per gallon. Last
week, I was part of a discussion of this issue on a terrific New York City
cable show called Inside City Hall, hosted by the incomparable Errol Lewis.
After watching clips of the candidates promising cheap gas, I described their
statements as "idiocy." On reflection, I think I was being easy on
those guys.
Oil is part of a global market. If you "drill baby drill" in
the United States, there is no guarantee that the oil will stay in the United
States. It will enter the global marketplace and be sold to the highest bidder.
The fundamental fact of the oil market is that demand is growing. Supplies are
growing too, but the market is volatile. Prices vary due to the political
factors that interrupt supply-like wars and revolution in the Middle East and
by rapid increases in consumption, especially in Asia. Speculation also has an
impact on the volatility of gasoline prices.
The increases in petroleum consumption over the past thirty years have
been dramatic, as has the relative shift in consumption from the West to the
East. According to the U.S. Energy Information Agency, in 1980, the world
consumed a little more than 60 million gallons of petroleum every day. In 2010
that number topped 80 million gallons a day. That's an awful lot of new
"drill baby drill" in three decades. Perhaps as important as the
total consumption of oil is the global distribution of that consumption. In
1980, North America consumed about one third of all petroleum and Asia only 16
percent. In 2010, we consumed 27 percent of the daily supply of oil and Asia
consumed 29 percent. The competition for the world's oil supply is a major
cause of higher gasoline prices. However, as we all know, what goes up also
seems to come down, as well.
In fact, an indication of the volatility of gas prices is that
according to the AAA, average gasoline prices today are actually lower than
they were on May 1, 2011 -- when they peaked at $3.94 a gallon. After May 1,
and despite the fact that more Americans drive in the summer than in other
seasons, prices dropped last summer, hitting $3.54 a gallon on September 1,
2011.
I know we don't want to confuse this year's Presidential race with any
facts, but the story of gas prices is one of rapid increases and decreases.
It's a mark of the desperation of Gingrich and Santorum that they use the price
of gasoline as the basis for an attack. They must know that the price of gas
will probably decline after Labor Day, and keep declining until Election Day. I
assume they are not worried about that since the Republican Convention in Tampa
will end on August 30, and in all likelihood so will their candidacies.
Nevertheless, while I certainly don't expect a presidential campaign to serve
as a time of great national debate and dialogue, 2012 seems to be about as far
as you can get from a meaningful, substantive discussion.
There are, of course, great issues of national policy being introduced,
but the discussions are dominated by symbolic gestures and non-stop and
deceptive media attacks that refuse to take the opposition's views as
legitimate and substantive. Our nation needs to develop a consensus on the role
of the state in the national economy, the nature of the social safety net, the
role of money in politics, the limits to privacy rights, national security
strategy, and the role of the state in defining and enforcing public morality.
Compared to the gravity of those issues, energy seems almost trivial, but while
energy policy does not require deep, philosophical analysis, it does require us
to do more than pander about price and pretend that more drilling will really
make a difference.
Energy is a part of everyday life in ways that only become clear to us
when we are denied energy during a blackout. When we lose light, refrigeration,
air conditioning, heat, the Internet and television, we get a sense of our
dependence on energy. If you also consider our use of cars, jets and trains and
the use of energy to distribute and store food, you might develop an even
deeper appreciation of the centrality of energy to modern life. Then think of
what the absence of energy would do to the electronic security systems in our
prisons or the operation of water filtration and sewage treatment facilities.
Think of how much energy is used by fire, police and ambulance services -- not
to mention healthcare facilities. When you take all of that into account, you
might want a more substantive and compelling energy policy than "blame
Obama" or "drill-baby-drill." In fact, you might want to start
thinking about what we will do when the cost of extracting and burning fossil
fuels starts to exceed their benefits.
Consider these facts. In the 1960s there were three billion people on
the planet, today there are seven billion, and when population finally peaks it
will reach ten billion. More and more of the planet's population is starting to
live like us and use more and more energy all the time. For all practical
purposes, the fossil fuels now on the planet are all we will ever have here.
While we will not run out of fossil fuels in our lifetime, some day they will
become so scarce or risky to extract that they will be too expensive to use.
The sooner we discover a cheaper form of energy that is not finite and not
buried underground, the better off we will all be. We need an energy policy
that acknowledges the centrality of energy to modern life and focuses
scientific and corporate attention on developing fossil fuel free energy.
What we have instead is an interest group-dominated battle over
subsidies and ideological warfare over drilling vs. protecting the environment.
The great irony is that the more valuable use of hydrocarbons may be in
construction and manufacturing. Our grandchildren will wonder what we were
thinking when we burned, rather than used, all that oil and coal we extracted
from the crust of the earth. Despite the absence of substantive discussion of
energy issues in the 2012 campaign, I remain hopeful. Somewhere in a garage in
America, or a laboratory in China, there are scientists busy inventing a form
of renewable energy that will transform our economy and re-direct the policy
conversation. Like the auto, radio, TV, Internet, personal computer and smart
phone, this renewable energy technology will be transformative. Unlike those
other technologies it will produce, rather than consume, energy. Let's hope it
happens soon.
Steven Cohen
Huffingtonpost
Business & Investment Opportunities
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