Monday, August 6, 2007

I should add a second extrapolation to the one regarding the middle class and renewables:
It is the middle class which suffered most from the OPEC-related gas price crisis of 1973. At that time, inflation and the price of oil were inextricably linked, and the middle class was hit with a period of high unemployment and high inflation. The 1990's period of previously unheard-of low unemployment and inflation was probably linked to $10/barrel oil, as much as the technology bubble.
The upper class loves expensive oil, with oil companies taking in huge profits. And as we've seen today, the stock exchange can do very well with $70/barrel crude. It's the middle class which suffers at the pump, and the middle class that's hurt by unemployment. It's also the middle class which would most benefit from efficienct cars and homes. That's why I think gov't policy should be centered on home improvements below $10k. And it's why I think energy policy belongs uniquely on the Democratic platform, is something to be capitalize on.
Incidentally, the 1973 crisis was linked to the 1971 removal of the gold standard: with dollars no longer anchored to $35/ounce of gold, a floating dollar was set for problems. Incredibly, OPEC decided to accept only American dollars as payment--a policy which continues today---meaning that instead of the Sterling's power based on the stock of gold England held through its empire, the American dollar became the standard world currency on the back of Middle East oil. The American dollar is backed not by gold but by Saudi oil. That's why there's a connection between inflation and the price of gas. And it's why we cannot allow anti-American monarchies to thrive there.
And this leads me to my second extrapolation:
The capital investment required to make America independant from OPEC oil (I'll assume we're still happy to take the 135 billion barrels of bitumen stuck in Canadian oil sands---Canada is the largest foreign exporter of oil to the US, it's just that the Saudis have the largest *reserve* stock, they're the only ones who can turn up the taps, so they control world prices) the captial required is only available through a massive government-sponsored, R&D led investment. Something over a trillion dollars in a twenty-year period.
And the only reason the government will MAKE that investment is if it becomes clear to them that our national security is, today, more tied up in energy than in bombs. I think the example of Russia is instructive here, and the clarity with which Putin sees his reserves in the Caspian as more important to Russia's place in world politics today than its ability to blow up the planet.
I remember a talk I had at a lunch table at Los Alamos. It was my claim that energy was a larger national security issue than nukes, and that we needed a Los Alamos project targeted at new technologies to reduce our reliance on foreign oil.
Today I believe something a little different:
Los Alamos was founded in the 30s and we had a world-changing (and war-ending) new technology 15 years later. No such technology exists to solve the energy problem. What is instead required is a massive investment in infrastructure and existing (but immature) technologies which haven't been developed by the private sector in the years following the 1973 crisis. We require stricter building codes and higher CAFE standards.
And the frame for this debate cannot be global warming.
Incidentally, ever wonder why global warming gets more press in the UK? It's because the growth of the UK economy is unlinked to a growth in oil consumption. To grow our own GDP we *require* more oil, although this link has become weaker in the post-industrializing period since the 1970s. The GDP/oil growth ratio in China and India is the same as it was in the US from 1940-70, reflecting their rapid industrialization.
Global warming isn't going to cut any ice in the US, not on the trillion-dollar levels required. But energy security can. If another price shock occurs (e.g. a supertanker blown up, moves from the Caspian toward China, etc.) , up to $5 or so, it may be possible to convince the government to make investments on a par with the US Military.
So strategy one is hippy houses ('enabled' houses maybe). Strategy two is a new energy complex. And overriding is a political strategy of putting enviornmentalism (NEW enviornmentalism, attached to warming and security as opposed to the land-use issues of the past) to the fore of the Democratic party.

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