Wednesday, June 25, 2008

Pandering on Energy

Reminder: You can continue to find Pledge Project updates at my other blog, Atheist Ethicist Journal

In other news, both Presidential candidates have decided to pander to an ignorant public on matters of energy policy, rather than educate the public on the real problem or to propose real solutions.

Both candidates are telling the American people that the problem, when it comes to energy, is the price of gasoline, and both candidates are offering proposals that have the explicit goal of lowering the price of gasoline. They then criticize each other’s proposal by pointing out how ineffective their opponents’ projects will be on effecting the price of gasoline.

The real problem is not the price of gasoline. The real problem is the cost of energy.

The difference between price and cost is determined by who pays the bill. If I go over to your place and buy a car from you for $1000, then the price of the car is $1000. The cost of the car includes the time and expense of getting to you. It also includes whatever I have to give up in order to spend the time and money getting the car. If, for example, I spend a weekend getting to you so that I can buy your car, and I could have spent that weekend hiking in the mountains, then a part of the cost of buying the car from you is the value of a trip hiking in the mountains.

My costs are not the only costs involved when we look at the transaction. The cost of my buying the car includes the costs inflected on others by my actions. If I fly to where you live to pick up the car, and I bump somebody else off of the flight, then his lost opportunity to take that flight is a part of the cost of my buying the car. If my getting the car from you mean that somebody else, who only has $900, loses the opportunity to buy the car. That is also a part of the overall social cost.

(Note that value of $900 in the hands of somebody who only has $1000 is a lot greater than the value o $1000 in the hands of somebody who has, let us say, $1 billion. The first person, in paying $900 for the car, has to give up a lot more than the second person in paying $1000. The ‘cost’ in this case cannot be measured in terms of dollars because the same dollar has different values for different people.)

The cost of burning a gallon of gasoline – which is what any moral person would be focused on rather than price - includes the contribution that burning gasoline makes to global warming and the costs that future generations will have to bear as a result. This could well include the widespread destruction of a great deal of coastal property through sea-level rise. I’m not just talking about the destruction of what was built on the property, but the loss of the property itself as what is now dry land becomes ocean floor.

Another cost of having America consume the oil that it has available domestically is that it has less of a reserve to draw upon in the case of an emergency. I know that this is a wild science-fiction like example that has absolutely no chance of happening in the real world, but assume that there is a significant outbreak of violence in the Middle East involving Saudi Arabia and Iran that disrupts oil supplies.

If that happens, we will be in much better shape if we have resources off shore and in Alaska that we have not touched than we would be if we used these resources up. They are like a saving’s account that protect a worker from the possibility of getting fired. We have the Strategic Oil Reserve for these types of emergencies, but the Strategic Oil Reserve is meant to protect us from a short-term disruption. The larger and longer the disruption we are worried about, the more reserve we need to protect ourselves from it.

In other words, another part of the cost of opening up offshore drilling or ANWR is the cost of lower national security – the cost of having nothing to fall back on if events elsewhere block our access to foreign oil, if we have used up all of our domestic oil.

I want to note that, in speaking about what a moral person would be concerned with, one might think that politicians are excluded from this list. However, the politicians, in taking the stands they do are pandering to the public. If the public itself was made up of moral people – if the voters were concerned about the cost of gasoline rather than the price of gasoline, then politicians will only be able to pander to the public by doing the right thing. Politicians get to take the immoral option of speaking only about the price of gasoline because the voters are not living up to their moral obligation to be concerned with cost, rather than price.

There are two tremendous side effects of a high price of fossil fuels. One is that it provides an incentive to conserve. As people find way to consume fewer fossil fuels, they inflict less costs on future generations.

The other, more significant effect is that if the price of oil is high, and it stays high, it provides an economic incentive to invest in option that do not have the same costs. It provides an incentive for research in nuclear, wind, solar, tidal, biomass, and other forms of energy. Research in those fields of energy could very well lead to discoveries that will lower the overall cost of energy.

The factors that investors are going to use to determine if investment in an area of production is worthwhile includes more than the current price of competitive options. It considers the future price of competitive options. Even the threat that the government is going to play with the price of oil – that the government is going to push oil prices lower through artificial means – is enough to frighten investors away from options that will not be competitive at the lower price of oil.

I am talking here about artificially lower prices of oil – prices manipulated downwards by having the government force excessive production (generating a false economic sense of surplus).

Another cost of these policies is that, while the government is keeping the price of oil artificially low by forcing oil into the market (regardless of costs), it is encouraging people to use up the oil we have left that much more quickly while discouraging people from investing in substitutes (because they cannot compete against the artificially low price).

The combined result of these two effects is that future generations will more quickly come to an age in which there simply is not enough oil for them to use – where governments cannot force more into production because it does not exist. At the same time, they will discover that they have not been building up alternatives. They will find themselves facing an economic catastrophe at the same time that they find themselves confronting a global climate catastrophe.

For a person with good desires – desires that tend to fulfill the desires of others – this is definitely something to be avoided.

1 comment:

Sheldon said...

Yeah!!! New topics!

And I whole heartedly agree that it is a good thing that gasoline prices are high so that there is greater incentive to conserve, and develop alternative energies. Even though it has an immediate negative financial impact on myself.

Linked below is an appropriate "This Modern World" cartoon.