Ray Rothrock

Everything Is Great, Until It Isn’t

In Energy on November 17, 2010 at 5:04 pm

Today the New York Times published a whole section on Energy.  One could conclude from this group of articles that everything is okay with just how things are today.  We have plenty of fossil fuels and prices are going stay cheap for Americans because we have plenty.  This view of our energy situation struck me as a bit Pollyannaish.

Energy crises always seem rather slow rolling.  Even the ones in the 1970s were sharp at first but quickly abated to a point of irrelevance in short order as prices were stabilized.  But we were changed forever.  Clearly the US was no longer in charge of its energy destiny.

The inertia of the energy system is huge which is a good thing on one hand, but also problematic on the other.  The cause for action is hard to justify unless you decide to paint a vision of the future and convince people something is going to happen that they won’t like.  If you try to do that, then you are painted a pessimist and really not popular.  If you’re a politician, you’re out.  Otherwise, in a democratic society, everything is great until it isn’t.  And, unfortunately with energy, it takes time, perhaps decades, to change old habits.  The only real thing that will change habits is the price of energy.  Here is where we are kidding ourselves.

Nowhere in our economic system do we capture the real cost of energy.  We have over time tried to change the energy system with regulation.  Regulation works.   And it seems to be nicely absorbed in the cost of our consumption – electricity, cars, home heating.  Electricity has stayed about the same price for the last 40 years.  Cars are still affordable by all.  And our homes remain heated or cooled, accordingly.  I’m not saying there isn’t any stress by citizens, but somehow things continue to move along without major dislocations.

Despite regulation, we spew smoke, soot, and other harmful gasses right up the stack at a coal plant – including radioactivity.  Our cars put out gasses we’d rather they didn’t – and we have done a huge amount on that front with good, strong regulation to reduce this impact.  Dams, though fewer are built now than ever, block the streams and rivers.  Power lines cut through forest because our centralized electric power grid was organized this way for economic (good) reasons.  And solar panels cover large swaths of deserts and other land.

I’m glad that there are plentiful sources of oil and gas, even at costs.  The article talks about a lot of it in North America.  These are great fuels.  But nowhere does it discuss the mass balance of oil in the world.  Where the reserves are, at what costs those reserves, and what political/societal costs those reserves.  It is irresponsible for the New York Times not to devote an equivalent amount of column inches to the political, environmental, and societal risks of continued oil and gas – especially from overseas.  This is a big deal as Tom Friedman often writes.

It’s probably not in the cards in the near term in the US to have a cap and trade system on carbon, or even surtax on carbon to level the playing field on energy.  I’m fine with that.  But somehow, we have to put all the costs in the price we as Americans pay for energy.  In our economic system, pricing signal is the most important economic signal there is.  It allows people to shop for the lowest price.  It allows entrepreneurs to build something for the future because they can model future prices.  It allows investors to make investments that will pay off.  Not paying the real costs of energy at the point of use is, well, silly.

Thanks New York Times for making energy its own special section.  It deserves it.  But, please, there is no one solution and there are many tradeoffs.   Taking the long view is required in energy.  Unfortunately, after reading the section, I’m left thinking all our problems are solved.  Hardly.

More on the real costs of energy in future blogs.

  1. Way to go Ray!It’s about time.

  2. Ray,

    You have a wonderful gift of providing perspective that we can all understand, appreciate and relate to. I look forward to reading more blog entries! Sharing with David also. 🙂


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