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Abundant cheap scarce expensive energy

06 Apr 2022 | News Roundup

The New York Times announces that “President Biden is considering a plan to release one million barrels of oil a day from the Strategic Petroleum Reserve for as long as 180 days… The idea would be to combat rising prices at the pump.” Which is very odd since the whole idea was rising prices at the pump. Remember? Stop people using carbon-intensive fuels by making them scarce and expensive? Save the planet? Wasn’t that what everyone wanted? Oh oh.

The policy is silly in practical terms as well. The U.S. strategic reserve does not contain, is not meant to contain, and could not possibly contain enough energy to power the American economy indefinitely. It is, as the name implies, a strategic asset intended to ensure that in a crisis potentially involving widespread infrastructure breakdown, the government itself including the military can operate in the ensuing chaos long enough to restore order so private citizens and the private economy can get back to functioning including producing and transporting energy.

Even the New York Times, in an email teaser to another story, admitted that the response from “oil industry and energy experts was muted”. And that there was something disquieting about “the largest release” from the SPR in its history.

Regrettably it then went on to quote Biden’s folksy rhetoric about growing up in a family that worried about the price of gas without mentioning that he was as committed as the Times is to making people go without from now to eternity, or mentioning that there was something economically fatuous and politically expedient about worrying that “With midterm elections just months away, gasoline prices have risen nearly $1.50 a gallon over the last year, undercutting consumer confidence.” Especially since the planned release is just 5% of American consumption and 1% of world consumption. Big enough to cause panic at the ataxic nature of policy development, but far too small to calm fears about the underlying problem.

We confess to a horrified fascination with the rhetoric of politicians, in this case the Biden administration’s professed intention, quoted in the first Times story, to take “actions to reduce the impact of Putin’s price hike on energy prices and lower gas prices at the pump for American families”. Which is classic verbal misdirection because families do not purchase gas from different pumps with different prices than unattached individuals. And, more importantly, because the floundering Russian tyrant did not set out to raise prices for families or everyone else, unlike democratic politicians. And while the Ukraine war has disrupted world energy systems and sent the futures market into a tizzy, neither inflation nor the shortages of oil, coal and natural gas caused by banning pipelines, preventing drilling, suppressing fracking, shutting power plants and imposing carbon taxes are the work of Vladimir Vladimirovich Kremlin.

Even inflation is, primarily, the result of piling the Pelion of cranking open the monetary floodgates on the Ossa of the deficit spending that made cheap borrowing critical to the short-term functioning of government in the industrialized democracies as elsewhere. But we digress.

The point is that governments throughout the Western world, including the American government at least under the Democrats, have not only insisted that we must reduce our reliance on hydrocarbon energy, they have moved with ataxic vigour to reduce our supply of it. And it has worked. Not as quickly or as completely as they had long promised, but sufficiently by now to be self-evidently bad. And now the same politicians are desperately trying to reverse the price increases they themselves deliberately caused, while Bart Simpson-ing about how it happened.

As Eric Worrall put it of McCarthy-style Congressional hearings getting under way in the United States, “After two years of blocking drilling permits, banning pipelines, hostile EPA oversight, pressure on banks, SEC investigations into climate risk exposure, and helping the enemies of friendly oil producers, the Democrats suspect big oil executives are responsible for gasoline shortages.” And it is amusing to watch climate-panic politicians’ journalistic hangers-on trying to argue that the best way to raise taxes on fuel quickly enough to avoid climate catastrophe is to raise them slowly enough to avoid economic and political catastrophe. But how can they ever get citizens to accept higher fuel prices if they won’t defend them in principle, and try to prevent them in practice? Or have they not thought that far ahead?

To be fair, Justin Trudeau and his colleagues are pushing ahead with carbon tax hikes. But modest ones, and even they are trying to send the entire increase in costs back to consumers in rebates so the net cost increase is zero whereas for net zero you need large increases.

5 comments on “Abundant cheap scarce expensive energy”

  1. The very last people to be in charge of a nation's finances are politicians, whose time horizon rarely extends beyond the next election. Financial affairs require a reasonably long term approach ("if we do this now, what will the effect be next year or the year after or the next decade?"), whereas politicians usually operate in a knee-jerk, OMG-there's-an-election-comin-up-let's-throw-money-around mode. Here's a suggested technological solution to the problem. Let's have a Constitutional amendment so that any additional government spending over and above a very conservative baseline would require a referendum of the form "Do you agree that additional funds to a maximum of .... be raised for the purpose of .... Yes/No". Everyone on the voters list would be sent an email, and the ayes and nays would be tabulated at a set cut-off time. I suspect most people would automatically vote no in almost every case, and only those things that were really, really necessary would get through.

  2. Roger, I think you are being grossly over-optimistic. I regret to say that most Canadians would vote in favour of almost any government-sponsored boondoggle, always believing that someone else will be paying for it or that the government will make it appear magically and costlessly. The popularity of most of Trudeau's way over the top and wasteful pandemic spending, not to mention his new 16 social programs to be introduced in tomorrow's budget, proves this. Canadians can't get enough government; we crave it.

  3. One would think that one glance at the behavior and words from the current crop of elected sociopaths would preclude any expectations of rational thought and behavior. We are at or near end-state democracy where all democracies eventually morph into tyranny due to the inevitable learning of the electorate of voting for direct access to the treasury, no mater how indebted. At such an advanced state, being a party to such ruin is the only way to be elected to power.

  4. Thylacine, how about changing that email to "Do you agree that additional funds to a maximum of .... be raised for the purpose of .... This will require that your income tax be raised by .... Yes/No".
    Of course, one of the problems of any so-called progressive tax system is that a great number of people pay little or no tax, so any additional government expenditure will not affect them. How about a system in which at election time your vote would be weighted according to the total amount of tax you have paid since the last election? There will of course be squeals from the non-tax payers that this is undemocratic, although this is a non-sequitur; democracy means rule by the people, not that every person's vote is necessarily the same. What this system would mean is that the politicians would have to justify their pet schemes to the people who would actually pay for them, rather than the people who would benefit by them. After all, voting for something which benefits you is what we call a conflict of interest.

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