Energy Wisdom and Folly

Robert J. Samuelson, in "Why Cheap Gas is a Bad Habit" (Newsweek, 9/19/05) said: "What this country needs is $4-a-gallon gasoline or, maybe, $5. We don't need it today, but we do need it over the next seven to 10 years via a steadily rising oil tax. Coupled with stricter fuel-economy standards, higher pump prices would push reluctant auto companies and American drivers away from today's gas guzzlers. That should be our policy. The deafening silence you hear on this crucial subject from the White House, Congress, and the media is a sorry indicator of national shortsightedness."

In 1993, President Clinton proposed a tax of 25.7 cents per million BTU on coal, natural gas, and electricity from nuclear, hydro, and imports, and 59.9 cents per million BTU on petroleum. His proposal was killed by many objections, centering around the charge that it would put the U.S. at an economic disadvantage and would lead to job loss. The BTU tax proposal was called "an implicit statement that it's bad to consume energy . . . . It's kind of silly to shoot ourselves in the foot just so we can be as deprived as other countries."[1] Clinton's proposal might have had a better reception if he had argued for a ramp increase over several years rather than a sudden imposition. The prospect of immediate economic loss eclipsed any thought that we might make it easier for ourselves later by imposing a modest burden now.

These are just two examples, several years apart, of what Samuelson calls "our national shortsightedness." Why are we so blasé about using up our oil? Is it because we don't think it will run out? Do we think it will last forever, or do we count on scientists and energy companies to eventually come up with a painless solution? Or do we just not think about it?

From the beginning of human history until about the 12th century A.D., people lived entirely from what is called "income" energy rather than stored or "capital" energy. Then, people who were living on the northeast coast of England discovered that certain black rocks found along the shore would burn. They called them "sea coales." Consumption of such capital energy was minuscule from then until about 1700 and remained almost negligible until about 1800. From that point on, the consumption of capital energy began to rise significantly at an ever-increasing rate, until the world is now consuming oil faster than it is being discovered, and our rate of use continues to climb.

What about the future? Let's face it, fossil fuel use cannot continue forever. It will become harder to retrieve, making it more and more expensive and forcing us to find alternatives. Voluntarily reducing our use to reduce global warming does not appear to be humanly possible. We cannot force ourselves to voluntarily cut back; it must be forced upon us.

We can state the history and future of fossil fuel use quite simply. There was a time before fossil fuel use began, and there will be a time when fossil fuel use has ended. We are now living in the most abnormal time in history. Figure 1 shows the bubble of fossil fuel use we now live in. It would seem prudent to limit our use of fossil fuels to allow that bubble to last a little longer, to buy some time to develop the technologies and population stability needed to sustain life without the use of fossil fuels.

M. King Hubbert, a researcher at Shell Oil, predicted in 1956 that U.S. production of oil would peak between 1965 and 1970. It peaked in 1971. He also predicted that global production would peak around 2000 and that 90 percent of the oil initially in the ground would be gone between 2020 and 2032.[2] Present estimates put peak production at around 2005. Oil production is declining in 33 of the 48 largest oil-producing countries.[3]

Gordon Aubrecht has said that "any transition to a sustainable energy future will become more difficult the longer it is put off. . . . The switch to the sustainable energy future should not be put off until we have squandered our one-time access to inexpensive, useful fuel."[4] But that is just what we are doing. The "national shortsightedness" cited by Samuelson prevents us from doing those things that would make that bubble of fossil fuel use last longer so we can develop a return to living entirely from income energy (plus nuclear).

Although we must some day run out of fossil fuels or our ability to use them, we have two things going for us that earlier generations did not. First, we have technology which enables us to use income energy in ways that were impossible in the past: solar collectors, photovoltaic cells, hydro, wind, and conversion of biomass to power and liquid fuels. Second, we have nuclear energy, which is a capital resource, but if breeder reactors are put to use and if we learn to recycle our radioactive by-products, or if fusion is developed, it will last long enough to be considered limitless.

What Should We Be Doing?

Various suggestions have been made and I'll mention some of them here.

Writing in 1990 with a concern about global warming, John L. Helm recognized that the consequences of our present activities might not turn out to be as bad as predicted. However, it would still makes sense, he argued, to develop a strategy of generating, distributing, and using energy as efficiently and as cleanly as possible, so that even if current estimates of global warming turn out to be high, we will still be ahead. Moreover, "energy efficient manufacturing can in many cases reduce production costs and enhance global competitiveness of U.S. industry."[5]

In 1992, the Energy Efficiency Committee of the United States Energy Association had this to say: "Another market mechanism under consideration in some states, notably California, are 'feebates' that scale vehicle registration fees, excise and property taxes to penalize the purchase of gas guzzlers. Under this approach, revenues from such 'feebates' would be used to provide incentives to encourage consumers to purchase high efficiency or non fossil-fuel-powered vehicles."[6]

Another group of scholars[7] concluded that vigorous improvements in U.S. energy efficiency would lower consumers' energy bills, reduce the cost of energy services, cut oil imports, and reduce pollutant emissions. They also predicted that energy efficiency improvements would result in a net increase in jobs and personal income.

All of the above suggestions and more may be possible, but raising fuel prices is perhaps the most commonly heard recommendation. One such proposal is for "green taxes": "Perhaps the single most powerful instrument for redirecting national economies toward environmental sustainability is taxation. Taxing products and activities that pollute, deplete, or otherwise degrade natural systems is a way of ensuring that environmental costs are taken into account in private decisions - whether to commute by car or bicycle for example, or to generate electricity from coal or sunlight. Each individual producer or consumer decides how to adjust to the higher costs: a tax on air emissions would lead some factories to add pollution controls, some to change their production processes, and others to redesign products so as to generate less waste. By raising a large proportion of revenue from such 'green taxes' and reducing income taxes or others to compensate, governments can help move economies swiftly onto a sustainable track."[8]

Paul Sabin says that political rhetoric calling for lower prices "may be good politics, but it makes for lousy policy. Higher gas prices are a short-term headache, but they also offer a window of opportunity to walk the walk of environmental and economic progress."[9]

The Energy Efficiency Committee of the United States Energy Association, mentioned above, said in 1992 that market mechanisms should "be explored to influence consumer decisions about vehicle purchases and energy use. For example, raising the federal excise tax on gasoline and diesel fuels by $1 a gallon (perhaps phased in over a 5-year period) would send a clear signal to consumers about the actual cost of gasoline."[10]

Just as Samuelson recommended slowly-increasing fuel prices coupled with stricter fuel economy standards, so Charles Krauthammer, a conservative columnist for The Washington Post, urged imposition of a federal gas tax "so that Americans pay $3 at the pump no matter how low the world price goes" (Bangor Daily News, 11/11/05). Why? Because, says Krauthammer, it's "the simplest way to induce conservation." And why induce conservation? Because when the cost of oil goes up, much of the benefit "goes overseas to foreigners who wish us no good. . . . It makes infinitely more sense to reduce consumption, drive the world price down and let the premium we force ourselves to pay at the pump . . . go to the U.S. Treasury." Although Krauthammer's argument may sound like he wants the strong arm of the federal government to come down on us, he sees a higher gas tax as a way to free up the market to do its work. "The beauty of a gas tax at $3," he wrote, "is that it obviates the waste and folly of an army of bureaucrats telling auto companies what cars in which fleets need to meet what arbitrary standards of fuel efficiency. Abolish all the regulations and let the market decide. Consumers are not stupid. Within weeks of Katrina, SUV sales were already in decline and hybrids were flying off the lots."

Earlier in this publication I argued for a ramp increase in the fuel tax (Public Justice Report, vol. 23, no. 3, 2001). Then I suggested that all oil, whether entering the U.S. by ship, pipeline, or from under our own ground, should be taxed the same, and that the tax should be increased year by year until it was a dollar a gallon higher. A ramp increase would allow people to plan based on future higher prices. In light of recent price fluctuations, the increased rate I proposed earlier now seems low. But the goal should remain, namely, to increase the price of fuel to induce us to use less.

Here, however, we have a problem. How can a majority of our Congress be persuaded to craft legislation to drastically curb our cheap-gas habit? And then how can our populace, addicted as we are to that cheap gas, be persuaded that kicking the habit is not only best for us, but necessary to prevent future disaster?

What about other countries? China, for instance, burns a lot of coal for electric generation and is dramatically increasing its use of oil for vehicles. With 1.3 billion people, it has great potential to be a large competitor on the world oil market. On the other hand, Norway's gasoline policy is the antithesis of that of the US and China.[11] Even though Norway is the world's third largest petroleum exporter, their gasoline tax is 2/3 of the basic price of the gasoline. This makes it sell for more than $6.50/gallon in Norway. Although there are critics of those prices, most Norwegians accept them. Automobile ownership is also much lower than in most other countries, partly because their tax on vehicle purchase is high and rises with the vehicle's potential for guzzling gas.

The time has come to clean our American house. We lag behind many other countries in fuel conservation policy. The tax on gasoline in several countries, for instance, is more than the total price of gasoline in the U.S. If we were to lead the way, other countries would certainly be more inclined to moderate their fuel consumption.

Our children and their children will pay for our profligate use of fuel. Thus God's punishment of the children for the sin of the fathers to the third and fourth generation (Num. 14:18) will be the natural result of our wastefulness. Is this the legacy we want to leave them?

[Dr. Huff is recently retired as professor at the University of Maine (Orono) in the Department of Bio-Resource Engineering.]

Notes:

[1] Alan Chapple, Nuclear Energy Information (April, 1993).

[2] M. King Hubbert applied a rate-of-consumption curve, shaped something like Figure 1, to our use of oil. He projected that the world would use its middle 80 percent (from 10 percent to 90 percent of the area under the rate of consumption curve) in 58 to 64 years, depending on the total amount available in the ground. That could not be estimated exactly. His projection was that the middle 80 percent would be gone between 2020 and 2032. The time it takes to consume the middle 80 percent is not proportional to the amount in the ground; with more available, our peak consumption will just be higher.. "The Energy Resources of the Earth," Scientific American 224 (3) 61-71, September 1971.

[3] http://en.wikipedia.org/wiki/Hubbert_peak

[4] Aubrecht, Gordon, Energy. Columbus, Oh.: Merrill Publishing Co., 1989, 119-120.

[5] Helm, John L, ed. Energy Production, Consumption, and Consequences, National Academy Press, 1990.

[6] Strategic Planning for Energy and the Environment, Vol 12 No 2, 1992, 15-16.

[7] Geller, Howard, John De Cicco, and Skip Laitner, Energy Efficiency and Job Creation: The Employment and Income Benefits from Investing in Energy Conserving Technologies. Washington, D.C., American Council for an Energy-Efficient Economy, 1992.

[8] Postel and Flavin, "Reshaping the Global Economy" in Brown, ed., State of the World, 1991.

[9] Paul Sabin, Boston Globe, June 27, 2000.

[10] Strategic Planning for Energy and the Environment, Vol 12 No 2, 1992, 15.

[11] Simon Romero, "The $6.66-a-Gallon Solution" The New York Times, April 30, 2005.