Tuesday, June 01, 2004

The Perfect Storm

The recent surge in the price of oil, and its refined derivative gasoline, have been felt differently in Europe and the United States, as noted in an article appearing in today's New York Times. While the sharp increase in the price at the pump has been a source of near panic for motorists and businesses in the U.S., in Europe the reaction has been decidedly more nonchalant.

The reasons are manifold. First, gasoline is taxed so highly in Europe that the increase in price represents a smaller increase proportionally, so it is less noticeable to the consumer. In addition, Europeans tend to drive smaller cars that get much better mileage than the American gas guzzling SUVs. But that is only part of the story. Europe has also been aggressively pursuing alternative fuel sources as a policy initiative with a multitude of benefits, from shielding their markets and economies from spikes in oil prices due to OPEC actions, market factors and from the inevitable, and possibly imminent, decline in the availability of oil worldwide, to providing for a cleaner environment.

In fact, the shift to renewable energy self sufficiency is also viewed as a national security measure of the highest order. As Europe becomes increasingly dependent on OPEC nations for their oil, there is an increasing need to establish a buffer of energy sources in order to insure the independence of national security decisions, diplomacy and policy making. For example, "Germany is the world's largest producer of wind energy, with 15,800 turbines generating 15,000 megawatts of electricity, or 6 percent of its total supply.

Solar energy is also growing, with the production of solar cells almost doubling last year. The German solar power industry, which is subsidized by the government, will generate more than 1 billion euros ($1.2 billion) in revenue in 2004, according to an industry group."

In what may be an unintended benefit, the recent increase in oil prices will in fact strengthen the efforts to increase the capacity for renewable energy capacity across Europe by highlighting the underlying rationales for the policy direction – desire for increased autonomy of diplomatic prerogatives and economic shelter from sudden surges in oil prices.

Of course the differences in oil dependency that are developing in Europe and the United States are largely the result of the political will of the respective leaders. In the U.S., the Bush administration rejected the Kyoto Protocol, and the promised alternative plan to reduce CO2 emissions has not been proposed. The Bush administration's energy bill, which has been languishing in Congress for the past three years, has been widely criticized as an enormous give-away to the energy industry, with few real efforts toward developing alternative fuels. The only nod to the crisis and vulnerability of our nation's dependence on an ever dwindling supply of foreign oil, is the suggestion to increase drilling domestically, specifically in an effort to access the meager supply of oil located in the Alaskan National Wildlife Reserve, as if this would somehow address the problem in any meaningful way.

The view that the administration's energy policy is one-sided in favor of industry is leant credence by the fact that environmental groups were completely shut out of the now infamous secret meetings of the energy task force with Vice President Cheney, although the actual roster of attendees remains a secret pending a case to be heard by the Supreme Court later this year. Still, with some Republicans such as Senator James Inhofe of Oklahoma declaring global warming a "hoax," and the vast rollback of the Clean Air Act's air pollution mandates, there is little hope that the current leadership will take the necessary steps to begin the transition to alternative fuel sources.

The hostility to alternative and renewable energies in the Bush administration is in sharp contrast to the stance taken by the European Union, and many of its member states. "In Germany, the Green Party, far from being a lobbying group on the sidelines, is part of the government. Germans accept, as environmental imperative, things that Americans would find bizarre - like sorting household garbage into four separate bins for recycling, or paying 70 cents of every euro at the pump in the form of taxes, to drive down fuel consumption." In an ambitious, possibly overly so, move, "The European Union set a target of producing 22 percent of its electricity, and 12 percent of all energy, through renewable sources by 2010." While it may miss its target, the message is clear, and the policy is there to back it up, whereas our own government's efforts have not even approached the level of state sponsored and subsidized initiatives in the European Union.

Which brings me to my central thesis: The Bush administration is making an enormous strategic blunder in failing to move aggressively toward developing alternative and renewable energy sources that will insulate our economic viability, and foreign policy independence, from an impending energy crisis. The supply of oil on this planet is a limited universe, and one that is shrinking at an exponential rate. Quite simply, we are using more oil than is produced in a process that takes nature thousands of years. No major oil field has been discovered since the late 1970's, and many once proud fields are nearing maximum output, and even declining output. Couple this with the emergence of China and India as energy starved economies that are growing at breakneck speeds, and there will be a serious shortage of oil in the World within decades. To be certain, the impact of China and India's new found hunger for oil may keep oil prices at or near the current levels indefinitely, until even more acute shortages push the prices even higher.

These increased prices, and bleak future, will hang like an albatross around the neck of our economy for the foreseeable future. The potential for a relatively sudden shortage in supply poses a serious risk to our economic vitality for as long as we remain unable to absorb the shock, which in turn could greatly imperil our national security. Without economic strength, it will be hard for America to sustain its position of prominence in the World and maintain the absolute edge we currently enjoy in the arena of military technology and capability. Our influence will diminish, and our safety will be compromised.

There is no doubt that our dependence on oil from the Middle East, has compromised our foreign policy aims in that region over the past century. Our need for oil from these nations has forced the U.S. to tolerate, and even actively support, brutish despots and repressive dictators much to the detriment of our image in this part of the World. In some cases, it has even caused us to undermine democratically elected leaders like Mossadegh in Iran, while propping up unpopular dictators like the Shah in that same country. To this day, our need for a steady and uninterrupted supply of oil that ties our hands when dealing with countries like Saudi Arabia that actively promote extremist, anti-American forms of Islam, such as Wahabbism through a network of state-funded madrasses spanning from Africa to Indonesia and all points in between. Restoring our ability to take tough stances with unpopular and un-democratic regimes in the region, and to make clear policy initiatives aimed at reform and tempering the state-sponsored spread of anti-Americanism is essential to the war against terrorism. It cannot be won without this step.

Third, and perhaps most important, although frequently underestimated, is the potentially devastating environmental impact that our reluctance to move to alternative and renewable will have. Clearly the movie The Day After Tomorrow, which predicts a sudden and apocalyptic change in the Earth's climate due to global warming, is an argument in the extreme, but there is little doubt among scientists that the long term effects of global warming will likely be devastating if not adequately addressed in a timely manner. The response of the Bush administration has been to put off action in favor of more studies, despite the overwhelming amount of scientific data that supports immediate and widespread action. Some argue that it may already be too late. Assuming that there is still time to act, now would seem like the appropriate moment to seize.

With the world's economies on a collision course with the world's oil supply, the war on terrorism seriously compromised by our inability to take the necessary foreign policy measures in the Middle East, and with the world's environmental health put in serious jeopardy by the widespread use of fossil fuels, there is a perfect storm of rationales for moving aggressively toward replacing oil with alternative and renewable energy sources. Europe has begun to prepare for the future, but we tarry dangerously in the past.

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