The prices keep going up and up and up...
Exxon Mobil announced its first-quarter profit last week -- $10.9 billion, up 17 percent from a year ago and very nearly a record for the company. This at a time when consumers are feeling the pain of record-high prices at gasoline pump.
Exxon's profits are soaring with the recent oil price spike, but the energy industry's earnings aren't as outsized as the politicians seem to think. Thomson Financial calculates that profits from the oil and natural gas industry over the past year were 8.3% of investment, while the all-industry average is 7.8%. And this was a boom year for oil. An analysis by the Cato Institute's Jerry Taylor finds that between 1970 and 2003 (which includes peak and valley years for earnings) the oil and gas business was "less profitable than the rest of the U.S. economy." These are hardly robber barons.
This tiff over gas and oil taxes only highlights the intellectual policy confusion – or perhaps we should say cynicism – of our politicians. They want lower prices but don't want more production to increase supply. They want oil "independence" but they've declared off limits most of the big sources of domestic oil that could replace foreign imports. They want Americans to use less oil to reduce greenhouse gases but they protest higher oil prices that reduce demand. They want more oil company investment but they want to confiscate the profits from that investment. And these folks want to be President?
After thinking about it a bit, I suppose I have to grudgingly acknowledge that a windfall profits tax isn't the solution. Like many people, I find the oil companies' profits obscene. But they don't control the market, and, yes, they're in business to make money for shareholders. But that doesn't mean they're totally off the hook. Subsidies? Sayonara. The last thing these guys need are tax breaks. Lawmakers should immediately terminate all government programs that give the oil industry unfair (and unnecessary) advantages.
And like Spider-Man says, with great power comes great responsibility. The oil companies should be required to devote a specific amount of their annual profit to public transportation and alternative energy projects.
Call that a tax if you like. I see it as a recognition of the companies' enormous potential to have a positive effect on society, rather than just being first-class riders on the economic gravy train.
Drill, drill on the range?
It's a never-ending debate. Republicans say Alaska's Arctic National Wildlife Refuge should be opened for oil drilling to help America achieve energy self-sufficiency. Democrats and environmentalists say there's not enough oil in ANWR to achieve that goal -- and certainly not enough to make it worth the environmental damage.
It's hard for the United States to complain that other countries limit access to their reserves when we're doing the same. If higher U.S. production reduced world prices, other countries might expand production. What they couldn't get from prices they'd try to get from greater sales.
On environmental grounds, the alternatives to more drilling are usually worse. Subsidies for ethanol made from corn have increased food prices and used scarce water, with few benefits. If oil is imported, it's vulnerable to tanker spills. By contrast, local production is probably safer. There were 4,000 platforms operating in the Gulf of Mexico when hurricanes Katrina and Rita hit. Despite extensive damage, there were no major spills, says Robbie Diamond of Securing America's Future Energy, an advocacy group.
Perhaps oil prices will drop when some long-delayed projects begin production or if demand slackens. But the basic problem will remain. Though dependent on foreign oil, we might conceivably curb the power of foreign producers. But this is not a task of a month or a year. It is a task of decades; new production projects take that long. If we don't start now, our future dependence and its dangers will grow. Count on it.
I know we’ve been down this road before, but since it’s been a while, and in light of Bush’s emphasis on ANWR, it’s probably worth keeping a few details in mind that the president neglected to mention.
"Drilling in ANWR would likely produce only 3.2 billion barrels of oil, according to the U.S. Geological Survey, not even enough to satisfy six months’ demand; oil would not begin to reach the market for another 10 years; and it would take 50 years to extract the full amount. For this pittance, the House leadership and the administration are willing to disturb hundreds of acres of pristine wildlife habitat."
I’d just add that the NYT reported a while back that oil companies are now “largely uninterested in drilling” in Alaska’s Arctic National Wildlife Refuge, because “any oil from the refuge would meet only a tiny fraction of America’s needs.”
My hunch is, the White House wanted to a) look like they were offering a proposal to address the gas-price problem; and b) try to pin high prices on congressional Democrats. I’d be surprised if anyone really fell for this nonsense, but given the president’s enthusiasm, it’s worth setting the record straight.
Rice rationing at Costco in California.
Recent months have seen "food riots" around the world as short supplies and high prices have turned hunger into anger. Now Americans are getting to experience the shortages firsthand: Costco and Sam's Club this week announced they were rationing sales of rice to prevent some customers from hoarding the grain from others.
Political turmoil and the retreat of freedom have managed to make people hungry even in places where many previously were not. Heading the U.N.’s list of countries where people are most undernourished, for instance, is Zimbabwe. When the country became independent in 1980 it had, according to the Index of Economic Freedom, “extensive natural resources, a diversified economy, a well developed infrastructure, and an advanced financial sector,” as well as networks of productive farms. But the increasingly repressive regime of strongman Robert Mugabe has destroyed property rights, allowed favored government officials to seize control of farm lands, and been hostile to Western investment, in the process transforming the country “from the breadbasket of Africa into a starving, destitute tyranny,” according to the Index of Economic Freedom.
In many places, hunger is prevalent even though natural resources are plentiful. In the Democratic Republic of the Congo, where two-thirds of the country’s 62 million people are undernourished, citizens lived amid constant chaos after war broke out in the mid-1990s and the country became a battle ground for troops from eight nations in the so-called African World War, in which more than 5 million people died mostly from starvation and disease. Tragically but perhaps not surprisingly, despite abundant resources including copper, cobalt and diamonds, as well as “enormous agricultural potential” according to the United Nations, the DRC is one of the world’s poorest countries, where production of food has declined some 40 percent since war broke out.
The United States may have been a significant part of the problem -- with its annual $6 billion in subsidies to produce ethanol from corn. But the United States is also almost certain to be part of the solution because it is to food what Saudi Arabia is to oil: the swing producer that can most easily and swiftly increase the world’s food supply.
The United States remains the world’s breadbasket. It produces slightly more than 30 percent of the world’s wheat exports, about 70 percent of the world’s corn exports and close to 40 percent of its soybean exports. Food exports, at nearly $70 billion, are one of the biggest earners from foreign trade, well ahead of chemicals or general machinery or aircraft.
The flexibility of U.S. farmers to switch crops in response to market signals is the reason not to panic, despite grim news pictures of food riots in Haiti and Egypt and signs of panic in the Philippines.
Sydney, Australia, darkened -- kind of -- for Earth Hour 2007.
Twenty-six major cities around the world are expected to turn off the lights at 8 p.m. tonight on major landmarks, plunging millions of people into darkness to raise awareness about global warming, organizers said.
Anybody who lives in Sydney knows that Earth Hour was a monumental flop. Sydney did not plunge into darkness. It was a little bleaker than normal but still not quite as bleak as living in, say, Melbourne. In parks around Sydney, children could be heard chanting: “Turn them off!” long after the Great Switch Off had apparently begun. In the CBD, lights dimmed a little when the logos on the buildings went out. Most companies were too terrified to keep their logos burning during Earth Hour but what are the chances that Coca Cola will permanently give up its billboards? It’s absurd.
Earth Hour won't suffer for a lack of gimmicks. Servers wearing glow-in-the-dark necklaces will sell eco-tinis at bars and restaurants in Phoenix. A local yoga house in Michigan will offer sessions by lamplight, and the Sheraton Hotel in Chicago will have check-in by candlelight. Watching the lights wink off in major metropolitan areas might look impressive, but it's worth asking: What's the point? As Roberts himself notes, the energy saved by turning off your lights for an hour "won't make an enormous difference." So, if it won't cut carbon emissions, why bother then with Earth Hour, or Earth Day or Earth Live, last year's daylong concert for the environment?
Because climate change is essentially a political problem, and the language of politics is symbolism. Just because an act is symbolic doesn't mean it empty.
Bad for the environment?
New studies suggest both industrialized and developing nations must wean themselves off fossil fuels by 2050 -- or global warming could dry up water sources across the planet.
"The question is, what if we don't want the Earth to warm anymore?" asked Carnegie Institution senior scientist Ken Caldeira, co-author of a paper published last week in the journal Geophysical Research Letters. "The answer implies a much more radical change to our energy system than people are thinking about."
Naturally, The Washington Post's Juliet Eilperin has a “narrative” for why the world seems to resist the manifestly correct course of action so stubbornly. She says that “some climate researchers who back major greenhouse gas reductions said it is unrealistic to expect policymakers to think in terms of such vast time scales.” She then quotes two climate researchers who say nothing about this subject. Finally, we get to a philosophy professor who gives her what she wants, when he says that global warming “is a classic inter-generational debate, where the short-term benefits of emitting carbon accrue mainly to us and where the dangers of them are largely put off until future generations.”
How can we be so selfish? I guess American democracy just can’t handle the complexity of the issue. We need a Leader who can get us past this petty squabbling and Take Action.
Here’s the political reality check, just as sobering as the data about sea ice and drought: China last year passed the United States as the biggest emitter of carbon on Earth. Now, that doesn’t mean the Chinese are as much to blame as we are -- per capita, we pour four times more CO2 into the atmosphere. And we’ve been doing it for a hundred years, which means it will be decades before they match us as a source of the problem. But they are growing so fast that there’s no way to head off this crisis without their participation. And yet they don’t want to participate, because they’re using all that cheap coal not to pimp out an already lavish lifestyle, but to pull people straight out of deep poverty.
Which means that if we want them not to burn their coal, we’re going to need to help them -- we’re going to need to supply the windmills, efficient boilers, and so on that let them build decent lives without building coal-fired power plants.
Which means, in turn, we’re going to need to be generous, on a scale that passes even the Marshall Plan that helped rebuild post-World War II Europe. And it’s not clear if we’re capable of that any more -- so far our politicians have preferred to scapegoat China, not come to its aid.
