"There are only two ways of telling the complete truth—anonymously and posthumously."Thomas Sowell

Thursday, February 01, 2007

Energy Independence---Who Needs It?

In his SOTU speech, President Bush made a call for US energy independence. So did Jimmy Carter, 30 years ago or so, and that irony was not lost on our Democrat friends. But Richard Nixon called for energy independence in January, 1974 and Gerald Ford put out a huge plan himself, which I ran across in the Daily Kos archives of all places. It was hardly a bold, progressive idea.

The principle behind energy independence is that our thirst for cheap and yummy oil dictates our foreign policy. How heinous, that we should sacrifice our goodly American principles to our hedonistic American lifestyle.

Now, it is true that the 1973 Arab oil embargo was designed to punish the US for its support of Israel in the Yom Kippur War. But as our thenewswalk.com colleague Dr. Benjamin Zycher notes in his entry in The Concise Encyclopedia of Economics:

Contrary to what many noneconomists believe, the 1973 price increase was not caused by the oil "embargo" (refusal to sell) directed at the United States and the Netherlands that year by the Arab members of OPEC. Instead, OPEC reduced its production of crude oil, thus raising world oil prices substantially. The embargo against the United States and the Netherlands had no effect whatever: both nations were able to obtain oil at the same prices as all other nations. The failure of this selective embargo was predictable. Oil is a fungible commodity that can easily be resold among buyers. Therefore, sellers who try to deny oil to buyer A will find other buyers purchasing more oil, some of which will be resold by them to buyer A.
Smart fellow, that Zycher.

So that's why the Arab oil embargo failed right quick---OPEC started it in October, 1973, but it was dead meat by February 1974. And as Ben explains further on, even if it had worked, OPEC couldn't, and has never maintained unity since, either.

Whether Carter was laughable in declaring energy independence the "moral equivalent of war" is another story. His rationale for energy independence was to the avoid economic disruption that dogged his presidency. That Ronald Reagan didn't see it that way is understandable, since oil went down to $11 a barrel or so after OPEC's powerplay failed and Reagan started sorting out the world's geo-econo-politic.

But the Arab oil embargo did put a permanent chill in the west's spine, and its lasting effect is that Europe abandoned its traditional support for Israel and has leaned against Israel ever since. Carterism survives, but let's note that it's absurd in light of recent revelations to believe that Jimmy Carter wanted energy independence just so the US could have more freedom to back Israel.

As for conservatives "ridiculing" Carter, as some of our friends from the left charge, perhaps they did. Reagan, in one of his first acts as president, tore off Jimmy Carter's solar panels, his energy hair shirt, from the White House. They ended up on ebay. Cheap.

But the real reason conservatives then and now disagree isn't out of partisanship or greed or evil, but because market forces would and will raise the price of energy, and conservation and innovation must necessarily follow. It's not all about driving SUVs and laughing at liberals. I meself drive a Honda Civic (but must confess to the latter when the occasion demands, which is often).

So that goes for you, too, Dubya. I'm all for Gerald Ford's proposed 200 nuclear power plants to give 'em all the Reddy Kilowatt finger, but energy independence is a chimera. The reality, and the irony, is that autocracies like the Saudis' and Hugo Chavez's rely almost exclusively on oil revenues to sustain their countries and stay in power---they're more addicted to western dollars than we are to their oil. "Energy independence" would loose our last and only bit of restraining influence on them.

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