Wednesday, November 16, 2011

Needed: A Free Market in Energy


I too am skeptical of government trying to pick winners and agree we desperate need a rational energy policy. But to me a rational policy is let the market decide. We do that for shoes and manage to get shoes to everyone. We do that for groceries and manage to get groceries to everyone. We let the market decide how electronics should be allocated and we do quite well by it (says he writing this on an ipad, with a wireless keyboard, linked to an iphone, connected to the Verizon network, all without the benefit of a government controlled policy). 

I don't worry too much about Russia, Saudi, Hugo (or Caesar) Chavez. Prices, technology change supply and demand all the time. For instance horizontal drilling and hydro fracking has created a 100 year supply of natural gas in the US. A similar large increase is likely, in my opinion, to happen with oil. Canadian oil sands have an estimated 143.1 thousand million barrel reserve, compared to 264.5 for Saudi Arabia and 211.2 for Venezuela. I'm the Alfred E. Neuman in the room. What, me worry? There is certainly risk of geopolitical disruptions hurting supply, but as long as we let prices clear, we'll adjust. Besides, if Saudi Arabia blew up Bill McKibben, Jim Hansen, Al Gore and Joe Romm would be delighted. 

We recently had a big debate in town about building a new Senior Center. One of the arguments put forth was a study by the architect of the proposed center that in 20 years the senior population of our community would double. The prediction assumed the current population would be static and we all would just age in place.  Besides being silly on the surface, and begging the question why aren't we preparing for a dramatic reduction in our school population, the thing that galled me was the person making the prediction was an architect, not a demographer. 

And that's how I kind of feel about the global warming/climate change debate.  Let's grant the greenhouse effect, and the 1 degree warming this century. Let's grant 100% of the warming is anthropogenic. Let's grant that there are severe second order impacts that accelerate warming/change.  After that I really don't want to listen to the scientists any more, because now we're talking about resource allocation and the costs of mitigation versus the costs of prevention. When we start talking about costs and benefits it is irrelevant to me how many scientists agree about warming, I want to listen to an economist.  (and Krugman doesn't count). Listening to a scientist discuss allocation of scarce resources is like listening to an architect make a demographic prediction. 

Gas taxes are highly regressive. I drive one mile to the train, another mile from the train (I've come a long way from walking 5 miles to school every day, uphill in both directions). I ride the highly subsidized Metro North to NYC, and park in the highly subsidized town parking lot. So I pay about $100 per year in gas for 25 or so gallons i consume every year on commuting. I'll pay about $25 for your gas tax while my blue collar older brother who I'm guessing drives at least 40 miles every day will get hit much harder. You sure you aren't a Republican. 


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