Max Gladwell

We can all find common ground on issues surrounding global warming, even if the points we agree on have little to do with climate change.

In Part 1, we made a key distinction about the how and why of debating climate change. We argued there’s only one way to win, and that’s to persuade as opposed to defeat. Otherwise, it’s an exercise in futility and a big waste of time. In Part 2, we acknowledged that making a case based on climate science alone can be a dead end and that the health effects of relying on fossil fuels is just as compelling, while achieving the same objective of reducing CO2 emissions. Next, we approach the issue as a matter of national and economic security.

Our economic and national security have always been opposite sides of the same coin. And if that coin was a silver dollar eight years ago, today it’s worth about 50 cents. Our economy relies almost exclusively on fossil fuels. Our prosperity relies on cheap fossil fuels. When access is restricted and prices go up, it threatens our wellbeing and our way of life. This is largely why we find ourselves at war in Iraq.

The solution for many conservatives is to drill for more oil. With prices at historic highs, that goes without saying. Market forces will certainly respond accordingly. In addition, President Bush lifted the executive ban on offshore drilling. This may very well be justified provided taxpayers don’t subsidize it and oil companies are forced to purchase bonds in excess of any possible cleanup costs associated with a spill (more on this later). So long as it makes economic sense under these conditions, it’s worth exploring. But does this really address the problem? Or do we just end up with a first-class-cabin upgrade on the Titanic?

It’s the Economy

The timing for Part 3 of this series could not be better considering the developments of the past couple weeks. First, legendary Texas oil tycoon T. Boone Pickens launches the Pickens Plan, in which he acknowledges that our addiction to foreign oil “threatens our economy, our environment and our national security.” His solutions are wind and natural gas. Next, Al Gore makes a big speech in which he essentially targets coal by calling for 100% of our electricity to come from low-carbon (he says zero carbon) sources within 10 years. The theme of the speech, though, is largely economic, and this doesn’t go unnoticed.

Seeking Alpha: By focusing on the “environment” instead of the “economics”, Gore has allowed the ideologues and industrialists to pooh-pooh him. End result: we don’t have a comprehensive energy policy like the one I have been pounding on the table for years to adopt.

Meanwhile, oil is at $130/barrel, gasoline at $4/gallon, the S&P is on the skids (returning nearly 0% over the last 10 years), the US trade deficit balloons as we send $750 billion dollars (and rising…) every year to foreign oil producers, inflation is raging (but the Fed can’t raise rates), and of course  as a result, the US dollar is down 50% since Bush took office. Still, our “leaders” cannot or will not see the wisdom of enacting a comprehensive energy policy to regain control of our economy, our financial future, and our national security.

Pickens responded with a bit of dissent:

“Today, former Vice President Al Gore put forward a framework of a plan that is focused on global warming and climate issues. My plan is aimed squarely at breaking the stranglehold that foreign oil has on our country and the $700 billion annual impact it has on our economy. We import 70% of our oil and that number is growing larger every year. Vice President Gore’s plan does not address this enormous problem, it is clear that he and I have two different objectives and our plans should be viewed with that in mind.”

While their individual objectives and motives may differ, the end will be the same: reduced CO2 emissions. What’s particularly compelling is that Pickens and Gore originate from the opposite sides of the political and ideological spectrum. But Gore is often assailed for having a vested financial interest in solving the climate crisis, as if Democrats aren’t supposed to be capitalists. Regardless, we find it hard to believe that Gore campaigned for the environment during his entire political career just so he could make money on it when he retired. Plus, he’s already made hundreds of millions on Google alone, and he’s donated every penny he’s earned from Inconvenient Truth. Meanwhile, Pickens’ financial motivations couldn’t be more clear.

The bottom line is that solutions to these problems present huge economic opportunities. All are welcome to participate and create wealth. Failure to address them, however, leads to (more) economic catastrophe for us (you and me), while enriching the few who have financial interests in fossil fuels.

Lives Per Gallon

One of the key problems with oil is that the price has been artificially low, especially for Americans. This has encouraged us to consume more, while devaluing efficiency. But you can’t defy the laws of economics, so it’s incredible to see the parallels between oil and the mortgage crisis.

What we’ve essentially had for the past 50 years is an adjustable, negative amortization (NegAm) mortgage on our oil. Every time we paid $1 or $2 per gallon in the past, another dollar or more was tacked on to what we’d have to pay in the future. It’s like the unpaid interest being tacked onto the principle of a mortgage. Sooner or later, you have to pay, and the longer you wait, the larger the debt becomes and the more painful it gets to pay it off. Sound familiar? This was accomplished by dramatically subsidizing the oil industry.

We turn again to Terry Tamminen’s Lives Per Gallon: The True Cost of Our Oil Addiction for some well-supported and cited statistics.

“According to a summary of studies compiled in 2001 by the New York Times, the United States had already been spending $25 billion a year on the military defense of oil-exporting countries in the Middle East. The Bush administration will spend $98 billion more to protect just one pipeline that delivers oil, bound for the United States, to a transportation terminal on the Colombian border with Venezuela, the Cano Limon oil pipeline, which is owned by Los Angeles-based Occidental Petroleum. Multiple estimates agree that the annual cost to U.S. taxpayers to defend our oil supply around the globe is between $55 billion and nearly $100 billion. This estimate does not include the more than $100 billion spent each year in Iraq for the war in that country, at least some [most] of which is attributable to securing oil.”

One of the biggest criticisms of renewable energy (and nuclear) is that it can’t compete. It needs government subsidies and incentives. Indeed, Pickens would not be in the wind business if Texas didn’t heavily incentivize it. While the oil industry clearly doesn’t need subsidies (see record profits), that hasn’t stopped U.S. taxpayers from paying them.

“When all is said and done, a fair tally of the total annual taxpayer subsidy to our petroleum addiction would run between $65 billion and $113 billion each year. The middle of that range is $89 billion each year. To put that in perspective, $89 billion is more than double the amount spent on homeland security by the United States each year.”

All told, Tamminen estimates the annual cost to taxpayers for all types of subsidies, from healthcare to military and direct giveaways, to be $128.4 billion on the low side and $806.9 billion on the high side. Yes, that’s every year. “That works out to $1 per gallon and possibly as high as $6 per gallon added to the actual price of every gallon of petroleum fuel used in the United States for these subsidies, costs, and externalities.” Note that global warming and CO2 emissions are not factored into these numbers.

It’s clear from this that record profits buys a lot of influence in Congress and the White House. But it doesn’t end there. When those profits and Big Oil’s very existence come under attack. When the media and public opinion start turning against it, it’s just as easy to buy some doubt and skepticism.

Follow the Money

Oil and coal companies are in the same position today with global warming that tobacco companies were several years ago with cancer. The response is the same (denial). Big Oil will eventually lose but not without a fight and not without spending obscene amounts of money on lawyers, politicians, and disinformation campaigns.

The conflicts of interest among the scientific community and fossil fuel interests are as broad as they are deep. After all, it’s a huge industry with lots of money to be made. Last year we saw this Stanford study about how increased use of ethanol fuel poses health risks…followed four weeks later by a story on what Stanford planned to do with all of its Exxon-Mobile stock. If nothing else, it’s cause for a bit of skepticism about the report’s objectivity, since biofuels compete directly with Exxon’s products.

Most are aware of the global warming shenanigans within the Bush administration. Where did Bush and Cheney come from and to whom do they answer? Most are aware that Big Oil supports disinformation campaigns and that it’s paying scientists to write articles undercutting the broad consensus on climate change.

Since the late 1980s, this well-coordinated, well-funded campaign by contrarian scientists, free-market think tanks and industry has created a paralyzing fog of doubt around climate change. Through advertisements, op-eds, lobbying and media attention, greenhouse doubters (they hate being called deniers) argued first that the world is not warming; measurements indicating otherwise are flawed, they said. Then they claimed that any warming is natural, not caused by human activities. Now they contend that the looming warming will be minuscule and harmless. “They patterned what they did after the tobacco industry,” says former senator Tim Wirth, who spearheaded environmental issues as an under secretary of State in the Clinton administration. “Both figured, sow enough doubt, call the science uncertain and in dispute. That’s had a huge impact on both the public and Congress.”

It doesn’t take an objective, truth-seeking person very long to peel back the layers and discover the underlying agenda. Just follow the money. The same might be said for Al Gore and T. Boone Pickens, except that they’re lobbying for cleaner, safer, healthier, more secure, and more prosperous alternatives. They just happen to have vested interests in their success. Indeed, we all have a vested interest in breaking our dependence on fossil fuels, no matter where your motivations might originate.

Ipso facto, we all have an interest in reducing CO2 emissions and combating climate change.

Photo: Flickr

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