A potential perfect storm is brewing, just like all weather forecasting it's not 100% certain how big the storm is going to be, but despite what some conservatives say the risk is too great to avoid, and despite what some liberals say a storm buster may be available.
Global warming, Global energy supply and Globalization – the free flow of energy, its availability and its effects – are changing on a global level, combining to produce a real threat to our everyday lives.
Oil supply problems and the switch of industrial economies away from industry to services based economies are linked. Current oil prices are largely due to increased demand rather than supply problems. Service based economies are doing well because they are outsourcing production to cheaper industrializing economies like China but in doing so they have created a rival with a growing appetite for oil.
One problem with the principal products of services based economies – ideas, is that they do not have tangible scarcity and therefore are difficult to protect. This is the tragedy of the virtual commons. In 30 years one could imagine a potential war with China if it decided to counterfeit America’s principal intellectual property based exports on a large scale while holding the US to ransom over manufactured imports – you cannot make things like vacuum cleaners cheaper than China, but you can make limitless copies of music, films, software and some drugs, for almost nothing.
Hurricane Katrina although not Global Warming related demonstrated very clearly the link between the weather and oil prices. The real effects of global warming may be subtle at first, but economically devastating – providing added instability and risk through higher than average incidences of storms which break the risk models of insurance companies and hinder the free movement of energy and trade and therefore, growth in GDP.
Doomsayers say that the principal supply of portable energy or source of ‘negentropy’ that underlies all growth in GDP is reaching peak production, after which costs will inexorably rise. It doesn’t really matter whether we believe the Doomsayers or not, however, because the storm that is brewing is such that most spare oil capacity in an area which is politically unstable, where we are fighting a war, while the switch to service economies has outsourced industrial production to countries like India and China which have almost limitless potential to soak up oil as their economies switch from agrarian to industrial as the world’s supply of industrial labor has doubled within a few years.
So what are the elements that point to there being a possible cloud buster?
1. As economies such as Europe and the US switch from agrarian to industrial to post-industrial, they temporarily subsidize industrial production to produce a smooth transition, but they produce seemingly permanent farm subsidies. Most European or American farming is not currently viable in a capitalist economy.
2. There is a difficulty for politicians in any capitalist democracy to win popular support for large scale constructive initiatives which involve government spending which inevitably leads to increased taxes or deficits. Because things which invoke fear and anger are more dramatic and simpler to base a course of action on, it is easier to raise money to go to war than boring, complicated and possibly unnecessary programs even if they create long term stability and may help prevent war in the first place. The best way to initiate large scale government spending is to direct it at the most conservative sector of society and at a time such as now, when the effects of something like weather or energy prices cause understandable fear anxiety and anger and to channel the funds through an area that already has a precedent for subsidy.
3. Despite the ideals of free trade and its clear economic benefits, countries that succeed best go through periodic cycles of being open or closed to the rest of the world. Even if there is a trend towards globalism on a macro scale, country by country, there are natural oscillations. While a country is developing it may open its borders to immigrants, as did the US in the 19th Century but as its internal development reaches its furthest reaches it increases its trade with other nations, while reducing immigration. At the same time the Until the 1930’s the US was almost entirely isolationist, GDP growth coming from internal expansion. Later as a country becomes richer it needs immigration to provide a cheap work force for the jobs that people who can earn a living elsewhere won’t do (as has been happening with the blind eye often turned to Mexican immigration into the US), and it creates trade sanctions to protect its existing workforce (e.g. the US steel industry). This cycle is periodic and despite preferences for one way or the other from people on different ends of the political spectrum, it is probably better that a country switches occasionally between an open or isolationist stance. Given the US’ reliance on increasing foreign energy and foreign labor and the problems on the horizon, now would be a good time for the US to return to a more isolationist mode till things stabilise. To do this and transition smoothly to an economy based less on new growth, but one which can enjoy and re-use its existing assets, it will need to produce a portable energy source domestically.
4. People like to make their own decisions and enjoy freedom. No matter how cheap or efficient public transport may be, all things being equal most people like cars. In America, where a significant percentage of the population was actually conceived in a car, cars are both a symbol of personal freedom and a concrete example of how portable energy benefits growth as opposed to energy per se. In short, cultures with a large availability of portable energy will usually do well.
5. Smooth changes are better than abrupt ones, and luckily with cars there is an alternative to the ideal but not yet viable hydrogen fuel. Modern diesel engines are quieter and have similar performance to gasoline ones. In addition diesel engines can run off a plant/mineral oil mix that allows for gradual increase of the plant oil component with no abrupt change in your car or the way you fuel it.
6. Plants remove carbon dioxide, the principal green house gas, from the atmosphere, while they are growing. This is a natural process, therefore its side effects, are likely to be less than other greenhouse gas reducing solutions such as plankton fertilizing with iron dust. Because they mop up CO2 while growing, a regularly harvested crop may absorb more CO2 than a mature forest (obviously, those plants whose oil is burnt as part of the mix in a diesel engine mean that there is a net increase in polluting gases, but still less than a traditional engine whose plants last mopped up CO2 millions of years ago).
7. OPEC members benefit if oil prices are high, but not if they are too high. If prices are too great, then alternative fuels become more cost effective. Oil prices are now at the point where certain alternative sources are attractive, particularly plant-oil based bio-fuels.
8. People are more receptive to genetically modified crops that are not used for food. Genetically modified bio-fuel crops could dramatically increase their potential energy output. Highly technological countries like the US are clearly in the best position to develop the technologies required for efficient bio-fuels, rather than existing suppliers such as Brazil.
I believe that you could mitigate the worst effects of the combination of energy supply problems, global warming and too rapid globalization by focusing on having the US turn the entire mid-west into a CO2 removing renewable crop some of which is used for oil in place of foreign imports. No matter what the efficiency gains elsewhere in the economy through other alternative forms of energy it is unrealistic to think that people are not going to want cars, so even if bio-fuel methods are not the most efficient form of energy for power, for cars it seems to make most sense. Specifically I think it could be sold in such a way that it would appeal to both sides of the political spectrum.
Specifically this would involve:
Dramatically increasing existing US farm subsidies, possibly even allocating the money as part of a strategic defense budget (based upon a weighted risk measure based upon reduced exposure to conflict in oil producing areas), and channelling this into greening a vast area of the mid-West which is predominantly rural and Republican.
Making the US turn full circle into being a net reducer of CO2 and having the US use its position as a superpower now able to fight on the side of reducing greenhouse gas emissions to help prevent emerging industrial economies such as China, offsetting the balance.
Providing large scale funding for research and development into non medical life-sciences to provide highly efficient genetically modified bio-fuel crops.
Increasing trade tariffs and protectionism in strategically important areas, to make the US isolationist in terms of energy but not in terms of trade in manufactured goods..
Encouraging a large scale switch from gas to diesel engines for cars.
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