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Got Choices?

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Bringing Choices to Energy

Whether your Faith includes a creation by way of the big bang or by the hand of a supreme being, there is no denying the universe contains a vast amount of energy. And thankfully, much of that energy is still in a relatively low-entropy state. This means it is still pretty organized or, by analogy, the “spring” is still partially wound up.

Theoretically, after a very long time, things will eventually burn out and settle down to a very high-entropy, or low organizational state. But for now, we are situated at a point in time when energy is still flowing from one place to another, from a state of order to a state of disorder. And we can get in the middle of this process to harvest the energy we need to maintain the processes of life on our planet.

Perhaps our most familiar and notable example of this is the sun, a fiery ball of hydrogen and helium plasma more massive than 300,000 of our earths combined! It seems fortunate we are here during a time when it still burns brightly and provides us with enough heat and energy to sustain our lives, but not so much that it would harm us. Excluding nuclear forms of energy, the sun is ultimately the source of virtually all energy found on the earth. And the amount of energy coming in from its radiation each day is staggering. In a single square meter of area facing directly at the sun, the earth receives power at a rate of more than 1000 watts as it peaks during the day. That is enough to power 16 old-style incandescent light bulbs or as many as 100 of the newer LED variety. Due to such factors as the atmosphere and the curvature of the earth, we can count on just under a quarter of this total power being captured in some way by the planet. But this amount is still huge, estimated at over 170,000 terawatts.

Using the terms by which we often measure energy, this is over 4 million terawatt-hours or 4,000,000,000,000,000,000 watt-hours of energy. To illustrate the size of this number, let us consider the average daily human consumption of energy world-wide which has been estimated at around 20,000 kWh (kilowatt-hours). At this level, if we could harvest 100% of the sunlight energy incident on earth, it could support a world population of around 200 Billion people. Looked at another way, we only need about 4% of the energy from the sun on an ongoing basis in order to support our population at current world-wide consumption levels.

Currently, we do not get much of our energy in this way. At some point in the future, we may have to harvest incoming sunlight as it arrives in order to fully satisfy our needs. This is often referred to as “renewable energy.” But for the time being, and likely for at least the next 100 years or so, we are fortunate to be able to access energy that has been stored in the earth in the past. For millions of years, sunlight incident on the earth has been used by vegetation to convert low energy molecules such as water and carbon dioxide into much higher energy molecules such as carbohydrates. Over time and under the heat and pressure of the earth, these high-energy molecules have been converted into hydrocarbons—the crude oil and coal which we extract from the earth and refine to meet most of our present energy needs.

Because this energy was collected slowly and gradually over time and now exists in highly concentrated pockets within the crust of the earth, it is relatively inexpensive compared to the more sophisticated methods required to harvest energy “on the fly” as it is delivered to earth from the sun. And because the basic forces of economics dictate that people will tend to gravitate toward the easiest path to obtain the energy they need, it seems evident we will be relying on these relatively inexpensive forms energy for quite some time—at least until they become much more scarce than they are today.

Some people have expressed great alarm because we have become so reliant on stored energy. Others believe we should just keep mining and drilling for as long as it is readily available. These arguments are very politically charged and the specific details are beyond the scope of what is being discussed here. But there are some basic and important points we will consider:

There is plenty of energy coming from the sun to serve our needs in a renewable way as long as we can develop the technology to harvest it. To some degree, that technology already exists. We know how to synthetically generate most the fuels we have become accustomed to such as gasoline, diesel fuel and natural gas. It is possible to generate them using, essentially, air, water and sunlight. But at the moment, it is more expensive to do so than it is to just mine the stored energy from the earth. As stored energy becomes more scarce, it will naturally begin to become more expensive. At the same time, technology for renewable energy will continue to progress and become more efficient and less expensive. At some point, the “lines will cross” and we will begin to rely more on renewable energy and less on stored energy. It will happen more or less automatically. We know this because the laws of economics say it must happen.

In addition to the energy produced by the process of fusion on the sun, there is also a vast reserve of potential energy stored in similar forms here on earth. We have not really even begun to tap atomic forms of energy. As these technologies progress, we may well discover they dwarf the energy available from solar radiation.

So we really don’t need to panic. In a world where all the stored reserves were largely consumed and we had to produce our fuels synthetically, we would certainly learn to adapt. Even if fuel became 10 times more expensive in real terms, this just means a greater portion of our work day would go toward meeting our energy needs. It would also mean we would quickly adapt ourselves to use less energy. The laws of economics will make it so whether we like it or not. So let us worry in the sense that we are aware of the issue, we continue to work on improving technology, and we gradually become ready for the day when it makes sense to change the way we do things. But let us not worry to the degree that we stop living good lives of freedom and opportunity. And above all, let us not allow big business, working hand-in-hand with big government to use an artificially created “energy crisis” to maximize their own profits at our expense.

Remember the principal discussed earlier: The primary result of big government regulation is to prevent small business from competing with big business. Stated another way, big business typically benefits from government regulation by limiting competition and therefore keeping prices higher than they would otherwise be. Some in the political arena have bought into this idea to such a degree, they are willing to admit openly their intent is to keep energy prices high. They rationalize this thinking by saying it will give us the incentive to move more quickly to renewable energy sources. But you can’t fool the laws of economics any more than you can fool gravity or “mother nature.” As long as cheap, stored energy resources are available, they will continue to be the most efficient way to satisfy our needs. Only when supplies become more scarce or technology becomes more advanced, will the tide begin to turn toward other alternatives. Until that time comes, who benefits the most from government policy geared to limit production of fossil fuels? The big companies who are already in the business of producing fossil fuels. They can drill it cheap, and sell it steep, thanks to government policies that prevent prices from dropping down to their natural market levels.

This is another example of a government supported monopoly. But it is not a single, unified conspiracy. Rather it is much more complex. There are multiple governments involved and multiple companies, each pursuing their own self interests. The outcomes are not always predictable. But this much can be said: much of the world’s stored energy reserves are controlled by a relatively few countries and corporations. Most of those countries belong to a cartel called the Organization of the Petroleum Exporting Countries, or OPEC. The purpose of a cartel is to create an effective monopoly—an activity which is actually against the law in the United States and many other countries. But because this cartel exists at an international level, our options are more limited in how to deal with it. It is important to understand, the stated goal of OPEC is to manage, or limit the production of its own members in a coordinated way so as to keep prices artificially high and thereby enhance profits in a way that would not otherwise be possible.

To Americans, this means, to the degree we are dependent upon energy produced by OPEC countries, we will be paying more than a natural market price for that energy. And they will be earning higher profits than would be expected in a free-market environment. It also means, if we try to enhance our domestic oil production capabilities, the cartel can cooperate for brief periods of time to force the price of oil lower than it might otherwise be. This can have the effect of discouraging investment in the development of our own reserves and thereby protecting the cartel during its normal times of artificially higher prices.

In recent years, much of our national productivity has been going to support the nations who are members of OPEC. That means less of our work has been available for other activities that could otherwise enhance our quality of life and/or develop our own natural resources. Unfortunately, existing American oil producers also benefit as well from the activities of OPEC. When prices are high, they are high for everyone. All oil producers can enjoy the benefits of high prices whether they belong to OPEC or not. We who consume the energy are the losers.

In a normal, free market scenario, high prices have the natural result of drawing new participants into the business of production. This is another example of a negative, or regulating feedback process. Where there is money to be made, more and more people will invest the capital needed to get into the business of energy production. As this happens, prices will begin to fall until they find an equilibrium, or the “market price.” This is how economics works.

When there is not enough supply of something, more supply automatically begins to come on line until the system stabilizes. If there is too much supply, negative feedback will automatically trim it back down again to match available demand. Allowed the freedom to operate in the absence of manipulation or coercion, a free market economy will always migrate toward a quality product at a stable and affordable price. This is the natural process of price regulation, thanks to the laws of economics.

So it is important to understand, regulatory policies making it harder to produce oil and gas primarily serve the purposes of the existing oil companies themselves. They skew the natural feedback processes that would otherwise regulate the price of energy, and instead, cause those prices to rise. Ideally, the goal of an oil company is to produce not too much and not too little—just the right amount to keep the prices where they want and to keep profits optimized. The goal of the public should be to have the resources we need and at true market prices, whatever that may be. So while it is important to protect the environment from careless damage, and it is important there are safe working conditions for those who perform the work to produce our energy, those concerns can be met effectively without making it virtually impossible for small business to get in and compete in the energy sector. Perhaps one good way to do this is to turn the regulatory process back to the states so there is also increased competition in the way we regulate. There is no reason we need to focus so much power at the level of the federal government where it can be coopted and misused by big business in order to enhance their own profits at our expense.

Energy is a much more critical concern today than it was a century or two ago. Inexpensive energy has literally fueled the industrial age. And the effect has been an enhanced quality of life for billions of people around the world. Improved methods of food production, better medicines and new treatment methods have combined to increase our life spans and to make our lives more pleasant and comfortable while we are here. There is no question, access to energy has improved our lives in many different ways. But we have also become quite dependent on this energy. It would be very inconvenient and uncomfortable to revert to a lifestyle where we could not use so much. Regular people throughout the world use energy to light and heat their homes. They use it to grow and to prepare their food. And they use it to communicate and to travel to and from their jobs. It has become an integral part of our way of life. So it is important that we protect and enhance our ability to access the energy we want and need.

Because the stakes are so high, incredible amounts of money and power will be allocated by big business interests into efforts to limit production and thereby keep prices artificially high. We need to recognize it is only through the free operation of competitive forces, such as small business competing with big business, that prices will be kept in check and we can count on both prices and production levels being maintained at their natural and proper levels.

As discussed earlier, in an environment focused on choice, a federal government should be more focused on a strong foreign policy that protects the nation from acts of aggression from abroad. And it should be less involved in managing the affairs of domestic policy, leaving that work instead to individual member states where a diversity of methods and ideas can be allowed to operate on problems, providing a corresponding diversity of solutions. In the field of energy, a good role for the federal government would be to carry out a defensive strategy against cartels such as OPEC that form in order to victimize citizens. It seems very appropriate for a national government to consider such tactics as sanctions and tariffs, where necessary and where approved by the people’s representatives, in order to promote and protect the domestic production of energy and/or other resources. This will limit or eliminate a country’s dependence on foreign competitors who typically will not have the nation’s best interests in mind.

One present problem in the American federal government is that foreign political and corporate interests are able to use money and power to lobby our government to implement policies that serve their own selfish interests. More and more, we see cases where American politicians are willing to sell their influence and power to the highest bidder, regardless of its impact on the American people. At times, the United States has used regulation to limit its own oil production while continuing to favor and even subsidize countries who are active participants in the very cartels that threaten our access to energy at market prices. This raises the question of whose interests our political leaders are loyal to—their voters or their donors. Because anyone can lobby officials of the federal government, including foreign governments, foreign companies and multinational corporations, our interests as citizens are seldom considered first. In fact, these special interests too often are the dominant presence in Washington because the money and power they wield dwarf any kind of grass-roots efforts the American citizens are likely to mount.

Recently as of this writing, we have seen a precipitous drop in the price of oil. Several factors were cited, most notably the dramatic increase in domestic US oil production. Due to improvements in the technologies of hydraulic fracturing and horizontal drilling, US oil drillers have begun to obtain access to domestic energy reserves which were previously not as economical to harvest. This has produced a boom in domestic production that has provided a challenge for OPEC. You can be sure foreign oil producers do not want to see such low prices continue in the long run. And don’t doubt they will do everything in their power in order to turn it back around. It may include short-term over production of oil in an attempt to damage and discourage domestic development. This is sure to include furious lobbying efforts to get the federal government to limit or discontinue domestic fracking. And it may even include acts of terror against the West in order to create fear and uncertainty in energy futures markets.

This is deadly serious big business, it is international, and it is conducted by the rules of force—not by the rules of law and civil society we are accustomed to in the United States. This means power will rule the day and the outcome may not always be a happy ending for the American consumer.

While we want our government to protect our freedoms and promote civil society within our borders, we should also recognize this “law of the jungle” that exists between nations. We can be sure competing nations understand it very well. And we should hope our federal government is actively engaged in defending us from any attempted acts of outside aggression. We should expect our government to be prepared to confront our enemies with rules of engagement that will hold up to any threat they might pose. As long as other nations do not attack us or otherwise attempt to victimize us, we should leave them to their own freedoms, to organize and govern as they see fit. But if they threaten us, attack us, or otherwise prey upon us, our leaders have an obligation to mount a credible and effective defense against the threat. And our citizens should be prepared to support such actions wherever and whenever they are appropriate and necessary.

We should hope we have elected Good and honest people to office in federal government who will not take action against foreign powers except when it is defensive in nature and will protect our rights and freedoms. It is important our leaders use force as a last resort, not for their own political future, and never for the enrichment of private financial concerns who may have influence over them.

So there are huge amounts of money and power concentrated in the big governments and big energy businesses of the world. The power they wield is unimaginably large. Is there anything that can be done by regular people to compete with such power? Are there ways to create a revolution in energy that would be as significant a shift in power as what we have seen in the information age?

Certainly, a breakthrough in fusion technology or some other nuclear form of energy production would revolutionize our whole approach. Rather than looking to the sunlight incident on the earth, for the energy we need, we could rely on atomic bonds that were forged in the very act of creation itself. The amount of energy available to us in this form should be much greater than anything we can obtain from sunlight or even from fossil fuels. For that kind of change, we will still have to wait for further technological progress. But for now, there are some relatively simple things we can do right now.

What I propose is not a top-down deconstruction of government sponsored energy monopolies. Rather, it is a bottom-up approach—A small step in the right direction, and one which could do much to introduce an element of small-business competition back into the energy sector. Have you ever wanted to own your own energy company? With a few simple reforms of our regulatory structure, maybe you could.
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