|
|
A Bone to Pick with Boone
T. Boone Pickens' energy plan falls short. He has to weave what he
views as ‘political realities' into a comprehensive plan from which he
can also profit. While, I believe his highest goal is to develop a plan which
best serves the longer term economic and energy interest of the country, I
think he has not properly factored in some shorter term ‘economic
realties' which could short-circuit his scheme, well-intended as it may be.
His plan, available here, is basically to generate up to 20% of the nation's base load power
from wind and solar, thereby freeing up natural gas to be used as significant
portion of our transportation fuel. Boone already has significant investments
in using natural gas in this capacity. Though, reconstructing vehicles and
our infrastructure is a high hurdle itself, for argument purposes, I am
willing to accept the obstacles are not insurmountable. I am more concerned
with what Boone is leaving out. By passively saying that he is "all
for" coal, nuclear, and oil and gas drilling, saying "we should do
them all", but not explicitly including them in his plan to generate
base load power he is in effect saying: "hey look coal and nuclear, I'm
sorry but the environmental lobbyists and silicon valley ‘green
investors' wield much more power than you do." In Pickens' mind that is
more likely to be insurmountable than some of the technical factors in his
plan.
By saying "we should do them all" without actively promoting
coal, nuclear, and more drilling, he avoids offending proponents of those
energy sources while cleverly capturing support from such groups as the
Sierra Club because they understand that without an aggressive campaign
championing them, they will fall by the way side and clear the way for
renewable to totally replace fossil fuels. Or so they believe regarding the
point on replacement.
Environmentalist Propaganda of the Scariest Order
We should all be deeply concerned over the power the environments have
grabbed and the threat to freedom that this increasingly represents. The fact
that we have governors canceling construction of new coal-fired power plants
and an Al Gore-led extremist group subjecting us to the impression, through
their effective $300 million commercial campaign, that we are "all
coming together" in a crusade to fight the gravest threat to
mankind-global warming-should scare you.
Such extreme environmentalism is rooted in an ideology that the free
market corporate world is ‘evil' and needs to be corrected by an
enlightened elite who can lead this reformation. This comes at a time when
many families are going to struggle to pay for heating, electricity, and
transportation for the first time in their lives. Renewable energy sources
are years away from having any meaningful impact. The short term and
transitional solution (until we can depend on other alternatives) for the US is
coal. This is clear for anyone who does not have an ideological ax to grind.
It is cheap, abundant and quite simply our best alternative over the next
decade.
Environmentalism has become a "Pious moralism"
which makes it vulnerable to the vagaries of theory and not rooted in the
truth discovered from experience. Murray Rothbard
chronicles the evolution of the ideology where today's extreme
environmentalism is rooted. In his essay titled, "Origins of the Welfare
State in America" he writes:
If it wasn't industrialism or mass movements of the
working class that brought the welfare state to America, what was it? Where
are we to look for the causal forces? In the first place, we must realize
that the two most powerful motivations in human history have always been
ideology (including religious doctrine), and economic interest, and that a
joining of these two motivations can be downright irresistible. It was these
two forces that joined powerfully together to bring about the welfare state.
Ideology was propelled by an intensely held religious doctrine that swept
over and controlled virtually all Protestant churches, especially in
"Yankee" areas of the North, from 1830 on. Likewise, a growing
corollary ideology of statism and corporate
socialism spread among intellectuals and ministers by the end of the 19th
century. Among the economic interests promoted by the burgeoning welfare
state were two in particular. One was a growing legion of educated (and often
overeducated) intellectuals, technocrats, and the "helping professions"
who sought power, prestige, subsidies, contracts, cushy jobs from the welfare
state, and restrictions of entry into their field via forms of licensing. The
second was groups of big businessmen who, after failing to achieve monopoly
power on the free market, turned to government - local, state, and federal -
to gain it for them. The government would provide subsidies, contracts, and,
particularly, enforced cartelization. After 1900, these two groups coalesced,
combining two crucial elements: wealth and opinion-molding power, the latter
no longer hampered by the resistance of a Democratic Party committed to
laissez-faire ideology. The new coalition joined together to create and
accelerate a welfare state in America. Not only was this true in 1900, it
remains true today.
You can download the essay here. The new pietism took on a very religious tone at inception, but
eventually grew to embrace a secularist nature, particularly after Dewey and
the Progressives become the standard-bearers. Today, the environmental
extremists have picked up the mantle. This is at the root of the
environmental movement today. Beyond the root are scientists whose modeling
leads them to believe in the harmful effects of man-made global warming and
the greedy green capitalist investors who are trying to make a buck. They are
desperate to make some money now that their information technology
investments have largely either stagnated or gone bust.
What Happens When the Economic Wheels Fall Off?
Getting back to Boone's plan, it might be all well and good in normal
economic times, but the perfect economic storm is brewing on the horizon as
negative feedback loops between the financial markets fiascos and the real
economies build. Marc Faber in his August commentary observes that by
"writing a massive check to the shareholders of the commercial and
investment banks" the Fed is not addressing the cause of the problem,
which is excessive debt and leverage - aside from a rotten and conflict
ridden financial sector - but simply shifting "private sector"
liabilities to the government (the tax payers). Talk about negative feedback
loops! If excess credit and debt are public enemy number on the collapse of
the housing bubble are where its effects are the most pronounced. Falling
home prices negatively affect the securitized debt market and the
banking/financial sector. They equally hurt the real economy as homeowners
see their wealth deteriorate and ability to consume diminish.
The pathological optimists still believe the bottom is just around the
corner. Those who have the courage to look at things realistically, however,
see things as International Herald Tribune writer Vikas
Bajaj does in his August 4 article titled "A second, far larger wave of
mortgage defaults is building." Vikas
observes:
After two years of upward spiraling defaults, the
problems with mortgages made to people with weak, or subprime, credit are
showing the first, tentative signs of leveling off. But with the U.S. economy
struggling, homeowners with better credit are now falling behind on their
payments in growing numbers...Defaults are likely to accelerate because many
homeowners' monthly payments are rising rapidly. The higher bills come as
home prices continue to decline and banks are tightening their lending
standards, making it harder for people to refinance loans or sell their
homes. ...Subprime was the tip of the iceberg," said Thomas Atteberry, president of First Pacific Advisors, an
investment firm in Los Angeles that trades mortgage securities. "Prime
will be far bigger in its impact."
Given the fact that our policy makers are prescribing more of the
measures which got us in this mess in the first place, I think that our
economic plight is going to become even more dire.
In such an environment the rallying cry of constituents will be energy that
is "cheap, cheap, cheap" and not "clean, clean, clean." And that means coal. The greenies in
government are too focused 50 years into the future to have any idea over the
economic sledge hammer that is about to hit us all over the head. Perhaps if
we were not fiscally bankrupt as a nation, they could afford their policies.
"Cheap, cheap, cheap", means "mine, mine, mine" -
coal, that is. This is not to be confused with "drill, drill,
drill." Drilling more will only enable us to partially replenish the
supply we will be losing over the next few years. While we will also reach
"peak coal" someday we are not there yet. If Boone Pickens wants to
free up natural gas from power generation he doesn't need to build 10,000
windmills to do so. He could do so by merely switching power plants to coal
from natural gas. If we approach the economic duress I am expecting soon,
this will be the selected course of action. Furthermore, coal companies are
already taking the initiative to create coal-to-liquids transportation fuels.
Two plants will be constructed along the Ohio River within 50 miles of each
other over the next couple of years. One will cost $5.5 billion and produce
53,000 barrels of jet fuel and diesel per day; the other costs $800 million
and will generate 100 million gallons of 87-octane gasoline and 720,000 tons
of methane annually.
And they are doing it without government subsidies. What a novel
idea.
Excerpted from the 08/04/08 Global MegaTrends
Portofolio's Newsletter:
To learn more about Kurt's Kasun's Global MegaTrends Portfolio, click here.
Kurt Kasun
www.greenfaucet.com
A contributing writer to
GreenFaucet.com, Kurt Kasun writes a
high-end investment timing service, GlobalMacro,
which is focused on identifying opportunities that produce returns in excess
of market with reasonable risk. He is strategically located in Washington, D.C.,
a key to maintaining contacts and relationships which help Kurt understand
global policy and economic factors as they emerge. His investment approach
has always been macro in nature largely due to his undergraduate studies at
the U.S. Military Academy
at West Point (B. S. National Security, Public Affairs, 1989) and his
graduate studies at George
Mason University
(M.A. International Commerce and Policy, 2006).
|
|
