Sometimes a Nut Finds the Squirrel

When Rep. Michele Bachmann said on the campaign trail she could bring back $2/gallon gas the reaction ranged from skepticism to derision.

But it revealed something really important about our present economy. While everyone has been focused on the debt, we've actually gone through another oil shock. I believe that's an opportunity, but opportunities take time to pursue, and in the meantime you have serious inflation.

We haven't seen this inflation reflected in prices because we've been taking it out in growth. Rising employment, falling incomes, lower investment returns (despite rising profits) they're all clear evidence of what is happening. Until we can de-link growth from oil prices, until we can make oil prices irrelevant in economic calculations, that tail will wag our dog.

Which brings me back to Bachmann.

What Bachmann was probably calling a solution lies in e-mails that have been floating around for years, claiming the Bakken oil field in North Dakota, or the Marcellus shale gas field in Appalachia, can produce the added supply needed to get prices down.

Fact is they can't. The Bakken takes too much water to bring to the surface, more than the region can possibly acquire. Producing shale gas risks water tables – even the field's advocates admit it.

But there is a force that can reduce gas prices substantially, and deliver American jobs in quantity. Efficiency.

America has more cheap renewable energy, in the form of waste, than any other country. It's the flip side of using 25% of the world's supply for 4% of the world's population.

The higher energy prices get, the faster your payback from efficiency. An electric or hybrid car pays for itself more quickly with gas at $4/gallon than at $2. Insulating your house is a better deal when natural gas is at a high price than a low one. Replacing a desktop PC with a laptop makes more sense when you consider the energy savings. You can sell more systems that cut-off the juice to devices that aren't on. It goes on-and-on.

I'm also seeing this in real estate. My home's value has remained stable the last year while homes throughout the Atlanta market are plummeting in price, because it's a safe neighborhood close to downtown and the employment center around Emory University. There are infill homes being built very near where I live right now, with ready buyers.

High fuel prices also bring solar, wind, and biomass closer to “grid parity.” The more of that supply we get the more pressure there is on energy prices going forward, because a solar panel keeps producing power for many years regardless of what prices do. All these supplies also mean American jobs.

So Michele Bachmann, environmentalist? No.

But sometimes a nut finds the squirrel