A Good Start in The War Against Oil But Just a Start

The President's Stimulus bill, just signed , makes a very good start toward fighting the War Against Oil. (Picture from Whitehouse.gov.)

But oil is a pernicious foe. Even now its advocates are taking advantage of some parts of the stim, and condemning the necessary next steps, in order to keep Americans enslaved to the oil power.

Let's start with the good news. Nearly 10% of this money is going into the low-hanging fruit of conservation and research:

1. Almost $11 billion will go into making government buildings more efficient.
2. Almost $10.5 billion will go into improving the efficiency of housing used by poor people, who are least likely to make the investment on their own.
3. About $16.4 billion is going into "supertrains" of one sort or another, either local transit or inter-city links. Trains are 10-20 times more efficient at moving people than cars.
4. There is $11 billion here for "smart grid" technology, which could allow utilities to buy as well as sell power.
5. There's $7.5 billion for building renewable power sources and transmission lines to get them to market.

There's some potential waste here, and a lot will depend on how well Dr. Stephen Chu and the Department of Energy do their work doling out the money.

• Some think of the "smart grid" only in terms of time-shifting power demand and getting more money from each kilowatt they sell, not enabling the purchase of power from urban solar farms or suburban windmill owners.
• Boone Pickens could easily grab that $7.5 billion to force construction of low-efficiency power lines from his West Texas windfarms to Dallas-Ft. Worth.

There's a big bet being placed here, namely that government can do things right. Republicans love condemning government and praising the free market, but it was the privatization of government and rejection of regulation that got us into this mess.

Now, for a warning and what comes next.

The primary impact of all these moves is to hold down energy demand and prices. Few of these programs do much to stimulate a true green energy revolution.

This gives opponents of the War Against Oil a big opportunity, one which they are already using anywhere you listen on the TeeVee.

1. Hybrids are still a small part of the market so "consumer choice" is for big oil guzzlers.
2. Green energy is impossible, claim the oil companies, not only directly but through a host of Astroturf groups.

Both these claims contain a germ of truth. Transforming an existing auto infrastructure is a long-term proposition. Much of what has to happen in solar energy (particularly) and transmission technology depends on scientific advances which have yet to happen. The current cost-efficiency of wind turbines and solar panels, while impressive, is several product generations away from where it needs to be in order to replace current hydrocarbon production.

That is one reason I have long called for selling this as a War against Oil. Only the idea of war gets you the kind of long-term commitment needed for success.

Fact is that oil, absent depreciation and political risks, is going to be our cheapest energy source for some years more. In Arabia it can cost less than $1 to bring a barrel of oil to market. At $40/barrel they're still making money there hand over fist. Lifting costs vary, exploration costs too, so the actual cost of oil extraction will continue to rise.

But there is an analogy here to global warming. Once the real extraction costs rise to $40/barrel, they go to $50, then $100, then $200/barrel very very quickly. Low extraction costs are costing exploration companies just as they cost alternative energy companies.

Coal has the same advantages and problems. Coal is actually very cheap to extract. Its real cost lies in burning it, and that's a cost that is not accounted for. Where I live The Southern Co. gets most of its electricity from burning coal — coal trains rumble by my home every day — and the savings go into my pocket as well as theirs. Carbon cap-and-trade will dramatically increase electrical costs, but not everywhere. Here, a lot. Elsewhere, less.

During times of real war, when the nation is truly at risk, citizens become expert in both the weapons of war and the enemies. We are nowhere near that level of awareness when it comes to the War Against Oil, but we need to approach it.

And the person who can do the most in that effort is the President of the United States. He made a big start by focusing on green energy in his signing ceremony, being introduced by a solar energy entrepreneur.

But there is much else to do. We need carbon trading deals with trading partners, deals that will help raise the prices of hydrocarbons, even while pushing forward to the next step, the use of hydrogen as an energy store.

There is every indication this Administration understands the stakes, and is willing to engage in the work. The details of the stim bill prove this.

But the work has only just begun.