‘PETROPOLY’: THE AMERICAN ENERGY FUTURE

PETROPOLY: THE COLLAPSE OF AMERICA’S ENERGY SECURITY PARADIGM By Anne Korin and Gal Luft
CreateSpace, $18, 182 pages

Washington Times on December 31, 2012, published a review by David DesRosiers of a new book that calls for efforts of the United States to create a new energy future. Excerpts below:

The basic idea is that it’s hard to shake up an entrenched, self-interested status quo and that [U.S.] national interest sometimes is better served with someone or some few acting in an extraconstitutional capacity. This is the political sentiment behind Thomas Friedman’s “China for a Day” meme: If only the engineers were in charge and the “can’t do” forces of our aging democracy held at bay, we could build an energy future worthy of a growing, clean and safe 21st century.

A reading of “Petropoly” offers a glimpse into the promised land of what [American] energy future could look like if we upended our thinking. It ought to be required reading for every elected official, the ethanol lobby and all those who forecast energy markets.

According to Ms. Korin and Mr. Luft, both conservatives and liberals have a completely wrong understanding of oil and our “addiction” to it. Liberals want to put our planet on a “diet” — learning to live with less. This was the sentiment made infamous by Secretary of Energy Steven Chu, who made the mistake of speaking truthfully that the administration’s ends are well-served by high gas prices.

On the flip side, conservatives argue for increasing domestic supply — “drill baby, drill.” Unfortunately, the price of oil is set in a global market that it is manipulated by the Organization of the Petroleum Exporting Countries (OPEC) …Hugo Chavez.

The authors’ answer to this problem: fuel competition that starts with engines capable of accepting a variety of fuels, especially natural gas and methanol.

“Petropoly” opens with a quote from Milton Friedman, and its last chapter is titled “What would Hayek Do?” The book starts and ends with an examination of the problem of monopoly power. More important, it provides the solution.

“The author’s” speak clearly and sharply to soft green thinking: “Invoking solar, wind and nuclear power as remedies to oil independence is like offering Prozac to a cancer patient.” They put forward two lapel-shaking developments that change everything: the Arab Spring and America’s position sitting astride what President Obama calls “the Saudi Arabia of natural gas.”

…OPEC’s latitude for lowering the price has been circumscribed with the Arab Spring. In response to the uprisings, King Abdullah of Saudi Arabia increased his budget by $129 billion, an 83 percent increase in spending, with the other OPEC heads of state following suit.

The authors argue persuasively that the best predictor of the price of oil has been and will remain how much OPEC countries need to raise to cover their expenditures. OPEC output has been relatively flat for the past 40 years even though its member countries are sitting on 78 percent of the world reserves and global demand is up 60 percent. Barring a competitor fuel in the transportation sector, we are looking at a future of high oil prices.

“For years, the Saudis have calibrated oil prices in such a way that oil revenues are sufficient to balance their budgets and ensure cradle-to-grave services to their booming population.”

Enter the United States. During the past 10 years, it has become the Saudi Arabia of natural gas, thanks to two innovations: hydraulic fracturing and horizontal drilling. As a result of these technologies, Rust Belt states like Ohio, Pennsylvania and New York — and, farther west, North Dakota — are positioned to grow our economy, help our environment and increase our national security. The latter is particularly important in light of the sequestration cuts and a war-weary nation.

To take advantage of the economic opportunities presented by technology, some political foresight and will are required.

With…a minor policy tweak starting at the gas tank, investors would provide the billions needed to build natural-gas-to-methanol conversion plants, and gas stations looking to serve price-conscious consumers could justify giving methanol a place on their pumps.

It sounds like an idea that a democracy facing a fiscal cliff might want to give a fair shake as part of the effort to save itself from itself. We [now] have the wisdom of “Petropoly” and the ideas coming forth from the American Alcohol Association, which they have founded to engage and counter America’s abundant “can’t do” forces.

David DesRosiers is president of Revere Advisors.

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