Opinion Archive

What to Make of the Dearth of Energy Leadership

May 21, 2008

Modern life requires energy. Lots of it. Nevertheless, this very demand is causing the price of fuel to rise dramatically, making our current mix of energy supply unsustainable in the medium-to-long run. Further, as Polar bears can attest, our main source, oil, is affecting our environment in ways that will negatively affect all of us within a short period of time. Worryingly, greed drives decisionmaking among both the suppliers and the consumers of this essential commodity and true leadership is lacking.

Think locally

Net oil exporters are having their vision clouded by greed, which chokes supply. Countries that had opened their oil sectors to foreign investment, like Russia and Venezuela, are busy breaking contracts and raising barriers to entry. Thus, an oil company executive quoted in The Economist recently discounted further investment in Russia, noting that, by his calculations, fully 92% of profits are being snapped up by the “assertive” Russian government. Meanwhile, Russian oil exports have started to decline, as new investment has dwindled and local mismanagement begins to take its toll. Something similar is happening in Venezuela.

Mexico is another case in point. It produces 4% of the world's oil with only 1% of the world's proven reserves. But, as has been mentioned in previous editions of this column, the left has spun itself into such a frenzy regarding the country’s nationalized oil industry that a large segment refuses even to analyze the urgency of new investment. During a recent breakfast with members of the Georgetown Club of Mexico, the head of the Mexican Congress’ Energy Commission, former PRI presidential candidate, Francisco Labastida, was candid and knowledgeable regarding both the problem and possible solutions. Nevertheless, most of the best ideas are off the table “for political reasons”. That’s a politician’s way of dramatically lowering expectations. It means that public opinion has been so contaminated by  “nationalist” (read: shamelessly manipulative) rhetoric that reasonable leaders have all but abandoned espousing real solutions for fear of being branded a traitor to their country.  By polarizing our public discussion, we are all responsible for allowing things to come to this.

So, greed in oil producing developing countries takes the form of broken promises (to private investment) and the protection of vested interests (kleptocrats, unions, etc). Here, it is all about taking as much of the windfall profits from providing the “input” side of the energy equation.

On the other side, both oil-importing developing countries (China, India), and the rich world, should be focused on mitigating the impact of their energy consumption. Their greed manifests in their persistent justification of both current and future levels of energy profligacy, blaming the “other” for the consequences. The upshot is that no country is doing nearly enough.

Act globally

The Europeans, especially Scandinavia, have done the most to emphasize the conservation aspect of the energy conundrum. But even they have yet to propose, or implement, a universal solution to both the demand for energy and its negative environmental impact.

True environmental leadership would espouse a universal approach. A simple survey of the options currently available provides clues as to what this might look like. It would probably have a hefty dose of conservation, with things like LEED (“Leadership in Energy and Environmental Design”) buildings and minimum levels of efficiency in both transport and industry being mandated. Non-fossil fuel burning sources of energy would be encouraged, including a significant increase in nuclear power generation, under the watchful eye of a radically strengthened International Atomic Energy Agency. Public transport would be an important element of the ideal mix and private cars would have to be weaned of gasoline and fed with electricity. A survey of the planet would show where to implement tidal energy, where solar energy (probably not Germany, which is where it is currently being subsidized the most) and where geothermal energy (here, for example). Wind could be harnessed in most places. Corn-based ethanol would be recognized for the environmental red herring it is, given that the latest Harvard study shows that it requires as much energy as it produces. But other biofuels, such as that made from switchgrass, would be looked into. Meanwhile, oil producing developing countries, like Mexico, Russia and Venezuela, would be encouraged to take full advantage of their current situation by honoring contracts and encouraging private investment: if the world were to espouse true energy leadership, fossil fuels would become as worthless as they are dirty.

Finally, true environmental leadership would confront the two elephants in the energy debate room: demography and material expectations. In a sustainable world, how many of us will be able to consume how much, given projected levels of technology?

That is the key question of our time. Everything else is just so much more greenhouse gas.

For the latest thought-provoking article by Agustin Barrios Gomez please go to our Opinion Column page

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