by Mitt Romney
Our reliance on imported oil weakens our hand outside the Middle East as well. Venezuelan president Hugo Chávez’s verbal buffoonery is exceeded only by his persistent desire to supplant democracy throughout Latin America, an effort financed through the sale of Venezuelan oil. Chávez is fast becoming a menace to freedom across his continent, and his instability is exactly the sort of megalomania that has plunged other states like Zimbabwe into cycles of crushing violence and destruction. Chávez could become our hemisphere’s Mugabe, all because of the wealth his exploitation of oil provides him.
Our efforts to end genocide in Sudan are frustrated by China’s reticence to interfere with the flow of oil from its Sudanese wells. Intensified geopolitical rivalries with nations like China, and even allies like India, are the by-products of the search by modern economies for the energy they need to run. The demand for oil could draw those nations into closer alliance with the increasingly hostile Russia of Vladimir Putin.
The global addiction to oil promotes corruption, autocracy, terrorism, and repression; conflicts in Iraq, Nigeria, Sudan, Indonesia, Yemen, Algeria, the Congo, Georgia, and Chechnya all have been sparked or fueled by oil. Freedom House reports that only 9 percent of the world’s marketable oil lies in countries that it considers free. Oil brings wealth, but it also has been a curse for many of the countries under which it pools.
One of best things that could happen for the advancement of American foreign policy and world peace would be an end to the global dependence on oil. Our oil gluttony is not good for the American economy. We spend over 200 billion a year buying oil from other nations—a staggering amount that accounts for a third of our current account deficit. Economists note that buying something for less than it costs you to produce is generally a good thing. It isn’t bad economics for American companies to use oil imported from abroad when energy produced at home costs more. But we have better options than producing energy here at higher cost: We can dramatically reduce our appetite for oil and over time transition to cost-efficient alternative sources of energy. Spending our energy dollars here for domestically produced energy while also funding research, development, and production of new sources of energy creates jobs, strengthens the dollar, and reduces our exposure to supply risks and volatility.
We must vigorously embrace and develop all of our domestic energy sources. One of the great disappointments of the so-called stimulus package of 2009 was that we spent nearly a trillion dollars and have no new energy production facilities to show for it. These dollars could have funded dozens of clean and safe nuclear plants, hundreds of clean and safe offshore or onshore wells, and natural gas pipelines that could have provided low emissions fuel to electric utilities. Instead, just as much foreign oil arrives in American ports as before.
The Question of Climate Change
It’s impossible not to take a look at our current energy policies without considering the question of climate change. I believe that climate change is occurring—the reduction in the size of global ice caps is hard to ignore. I also believe that human activity is a contributing factor.
I am uncertain how much of the warming, however, is attributable to man and how much is attributable to factors out of our control. I do not support radical feel-good policies like a unilateral U.S. cap-and-trade mandate. Such policies would have little effect on the climate but could cripple economic growth with devastating results for people across the planet, as I will discuss later in this chapter.
Oil is purported to be one of the primary contributors to rising global temperatures. If in fact global warming is importantly caused by our energy appetite, it’s yet one more reason for going on an energy diet. As we have seen, it is hardly the only reason for doing so.
Scientists are nearly unanimous in laying the blame for rising temperatures on greenhouse gas emissions. Of course there are also reasons for skepticism. The earth may be getting warmer, but there have been numerous times in the earth’s history when temperatures have been warmer than they are now. Climate cycles with great variations in temperature predate the greenhouse gas emissions of the past three centuries, and they even predate the rise of human populations. In fact, climate change has been going on from the beginning of the world; it is certainly not a new phenomenon.
Even the apparent unity among scientists is not a sure indicator of scientific fact. The idea that earthquakes are caused by the movement of tectonic plates, for example, was roundly rejected in the scientific community well into the twentieth century but is now accepted as scientific fact.
Whether or not you agree that the climate is changing and that human beings have something to do with it, assume for the sake of argument that both positions are accurate. What then should be done? Here the unity among scientists tends to splinter. Most argue for extreme measures to limit greenhouse gas emissions, citing catastrophic consequences if global temperatures rise. In addition to severe impacts on agriculture and freshwater, some estimate that the seas will rise between one and three feet by the end of this century, devastating low-lying cities and their populations. While no credible voice predicts that the polar ice caps will melt entirely in this century, the threat is truly alarming. If the Greenland ice cap disappeared, oceans would rise about twenty-four feet. They would rise an additional two hundred feet if the Antarctic ice cap melted.
Yet even given these disastrous scenarios, and even accepting that there is some possibility of their occurrence, not everyone argues for draconian measures to curb greenhouse gases. Some, in fact, believe the most responsible action is to reduce emissions where economically reasonable on the one hand, and to prepare to mediate the effects of sea level changes on affected populations on the other.
In 2004, Danish economist Bjørn Lomborg gathered ten of the world’s leading economists, including three Nobel laureates, in what he called the Copenhagen Consensus. He asked them to prioritize the greatest problems faced by humankind. They were not asked to determine which problems were the most severe, but rather to rank the most severe global challenges according to the cost and benefit of overcoming them. They were asked to determine the benefit of remediating each problem in terms of saving human life and reducing human suffering and then comparing that with the cost of doing so. Given the worldwide attention given to global warming by politicians, the media, and scientists, it presumably would be at the top of the list. It was not. Instead, HIV, the economists agreed, was number one: 27 billion spent over eight years to prevent AIDS would save 28 million people from contracting the disease. This choice would be the most effective in sparing human life. Eliminating micronutrient malnutrition by distributing vitamin A, iron, zinc, and iodine was second. Preventing malaria was high on their list: at a cost of 13 billion per year, the 500,000 malaria deaths that occur annually would be cut in half. Remarkably, promoting free trade by reducing tariffs and removing protective subsidies was also high on their list. The economists determined that doing so would add 2.4 trillion to the world economy, lifting two to three hundred million people out of poverty.
Astonishingly, spending money to prevent global warming came in last. Why? To reduce global temperature even by a very small amount requires enormous investment. Achieving the Kyoto objectives, they reasoned, would cost 150 billion a year and only delay the global temperature that would otherwise have been reached in the year 2100 by six years. For just half that amount of money, in fact, all of the other global problems they had considered could be solved. Therefore, if human life and well-being is the measure, they concluded, money would be better spent on other global problems.
Lomborg’s own view is that planning for and addressing the remediation of the effects of global warming are far more economic and more humane than massive spending to reduce emissions. British zoologist and author Matt Ridley agrees. Bjørn Lomborg’s rational and compassionate suggestions would save more lives, preserve more wilderness, and have a better chance of eventually halting man-made warming than hysterical catastrophism, global treaties,
and high-minded energy rationing, Ridley writes.
My own visits to China convince me that there is at least one more significant reason to pause before we engage in extreme and expensive measures aimed at cooling the planet: the thorny issue of feasibility. China emits more carbon dioxide than does the United States. It accounted for two-thirds of the entire world’s increase of greenhouse gases in 2007, the latest year in which the figures have been reported. By 2030, China will emit more greenhouse gases than North America and Western Europe combined. In fact, China and other developing nations will be the source of over 80 percent of the worldwide growth in emissions. At present, China and other developing nations are focused on improving the standard of living for their populations. These governments have mouths to feed and famines to prevent. This is a higher priority for them than making meaningful reductions in greenhouse gas emissions. In one respect, their position is compelling—the prospect of malnutrition or starvation of large numbers of people must necessarily engage their primary attention. The sometimes catastrophic events of the here and now take precedence over the far-off and potential disasters brought about by climate change.
Even if developing nations’ food, water, and basic medicines are secure, they also want to obtain for their people the basic standard of living that we in the West take for granted. Before they reduce energy consumption, they argue, shouldn’t they be entitled to enjoy the benefits that the burning of fossil fuels makes possible in developed nations? In contemporary China, for example, there is one automobile for every forty people, compared with one car for every two people in the United States. As nations like China and India make available to their citizens the automobiles, home heaters, air conditioners, and appliances that we take for granted in the West, their energy demands—and their emissions—will rise dramatically. As they build better housing, more hospitals, and the sort of minimum amenities that rural America considers outdated, these emissions will rise again.
If developing nations won’t curb emissions, even extreme mitigation measures taken by the United States and other developed nations will have no appreciable effect on slowing the rate of greenhouse gas emissions. Massive spending—or even worse, borrowing for emission reduction—would only make us less able to remediate the effects of warming later.
These considerations lead me to this: We should pursue a no-regrets policy at home, and we should continue to engage in global efforts—not just U.S. and European efforts—to reduce global greenhouse gas emissions. By no regrets, I mean that we ought to take unilateral action on emissions when doing so is also consistent with our objective of reducing our dependence on foreign sources of oil. In that way, if the human contribution to global warming turns out not to be the problem most consider it to be today, we will have no regrets for having taken action; these actions will have reduced our dependence on fossil fuels.
Internationally, we should work to limit the increase in emissions in global greenhouse gases, but in doing so, we shouldn’t put ourselves in a disadvantageous economic position that penalizes American jobs and economic growth.
The notion that if we spend trillions to reduce emissions that China will feel morally obligated to follow suit is folly. The world is littered with instances where American moral leadership has been ignored or actively defied by the People’s Republic of China, the Heritage Foundation’s Derek Scissors points out, including the Sudan genocide, Iranian and North Korean nuclear programs, Burmese human rights repression, and so forth. At least until China’s jobs crisis recedes during the coming decades, it’s unimaginable that the country will do anything that would risk slowing its economic growth. The Chinese believe in economic growth in a way that few in the West can grasp—a belief powered by the almost desperate need to keep up with their own population. We simply cannot blind ourselves to that reality.
Our Energy Legacy
If the economy, geopolitics, and potential repercussions of climate change aren’t enough to cause us to dramatically reshape our energy habits, I hope that our collective concern for the legacy we leave our children will bring us to our senses. Will the next American generations have sufficient clean, safe domestic energy, or will our children and grandchildren be economically captive to some of the world’s most unstable nations and the tyrants who lead them? Today, we produce just 42 percent of our own oil, and production is on a downward trend that is likely to continue. Crude oil production peaked in 1970 in our lower forty-eight states and peaked in 1988 in Alaska. Since 1972, the amount of crude oil produced per well in the United States has declined from 18.6 barrels a day to about 10 per day.
We consume roughly 24 percent of the world’s oil but possess only 2.4 percent of the world’s oil reserves. Even if we were to begin to drill in the Arctic National Wildlife Refuge and on the continental shelf, it wouldn’t be enough to appreciably have an impact on our dependence on other nations for oil. And if we were to open the domestic oil spigot too wide and drain our last fields, we would risk leaving America even more vulnerable twenty-five years from now than it is today. But there should be no objection to preparing the energy infrastructure to tap known reserves and to discover more reserves: This is a vitally important insurance policy against future energy shocks or threats to national security. And it is always possible that new, very large discoveries could surprise us.
With all that is at stake, the time has come for America to adopt a proactive energy strategy, one that will generate a dramatic change in our energy habits instead of waiting for change to be thrust upon us by others. Some believe that our goal should be energy independence. Other very credible energy experts explain that energy independence is impossible or impractical and therefore that energy security is a more realistic objective. I think both camps actually mean the same thing: We need to become independent of oil geopolitics and oil-state blackmail so that our citizens and our economy will never be hostage to price manipulation by the oil oligopoly. And in addition to achieving energy security for ourselves, we should make sure that we provide for future generations of Americans as well.
In recent years, there’s been a view in Washington that we should simply let the market work by taking a hands-off approach, rather than adopt a proactive and comprehensive set of energy policies. That prescription is exactly the right one in most economic sectors, but it falls short when it comes to energy. And it ignores the fact that we have policies in place right now that distort how the energy markets function.
Markets can’t be expected to work their unique magic when they’re controlled by oligopolies, as the oil market currently is—free markets simply don’t exist when sellers collude. When an aspiring superpower like Russia seeks to dominate the energy market with monopolistic and militaristic measures, letting the market work could obviously pave the way to a very bad outcome indeed. If the energy market were truly free, it long ago would have attracted global investors to develop alternative sources of energy, but the oligopolists have intentionally manipulated production and prices to dissuade investors from making long-term commitments. The aim of the OPEC cartel is to constrain supply, note the authors of Winning the Oil Endgame, and thereby force others to produce high-cost oil first, then sell the cartel’s cheap oil for that higher price—and by depleting others’ oil first, make buyers even more dependent on the cartel later.
Our own policies interfere with free-market mechanisms. We subsidize domestic oil and gas production with generous tax breaks, penalize sugar-based ethanol from Brazil, and block investment in nuclear energy. Our navy assumes the prime responsibility for securing the oil routes from the Middle East, effectively subsidizing its cost. Thus, we don’t pay the full cost of Middle East oil, either at the oil-company level or at the pump.
Market economists also identify a number of externalities—real costs that aren’t captured in the price of fuel—the most frequently cited of which are the health-care costs of pollution and the climate costs of greenhouse gases. There is a further externality: potentiall
y leaving the next generations in the lurch by using so much oil and energy ourselves—domestic and imported—that our children face severe oil shortages, prohibitively expensive fuel, a crippled economy, and dominion of energy by Russia and other oil-rich states. No matter how you price it, oil is expensive to use; we should be encouraging our citizens to use less of it, our scientists to find alternatives for it, and our producers to find more of it here at home.
Many analysts predict that the world’s production of oil will peak in the next ten to twenty years, but oil expert Matt Simmons, author of Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, presents a compelling case that Middle Eastern oil production may have already reached its peak. Simmons bases his contention on his investigation into the highly secretive matter of the level of reserves in the Saudi oil fields. But whether the peak is already past or will be reached within a few years, world oil supply will decline at some point, and no one predicts a corresponding decline in demand. If we want America to remain strong and wish to ensure that future generations have secure and prosperous lives, we must consider our current energy policies in the light of how these policies will affect our grandchildren.
An argument can be made that by the time we would experience a severe shortage of crude oil, we will have found new energy sources to replace it, so we should continue to consume oil just as fast as we want. Hydrogen, for example, is frequently touted as an energy panacea; my greenest friends have assured me that we can expect widely commercialized hydrogen cars within ten years. But I remind them that they’ve been saying that for more than a decade. Energy Secretary Steven Chu has decided to shift federal research funding from hydrogen to other energy sources because the lead time on hydrogen is so great.