Fossil Fuel Dependence: A Call to Action

-- By ShayBanerjee - 13 Mar 2015

Introduction

Enough games. It is time to get serious.

America’s dependence on fossil fuels must end because a 21st century economy should be powered by 21st century energy sources. There is no “silver bullet” to ending the dependence, so the solution will require multiple moving parts across a variety of industries. The necessary transformations will not happen without substantial federal government involvement on the order of Reconstruction or the Great Depression. Congress must step up in a big way, and it must do so immediately.

A Losing Strategy

A developed economy in the modern era can no longer rely on fossil fuels as its principal energy source. Any suggestion to the contrary is outright denialism. The energy return on investment for fossil fuels plummets with each passing moment as the cost of exploration balloons and net yield on extraction declines. This fundamental economic reality has not changed in decades and no recent industry development can or will reverse the historical trend.

Peak oil and gas have come and gone, and the emergence of shale production did not change that reality. The so-called “Global Shale Revolution” was an embarrassing commercial failure, and the recent price crash has proven it. The undeserved hype surrounding shale led to over investment followed by overproduction, and now the industry is paying the price. Shale production depletes wells far too rapidly, offers dramatically few returns, and requires extreme levels of capital investment. Shale plays are therefore seeing dramatic cutbacks in the midst of the supply glut, as oil and gas drillers are instead reaching deep into their most productive regions. This development will only exacerbate long term cost pressures, and economies reliant on oil and gas companies will be caught bill-in-hand when there are no more low hanging fruits to pick.

The state of American coal is even more pathetic, as the last year has seen a record number of plants close, dramatic job cuts throughout the industry, and sharp consumer price increases. The principal causes of coal’s collapse are the skyrocketing costs of mining and depreciating yield quality, realities becoming abundantly clear not just in America, but also throughout the world. Instead of so much as feigning an attempt to fix its desperate state of affairs, American coal points the finger at the EPA. Blaming mild environmental regulations for a failing business model is the epitome of loser talk, and should be treated as such.

Unable to salvage their business model through game-changing business strategy or technological innovation, fossil fuel companies are increasingly funding exploration campaigns with retained earnings. They also rely heavily on government subsidies totaling $5.3 trillion globally. Countries possessing strong environmental movements are contemplating reducing or eliminating these subsidies, even if the United States is not. Many will impose carbon taxes or have already done so. There is a growing belief among world governments and institutions that fossil fuels are not a worthy investment for financial reasons or otherwise.

Despite these realities, the United States government continues to back the failing fossil fuel industry, and that mistake diverts from our economic strength. In addition to spending billions in subsidies on the fossil fuel industry,the government has spent an estimated $8 trillion since 1977 to protect midstream oil flow in the Persian Gulf alone. Moreover, pollution from fossil fuels produces an estimated $120 billion in domestic health care costs. Over the last several decades, our dependence on the fossil fuel industry has contributed to blundering foreign policy choices, multiple recessions, rising inequality, and a reduced moral standing in a world increasingly captivated by environmentalism.

Time is of the essence. Fossil fuels will be surpassed by energy sources better capable of providing for the needs of modern society. The question is no longer “if” but “when.” Alternative energy sources already undercut the price of fossil fuels in many regions, and, by some estimates, they will achieve complete grid parity by 2020. Nations will reassert their economic positions in a changing world, and America must not fall behind.

The Case for a National Solution

Energy, and energy alone, determines economic power.

Mainstream economic theories have repeatedly failed to identify this essential fact. Instead, at different time periods, political economists have variously emphasized the relative roles of land, labor and capital. Yet land is only as valuable as the resources produced on it directly or indirectly by solar energy. Labor is nothing more than the harnessing of human energy. And capital is simply the technical equipment capable of utilizing an energy throughput. The underlying truth is this: when the predominant energy flow powering an economy becomes too costly, growth stagnates, civilizations become poorer, and societies collapse. Nations that lead counteract this by revolutionizing the processes by which energy is used and acquired.

At every recent turning point in human development, successful nations promoted more efficient energy strategy through federal government involvement. America is no exception. Following the Great Depression, the New Deal and WWII unleashed electrical modernization on the American home and petroleum-based automobiles on the American road. Decades before, the rapidly urbanizing North flexed its coal-fired industrial muscles, crushing the back of an antiquated Southern plantation system built around agricultural land and slave labor. Nations exist because there are some things only nations can do.

We have reached another turning point, and the core infrastructure of the economy remains path dependent on obsolete energy processes. The electrical grid is uniquely equipped to distribute fossil fuel-based power to residences, public facilities, and office buildings. It must be torn down and rebuilt around smart grid processes that enhance solar, wind, nuclear, and/or hydropower generation. The transportation sector relies on 250 million oil-powered cars and over 100 thousand gas stations located in commercial and residential areas. New refueling facilities, transmission lines, and/or public transport systems must be built to support a network running on plug-in electricity, battery power, and/or hydrogen fuel. All of these tasks require federal government investigation, investment, and administration.

The time for excuses is over. Congress must start developing findings and crafting legislation immediately. We have work to do.

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