As myths go, the inevitable triumph of green technology over fossil fuel ranks pretty high. Students are convinced that green technology with full government support is about to achieve massive breakthroughs. More mature people – at least chronologically — are convinced that we exist at the mercy of OPEC and that “foreign oil” controls our future. Also supporting the myth is the notion that all recent wars – Iraq, Afghanistan and Libya, assuming they are true “wars” – concern oil. The myth runs that America needs oil and will go anywhere and do anything to get it. (Iraq stands alone as a major oil producer.)
Two major contentions stand out. First, we live at the mercy of [evil] foreign interests who sell us oil and charge outrageous prices. Canada became our top oil supplier a decade ago. Mexico is not far behind. Both are free economies, linked to the U.S. geographically and through the North American Free Trade Agreement (NAFTA).
The U.S. seems pretty happy to be trading with its neighbors and they enjoy the economic benefits. We also buy from many OPEC nations although our “dependence” on OPEC has diminished over the years as we have shifted suppliers. Prior to its joining OPEC, Nigeria ranked as a major supplier to the U.S. as did Russia, which is not an OPEC member. (Note also that OPEC has grown from the original five to 12.)
Myth accepters often forget that oil prices rise and fall based on supply and demand. All countries need oil but the U.S. stands out by the amount it gobbles. Nothing can stem the demand for oil in the U.S. Since 1950 the U.S. has roughly tripled its use of oil. Today, we consume roughly 21 million barrels a day. About 60% is imported. Putting green technology in context, efforts to introduce true, effective green alternatives or conversely to stem the demand for oil prove uninspiring.
Supply has an argument to make also. Prices drop when supply spikes, which has happened a number of times in recent years. More production inside the U.S. would change the cost as well.
So, the facts are that the US buys oil from all suppliers, friend and foe alike. Oil does not change its color or shape because of the politics of the seller or buyer.
The companion myth – that green energy is on the verge of taking off – can now be seen in the context of the first busted myth.
The government works mightily to shift the energy balance from fossil to green. Tax credits for energy saving devices and newer forms of energy production have inspired presidents from Carter to Obama. Storm windows do save energy, but solar panels, windmills and ethanol raise issues.
Take ethanol. VeraSun, once the largest ethanol company, declared bankruptcy three years ago. On top of that, ethanol carries a bad image for raising the price of corn and by extension the price of beef and pork, which are largely corn fed in the U.S.
Windmills now enjoy a continuation of tax benefits. The problem is, after they are built, they do not help reduce our dependence on oil. Beyond electricity production, have you ever seen a car powered by a windmill? Are major utilities constructing windmills? As a New Yorker, I am waiting to see a windmill on top of the Empire State Building and one to replace the torch on the Statue of Liberty. After all, we are at the mercy of OPEC and windmills symbolize energy freedom! Or so the myth goes. There isn’t even a New York Times op ed to push for this surefire green technology solution.
Electric cars sound great, but there don’t seem to be many “electric gas stations,” if you will pardon the new terminology. Nor can you park your car on the street and plug it in for an overnight battery charge. Maybe some day.
To bust the myth even farther, in many energy producing plants, oil is an alternative to other fossil fuels. Coal is making a pretty good run right now. “Clean coal,” once an oxymoron, is selling well. So, a slight reduction in oil use in one area of the economy might be accompanied by a boost in natural gas or coal use.
It appears that our “dependence” on OPEC is more myth than reality. At least we might agree that our dependence on oil is of our own making.
Michael McTague, Ph.D. is Senior Vice President at Able Global Partners, a financial consulting firm in New York City.