Drill, Baby, Drill vs. the Lowly Tire Guage

I just wanted to take a moment to discuss some things that were said on the campaign trail last year and clear up some misconceptions people have about oil dependence versus foreign oil dependence. Namely, the idea that there is a meaningful difference.

John McCain and Barack Obama agreed on one thing: we have to reduce our dependence on foreign oil. They disagreed on the method, or at least the focus. Obama seemed to hew toward conservation and alternative energy sources, while McCain favored development of domestic oil resources. While Joe Biden seemed pretty mute on the issue, Sarah Palin was even more vocal than McCain, at times leading supporters in chants of "drill, baby, drill" in a perfect example of her striking ability to reduce complex issues to simplistic, meaningless soundbites.

At around this same time, Obama gave the "tire quote" prompting the RNC to immediately order bunches of tire guages with "Barack Obama Energy Plan" printed on them. He was of course willfully misinterpreted. As Time noted, his statement wasn't intended to suggest tire pressure as a solution, but rather to point out how minuscule the effects of expanded offshore drilling would be. And therein lie a couple of good points.

First is that Obama's completely right. We can't possibly drill our way out of this. There simply isn't enough to drill. The U.S. hit peak oil quite some time ago, and that's basically that. We can't meaningfully expand our production. Anyone who says otherwise is probably selling something. In McCain's case, he was selling the idea that Americans can just keep doing what they're doing because he had the easy way out.

But the second idea is this: why isn't tire pressure an energy plan? Or more broadly, if we really can save over a million barrels of oil daily just by properly maintaining our vehicles, why wouldn't we!? This strikes me as a lot less painful than bringing back the double nickel, or various other things that have been earnestly discussed in our legislature. Conservation is the cheapest, easiest way to reduce our energy consumption whether it's in our homes or in our cars. Being that our cars account for a great deal of our most costly energy, what's wrong with starting there?

The stock answer is that we can't expect people to change habits. I'm not buying it. It seems simple enough to me to tackle this either of two ways:

1. Negative incentive: put a federal requirement on state inspection programs that requires a check on air filters, alignments, and the like so that people can't neglect these infrequent maintenance items. Then make it illegal to drive with low tire pressure; not only is it inefficient, at a certain level it's dangerous.
2. Positive incentive: add a tax credit for vehicle maintenance. Require receipts that show maintenance was performed on schedule. Add logging functionality to the tire pressure monitoring systems so that at the end of the year you can prove that you kept your tires inflated. Pay people for doing this.

Note that neither of these would ensure that everyone does right. But even if only a quarter of people changed their habits, we'd still save more than twice the amount of oil that we could get out of offshore drilling and the Alaskan National Wildlife Refuge combined. Also note that almost everyone would agree that the second option is preferable. I merely added the first to show that there's more than one way to handle this, which is true of most conservation programs. Which is the real point here: we need to get religion on conservation. Every little thing we need to do to provoke people to save energy, we need to do and do now. The tire pressure issue just shows how even the smallest thing is bigger than our biggest industrial oil-drilling projects could ever be.

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Big Auto, Bailouts, and Batteries

There has been much weeping, wailing, and gnashing of teeth of late from all sides concerning the big auto bailout. Meanwhile, oil-based transportation costs remain the top threat to our longterm economy, national security, and environment. Is there a smart play here that can help all three of these problems?


First, let's look into why there's been so much strife on this issue:

The weeping: The automakers cried out in pain as the economy shrunk and people stopped buying cars. They had massive inventory surpluses, debt on sunk costs like factories, costly labor contracts, and suddenly the revenue dried up. To be fair, they had been losing money for a while, but now that they can't borrow more from private bankers, they went to the lender of last resort: Uncle Sam.

The wailing: Many members of Congress (and many of their constituents), particularly Republicans, were not thrilled by this idea. They saw this as bailing out an industry which was rightfully failing due to inability to compete; they were probably right. Lots of right-leaning members probably also saw it as a perfect opportunity to take a shot at the unions, particularly in light of the upcoming Employee Free Choice Act.

The gnashing: The Bush Administration, others in Congress, and most Americans, while no doubt sharing these concerns, were nevertheless unwilling to let the big three simply fold up. The U.S. lost around 600,000 jobs in the last couple months, and another 3 million from this would be a disaster.

So, bailout it is. For the record, I agree that we had to do something. That kind of unemployment would be an unknown, but no doubt horrible, shock to the economy. On the other hand, it seems obvious that things could have been done better. I'm not a proponent of thrashing the unions over this; I'll get to another post soon about EFCA, unions, and the economy. But I do think the management should have had to pay. Reduced salaries and firings should have been mandated. And we should have gotten more input to their continuing business model. The good news, though, is that we haven't missed our only chance. They'll be back for seconds soon enough.

When they've run through these few billions and still aren't profitable, we'll likely be in at least as unsavory a position as we are now. It's likely to be later this year, before our unemployment hasn't decreased much, so we'll still be afraid of letting them fail. And next time, their failure will put the government on the hook for the guaranteed loans, increasing the incentive to throw good money after bad. So we'll bail them out some more. This time, though, let's do it right:

1. Have an independent management review, with the power to hire, fire, and adjust salaries. Don't let the same people who have run these companies into the ground keep running them.
2. CAFE standards on steroids. This should probably be seperate from the bailout, but all manufacturers selling cars in this country need to start having more serious efficiency requirements and perhaps emissions requirements. This will help the big three by putting pressure on their competition at the same rate as them, while they have the upper hand because of:
3. Major-league electric vehicle programs. Like it or not, this is where the automobile is headed. When it gets there, let's be in the lead. Toyota leapt ahead of our automakers on hybrid technology because it had foresight and it took major losses on the technology for years. The climate is perfect for the same kind of losing investment for the big three. Why? Because their competition has to rely on private financing to fund such endeavors (which of course is all but nonexistant) and our boys get to simply raid the treasury.

Do note that 2 and 3 taken together definitely amount to protectionism to some degree. As a supporter of free trade, I generally consider this a Bad Thing. But this isn't really your average protectionism either. It's a strategic variety that hopes to better position our firms for the long run. That is, we aren't artificially raising the prices of imports...we're encouraging domestic business to produce something that isn't profitable in the near term, but will set up a strategic advantage in the long term. Since this is beyond the normal encouragement of the market, it gives our firms an opportunity to leapfrog the competition. And it just may be enough to make the big three profitable again, and get our government (and us, of course, since we own the government) its money back. And it would certainly help with our dependence on oil, and our contributions to global warming.

This post is long enough now. But I do note that it has begged a few more: the EFCA/unions/class-effects-on-economy post, the global-warming's effect on the economy post, and the oil-dependence effect on economy post. Just give me time.

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Existential Questions

What am I?
Why am I here?
From whence did I come?
Where am I going?

Don't worry, this isn't going to be Sartre. I'm not talking about myself; I reserve that for when I'm on strong drugs. I'm just talking about this blog. It seemed to me that before I started just throwing things at the wall to see what sticks I should lay out what I'm looking to have here.

This blog is authored by Hunter L. Cook, ostensibly a businessman in Springfield, Missouri. I drive an electric truck, brew and drink beer, and watch and talk politics. My pet issue as long as I can remember has been tax and economic policy, but over the last few years I've added a strong dose of energy, emissions and pollution issues. Which means the time is now ripe.

We are rather obviously at a critical moment, both globally and in the United States in particular. The economy both here and abroad has come crashing down, energy prices are high, and there is strong evidence that environmental damage and resource depreciation threaten to exacerbate both problems. To make matters worse, most policy thought tends to view our options as a trade-off: help the environment at the expense of the economy, or vice-versa. I feel this is a false dichotomy, and in this blog I hope to focus on things we can do to achieve both goals at once.

I want to stress that I am a pragmatist in these matters; I do not consider "saving the environment" its own goal. Rather I consider environmental stewardship a necessary component for our continued economic well-being, and indeed in the long run for our continued survival as a species. Put simply, I'm not concerned about an obscure bug in a corner of a jungle somewhere dying...but a massive drop in honeybee populations that threatens our agriculture has me quite worried indeed.

So, what we're going to do around here is discuss policies and technologies intended to deal with the economy and the environment. We'll talk about the good as well as the bad, with an aim to determine what's likely to work and what isn't from the perspective of long-term health and growth of society, particularly in the United States. I reserve the right to throw in unrelated political stuff from time to time, because frankly I know I won't be able to resist.

I hope you enjoy the (eventual) content here, and please comment with new ideas.

Thanks,

Hunter

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