(This has long been one of my biggest issues with Woolf’s doomsday take on our “failure” to grow in population.  The model is all wrong.  We should be striving toward a model called “sustainability.” – promoted by Sue Prent)

To hear Economist Art Woolf tell it, Vermont’s population problem is that it isn’t growing.  As he put it in a recent Burlington Free Press appearance:  

a very slow-growing population presents challenges.  For one, it limits economic growth and hence the opportunities for Vermont businesses to expand and for Vermonters to obtain jobs. Larger populations also make it easier for people to meet and communicate and to come up with new business ideas.

This is all true.  BUT–and this is a huge but–that doesn’t mean that the most cost-effective (the most economical) solution is to promote population growth.  

A reader of Woolf’s piece could be forgiven for thinking that this is the conclusion they’re meant to draw. He goes on:

Vermont is not headed for disaster if our population growth remains at current low levels. But it will present challenges for businesses, government and individuals, and it will limit everyone’s opportunities.

Yes, a population that doesn’t grow limits some opportunities.  The problem is what Woolf leaves unsaid:  a growing population limits other, very important opportunities even more.

Many Americans think that the government is too large, that its reach into our lives is too deep.  But imagine:  what if every single act of yours that might affect the health of ecosystems had to be regulated by public authority?  Economic growth used to be widely perceived as the necessary companion to increasing democratic freedoms; unfortunately, on a finite planet on which human civilization has built out to (and beyond) the limits of what’s ecologically sustainable, continued economic growth is now the enemy of democratic freedoms.  

We face loss of opportunity because of population growth:  The opportunity to have and keep our civil freedoms, and our sense that there is some behavior that is private and therefore not a fit subject for regulatory control.  

As I’ve argued in a recent book, democratic freedoms and civil liberties depend on our human population being below some critical point–a point below which  nature can absorb and adapt to our freely-chosen acts and ways. Many of us who are concerned about ecological sustainability fear that we’ve long since passed that point.  

The prospect if our population and economy continue to grow?  

The collision of the economy with its resource limits will give us an anemic economy–one in which unemployment is endemic and the rich grow richer, while middle and impoverished classes swell because of broken promises (like pension fund collapses) and higher effective taxes for poorer services.  Pressure will increase to promote economic growth (or even simply recovery) by doing  away with regulatory regimes that protect environmental quality and human health–like the regulatory regime that could have prevented the horrible spill of coal-scrubbing chemicals in West Virginia.  And if we don’t choose to continue to degrade our environment in the effort to maintain an unsustainable economy, then environmental regulation will necessarily get broader and broader in its scope and in the depth of its reach into our lives.  

The alternative?  Limit the matter-and-energy throughput of the economy, bringing it down to a flow that the planet can sustain.  This is the steady-state economy model.

Transforming our economy from an infinite-growth model to a steady-state model need not mean that we diminish the quality of our lives, or even the quantity of our material wealth.  In part the quality of our lives could be improved in a steady state economy by a trade-off of material stuff for immaterial benefits, like more leisure time, more satisfying work environments, a healthier environment.  In part the quality of our material lives could be improved in a steady-state economy by doing more with less:  we can expect that technological innovation will continue to let us wring more economic value–more human wellbeing–from a constantly-sized flow of throughput.  

Both of these sources of genuine economic progress are threatened–even made impossible–by population growth.  

If, under a given set of technologies, the amount of material wealth that an economy can sustainably create is finite, then the larger the number of people that share that finite amount of wealth, the smaller will be each person’s share. In a world that has reached the ecological limits to economic growth, continued population growth can only diminish the average quality of life.

Controlling population growth is now the most cost-effective way of increasing humanity’s standard of living–on the planet as a whole, in this country, and in the state of Vermont.  Far from sending up cautions about our population’s failure to grow, economists in Vermont should be celebrating our state’s near achievement of the steady-state ideal.

IN voicing his support for the selection of Alaska governor Palin as John McCain’s VP selection, Governor Douglas said, on VPR, that she’s done some great stuff:  for instance, she’s the one who blew the whistle on that famous “bridge to nowhere”–which, the Guv said, was something that “Congress approved.”  

As in, Douglas took the opportunity of a VPR interview to blame the Democratically controlled Congress for one of our era’s most notorious bits of pork-barrel spending, and to praise Palin for pulling the plug.  She’s a hero, right, Governor?

Problem with that:  Palin was a solid supporter of this bit of pork–she flip-flopped later, when the absurd ratio between the cost and the benefit became a subject of some media attention.  And more importantly, the Congress “approved”  the funding for the bridge ONLY because Republican Senator Ted Stevens inserted the funding for it as an earmark into an unrelated bill.  That’s right:  REPUBLICAN Senator Stevens was the guy dipping into the public till for this bit of dubious public works.

So let’s be honest, Governor.  The “Bridge to Nowhere” was a bit of Republican pork all along.  Your attempt to blame it on  a Democratically controlled Contress is either an outright lie, or at best a bit of sleazy campaign-season dishonesty worthy of Karl Rove.  You are going to have to do better than that if you want to retain a reputation for probity, honesty, and worthiness for public office.

It would be great if the upcoming election became a referendum on gubernatorial honesty.  Do Vermonters want a Governor who has no problems joining Bush-Rove-Cheney-Rice in distortion of fact, as long as it serves the party interest?  Or are Vermonters tired of Republican liars?  

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( – promoted by odum)

You can’t overstate the historic importance:  for the first time ever, the US Senate came to the verge of taking up a far-reaching bill (The Boxer substitute to the Lieberman-Warner Climate Security Act) that deals with global climate change. Republicans have been engaging in procedural tricks to try to kill the bill without actually voting on it (see “Shameful Obstructionism Stymies Climate Bill“, a Sierra Club press release, for an account), and just a few minutes ago a motion for cloture–to bring the bill to a vote–failed to achieve the 60 necessary votes.  

For the past few weeks environmentalists and progressives have debated whether this was the best bill that could be gotten, whether it could have been improved through amendments, whether a better bill might be gotten out of a different, presumably more Democratic, Senate next year.  In all that discussion there was one point that was overlooked:  

What is the problem?  Well, here’s how I frame it:

The problem is, we’re destroying the natural capital on which our civilization crucially depends.

Natural Capital is an idea that has been promulgated by ecological economists in the past few years.  It begins with the recognition that nature provides human civilization with goods and services, and that the natural systems that provide these goods and services are not directly consumed in the process. This makes those natural systems the analogical equivalent of humanly built capital.

Basically, capital is tools:  anything from the bricklayer’s trowel to the machinery and buildings that make up a factory where cars are assembled to the IT infrastructure that allows workers at a corporation to send each other email.  These tools increase the productive capacity of the workers who use them.  Unlike the bricks and mortar for the bricklayer, the fenders and engine parts in the automobile factory, or the employee’s time in the e-email example, the physical tools that the workers use are not consumed in the act of production.  They facilitate the production, but aren’t used up by it.  (The tools do wear out over time and need to be replaced.)  

Natural capital is the extension of this notion to environmental goods and services.  When you start seeing things through this lens, you see that the problem of global warming is that we have exceeded the capacity of the earth’s ecosystems to provide us with a necessary service–the absorption of one particular kind of waste that we produce.

A lot of people in the environmental movement don’t immediately take to using this conceptual lens; they’ve got a more romantic view of nature, a view of nature as pristine “otherness.”  Walking on the conceptual paths trod by Thoreau and Muir, they see nature as the anodyne to industrial civilization, and because of that it seems wrong to compare a marsh, say, to a factory.

But the comparison is instructive.  Both marsh and factory provide valuable productive services to humans.  The factory does so rather obviously.  The marsh’s productive services may not be so obvious, but they are just as real.  Here’s a partial list of services a marsh provides:

1.  Water purification

2.  nutrient recycling

3.  water regulation

4.  regulation of microclimate

5.  storm protection

6.  habitat to species that provide valuable services

These services have economic value, though for most of human history we’ve never bothered to acknowledge that, or to count those values as any part of our decision making.  Natural goods and services have a non-market economic value, which becomes clearer when you imagine having to pay for these services when natural systems no longer provide them.  By one estimate, the world total of all ecosystem goods and services is something like $US 16 to 54 trillion per year, a number that is much larger than the combined global GDP.  So much for the efficiency of markets, if they don’t even count the most valuable category of goods and services that humans receive.  (Which is to say:  there’s room to do some adjusting of market relations here, so that economic prices start to tell the ecological truth.  They won’t do that without regulation–as the necessity for global warming legislation demonstrates.)  

To give a large, easily understood example of a service provided by nature:  a coastal bayou, or marsh, has plants in it that function like sponges.  A linear mile of bayou will absorb four inches of storm surge.  A hundred years ago, there were fifty miles of bayou between New Orleans and the Gulf of Mexico.  In the past century, those bayous were lost to development:  they were dissected by canals, chewed up by dredging as companies looked for oil or built facilities to land oil being produced in the Gulf, and they were starved for replenishing sediment by an Army Corps of Engineers project that made the Mississippi River more “efficient” (for ship traffic) by straightening it.  The loss of the meanders of the river sped the flow of water, which meant that sediment that previously had settled out, nourishing the bayous, was discharged deep into the Gulf, where it fouled shrimp fisheries (and created a dead zone).  

Had those fifty miles of bayous been in place when Hurricane Katrina hit, they would have absorbed 200 inches of storm surge–about 17 feet.  The surge that hit New Orleans was 22 feet.  Had that surge been only five feet, there’s an excellent chance that the city’s storm defenses would have held.  

So, in retrospect, what was the value of the storm-protection service those bayous provided?  It has to be at least equal to the damage caused in this one episode–$88 billion, by one widely accepted estimate.

Let me emphasize this.

The bayous of southern Louisiana provided $88 billion in storm protection services before they were dismantled by development that proceeded under economic theories that didn’t take this valuable public service into account.

And of course, storm protection services were only ONE kind of economic service that the bayous provided.  When all the other goods and services the bayous provided are summed, it becomes clear that while some people made money in the economic development that led to the demise of the bayous, in general the population of the region suffered large economic losses when the bayous were destroyed. In the absence of the bayous, some of the economically valuable services they provided had to be replaced by humanly built capital (all those levees and storm defenses for the City of New Orleans–though it seems they would have benefitted from spending even more) or weren’t replaced at all.

So what does this have to do with global warming?  

Here’s the connection.  The absorption of Green House Gasses is a service that the planet’s atmosphere and ecosystems provide to us.  For centuries, the total emissions of GHG by all human activity fell well below the amount that the planet could absorb.  As the Petroleum Era got into full swing, however, we started cranking out GHGs faster than the planet could absorb them.  The productive capacity of the natural capital of the planet was exceeded; and finally we are coming to recognize that we have to rein in our GHG emissions or see dire (and economically expensive) consequences in the future.  

Global Climate Change is just one example of humans using natural capital beyond its sustainable limit.  If we are going to have a sustainable civilization (which, let’s be honest, is the end-in-view of global climate change legislation), we have to investigate, understand, and legislate in other areas in which we are exceeding the planet’s capacity to provide us with goods and services that are crucial to us.  

What are some of those other areas?  

A fishery is a form of natural capital:  it can provide a stream of goods (fish) without being depleted.   Any fishery has a Maximum Sustainable Yield, the maximum tonnage of fish that can be taken each year without reducing the amount that can be taken the next year.  If that MSY is exceeded, then we are in effect drawing down natural capital and treating the resulting flow as income.  Any company that sells off its capital assets and treats the resulting flow of money as income is going to go broke.  This common-sense truth about business applies equally to natural capital:  a civilization that cashes out its natural capital is going to disappear, as Jared Diamond’s book Collapse amply documents.  

A forest is a form of natural capital.  It provides a broad range of goods and services to humans, including:  oxygen generation; carbon sequestration; water retention and regulation; nutrient recycling; soil fertiity augmentation; storm protection; lumber; fruits and nuts; habitat for economically valuable species; pest control; micro- and macro-climate moderation; etc., etc.  If we harvest lumber from a forest at a faster rate than the forest can replenish itself, then we are, again, drawing down natural capital and treating the resulting inflow of money as income.  

Much of the twentieth century assault on natural capital was enabled by cheap energy.  It’s easier to overfish fisheries if you’ve got diesel-powered boats rather than wind-powered sailing vessels, easier to “harvest” whales to extinction if you’ve got factory ships and modern weaponry rather than a half a dozen guys in a rowboat with a harpoon.  It’s easier to scrape away mountaintops–destroying ecosystems and putting an end to the flow of goods and services those ecosystems provide–if you’ve got huge earthmovers rather than horse-drawn scoops and blades.  As energy becomes more expensive in the coming decades, the assault on natural capital will diminish.  But I don’t think we can count on increasing energy costs alone to preserve enough natural capital to support human civilization at the level of welfare we’ve grown accustomed to.

Two hundred years ago, before the advent of the petroleum era, it seemed that the planet was infinite:  it seemed to humans that the earth’s ecosystems could offer us their bounty infinitely, and that they could just as infinitely absorb our wastes.  Of course, two hundred years ago, the human population was numbered in the hundreds of millions rather than today’s billions, and the ecological footprint of the average human life was a fraction of what it is today, because we had less energy at our command.  With our larger population of humans living lives that have much larger ecological impact, that notion of an infinitely generous and absorptive earth is getting harder and harder to maintain.  (At present, I think only a few Republican Senators and right wing radio talk show hosts still hold this idea in its full, naive, nineteenth-century form.)  

The challenge that we face here in the opening decade of the twenty-first century is a challenge unprecedented in human history.  The question:  can we create, for the first time ever on this planet, an ecologically sustainable industrial society with a widely shared and generally high standard of living?

The world has never seen such a society, ever.  Some societies, hunters and gatherers, mostly, managed to be ecologically sustainable, but they had low levels of material throughput and consequently a low material standard of living.  Some societies, like the civilization of ancient Egypt, managed to last for thousands of years; but they were severely stratified, with the ruling class enjoying a much higher standard of living than the commoner or peasant class.  

The challenge before us here at the start of the 21st century and at the beginning of the end of the Era of Oil is to create a new thing under the sun.  Solving the problem of Global Climate change is one strong first step toward establishing our civilization as an ecologically sustainable civilization; but it’s only a first step.  

And whenever and however we take this first step–next year, perhaps, with a different Senate, one with a higher percentage of members whose political perceptions are reality-based–let’s not lose sight of the fact that there are more steps beyond that one.  To quote the wise slogan of last century’s civil rights movement, let’s keep our eyes on the prize.

(Quite a first diary, here… – promoted by odum)

Look, I love Bernie Sanders.  I love being able to say that my home state of Vermont is represented by the only avowed Socialist in the US Senate.  (And what is socialism but basic common sense?  To me it means “social control of things that affect society”–like, say, controlling the power of capital to impose costs on communities, controlling corporate power’s ability to affect health and safety and landscapes.)  Mostly Sanders’ challenge-the-corporations, take-care-of-the-little-guy approach has my full backing.  But he goes a little astray with his latest proposals on gas prices.

In a column that appeared last Thursday in Vermont’s Bennington Banner, Senator Sanders offers his take on rising energy costs and what we have to do about them.  For the most part, his analysis is spot-on:

Clearly, we are facing a national crisis. The crisis not only affects consumers of gas and oil, it has an impact on food prices, small businesses, family farmers, tourism and, in fact, our entire economy.

Meanwhile, as energy prices soar and the middle-class continues to shrink, Exxon-Mobil has made more profits in the past two years than any other corporation in the history of the world. Last year alone, Exxon-Mobil made $40 billion in profits, and rewarded its CEO Rex Tillerson with $21 million in total compensation. (Several years ago they provided their outgoing CEO Lee Raymond with a $400 million retirement package). Chevron, ConocoPhillips, Shell and BP also have posted record profits.

In fact, the five largest oil companies in this country have made $595 billion in profits since George W. Bush has been president.

Sadly, as in so many other areas regarding the needs of ordinary Americans, the Bush-Cheney administration has had nothing relevant to say. In their previous lives, both Bush and Cheney were heavily involved in the oil industry. They are far more concerned about the needs of oil company executives than working families.

So with deafening silence from the White House, Congress must act and act now.

There is no single silver bullet that will lower oil prices. The solution rests with action on a number of fronts – both long term and short term.

This puts Senator Sanders in the 99th percentile among politicians for perceptive understanding of the multi-faceted crisis we face.  Sad to say, there aren’t too many other politicians willing to tell the American public that energy crisis isn’t about a single commodity, oil; it’s about how we live, how we work, how we play, how we’ve built our houses and cities, how we do everything.  The end of the era of cheap oil is here, and it’s going to be a rough transition to what comes next, thanks to several decades of misrule and inaction.  While Senator Sanders doesn’t quite say this, what he does say shows that he sees these connections.  And that leads him to come out in the right place:

Long term, we must significantly increase our efforts at breaking our dependency on foreign oil and fossil fuels in general and move toward energy efficiency and such sustainable energies as solar, wind, geo-thermal and bio-mass. In the process, we can create millions of good paying jobs as we reverse global warming, clean up our environment and lower energy costs.

As a general statement of what is needed, this can scarcely be improved upon–and again, good common sense like this is rare from elected officials.  There are some difficult questions to face when you get down to specifics:  “efforts at breaking our dependency on foreign oil and fossil fuels in general” have to be not only, well, effortful, but successful, and there are a lot of difficult decisions ahead if we are to succeed at this.  But Sanders nails it when he says that heading in this direction will save us money, create domestic jobs, and reduce Greenhouse Gas emissions.  Really–it’s about time more Senators and Congressmen understood that a renewable energy future is win-win-win.  

Where Sanders goes astray a bit is in his recommendations for the short term.  His column offers four particulars, which we’ll examine in turn:

* Impose an excise tax on oil companies. The $35 billion in new revenue would fund a six-month federal and state “gas tax holiday.” This approach would lower the price of gas by up to 36 cents a gallon without reducing the Highway Trust Fund at a time when repairs to our decaying roads and bridges are desperately needed.

Call it an excise tax, call it a windfall profits tax: either way it’s a good idea.  Oil companies have seen the value of their prime asset, oil in the ground, increase dramatically, through no praiseworthy action of their own.  All they did was own it.  (A farsighted legislative body could have seen this moment coming years ago, and set up a structure to moderate these obscene monopolistic profits.)  To those who say that a windfall profit tax on oil companies will discourage and “disincentivise” future production of oil, the planet-sensible answer is “So?”  We need to reduce our production and use of oil, if we’re ever going to get our Greenhouse Gas emissions down to a level that the planet can absorb.  So to my way of thinking, the largest conservative objection to such a tax is in fact an argument for it.  

But I was sorry to see Sanders joining the call for a “gas tax holiday” –the idea that Senator McCain, in a bold pandering move, threw out and that Senator Clinton rapidly parroted.  As a unanimous chorus of others (like Joe Romm at Climate Progess and Thomas Friedman in the New York Times) have pointed out, that’s a stupid and dysfunctional idea.  It won’t do much for individual consumers.  As Obama pointed out in a

campaign ad in North Carolina, it would put about $30–“a tank of gas”–into the hands of consumers.  It wouldn’t do anything to discourage oil use.  It wouldn’t do anything to disabuse the American public of the idea that energy could be cheaper if Washington would just do something about it.  Sorry, America:  the great long cheap ride is over, and gas is never going to cost again what it did ten or five or even two years ago.  Sanders could exercise some leadership by acknowledging this–if not explicitly, then at least through support for a differently designed program tha would acknowledge the pain of increasing fuel prices, and lessen that pain, while sending the right signals to the American public.

(How to do that?  Instead of a “gas tax holiday,” give every American household a prebate check to cover rising fuel costs.  If you use less gas, you’ve got money in your pocket.  If you use more, you pay.)

Sanders’ second point:

* End the “Enron Loophole.” Created in 2000, this loophole exempts electronic energy trading from federal commodities laws. Virtually overnight, it freed over-the-counter energy trading from meaningful oversight, opening the door to excessive speculation and energy price manipulation. We also must regulate the secretive hedge fund industry which has also driven up the price of oil. Some experts believe a “speculation premium” is driving up oil prices by as much as 50 percent.

Some of this is fair enough. Closing loopholes is good; bringing the financial industry under greater regulatory oversight is good.  But there’s more than a hint of conspiracy-theory populism in that idea that half of what we pay for gas is going to a “speculation premium.”  Remember when the “gnomes of Zurich,” rather than our own guns-and-butter deficit economy, were driving down the value of the dollar in the ’70’s?  (No; you don’t.  I’m dating myself.) It’s always easiest to blame malevolent others for our woes rather than face difficult economic and physical reality.  A basic knowledge of thermodynamics tells you that oil is valuable because it can do work (and it’s the best, most versatile, most compact fuel, carbon-based or otherwise, that humans have ever exploited.)  As it gets scarce–as production levels off and demand continues to grow exponentially–it’s going to get more expensive.  Half the cost is pure speculation?  Let’s say I’m skeptical.

But moving on:  It’s the third point that gives me the most trouble, for it falls squarely within the old “pump forever” paradigm:

* Demand that Saudi Arabia and other OPEC oil-producing countries increase their production and put more oil on the market. Incredibly, Saudi Arabia is producing less oil today than it did two years ago. Experts believe that Saudi Arabia alone has the capability to increase oil production by 1.8 million barrels a day. The U.S. also should work to end the OPEC cartel which, in my view, functions in violation of international trade rules by illegally colluding to limit oil production and drive up prices. The exploding price of oil is expected to increase OPEC’s crude oil export earnings by $300 billion this year to a record $980 billion.

Some things that are wrong here:

This approach seems to embody that arrogant attitude that is parodied in a bumper sticker, “What’s our oil doing under their land?”  Sure, we can try to persuade them to increase production, but ultimately, it’s their call.  Some experts may believe that Saudi Arabia could increase production.  But many others believe not; there are indications that the Saudi spigots are open about as wide as they ought to go.  Every reservoir has a Maximum Efficient Rate of extraction, or MER, and if that is exceeded, the total amount of extractable oil is diminished. And when a field hits peak production, the only direction from there is down:  less and less oil.

How close are the Saudis to their MER?  Depends on who you ask. If you ask Kevin Drum, writing for The Washington Monthly, he’ll tell you that

The best technology known to man has already been put to use all over Saudi Arabia in an increasingly desperate attempt merely to keep production steady at 10 million bpd. In the vernacular of the oil industry, Saudi oil fields have been in “secondary recovery” mode for years, and long experience elsewhere in the world has already taught us the limits of the advanced extraction technologies now being used in Saudi Arabia. They can mitigate production declines after a field peaks, but they can’t stave off the peak itself. More money and more technology won’t bail us out here. We’re up against geological limits, not financial ones.

And when Senator Sanders calls for breaking OPEC, he’s demonstrating a lack of understanding of how the international oil market works.  OPEC does today, in the international market, what the Texas Railway Commission used to do for us when our oil market was entirely domestic:  it sets a market demand proration for producers, ensuring that supply and demand balance at something like a stable price. Producers are given production quotas to stabilize the amount of oil coming to market.

But (I can hear those of you who’ve had Econ 101 saying), supply and demand always determine price; there’s always a price that will clear the market.  Why set up an organization to restrain the free operation of the market?  

Here’s why:  both the supply and demand for oil are inelastic–neither will change much in either the short or the medium run in response to a change in price. This means that price swings enormously in response to small changes in supply or demand.  Market-demand prorationing involves pegging production to anticipated demand–a demand that changes with the season, with temperature drops and rises, with the arrival of big holidays when people get in their cars and drive to grandma’s.  

Demand is price-inelastic because we depend on oil.  When the price doubles, you can scarcely use less of it, not until you’ve had time to make some major changes in your life:  a new, more fuel efficient car, a home that’s closer to where you work and shop, another foot of insulation in the attic.  Same story on the supply side:  a rise in prices (as we’ve seen in the quotation from Drum above) can’t call forth new production.  Even in the best of times–in the middle of the oil era, when there were still large fields to be found, when there were still refineries to be built–a price increase couldn’t bring more production online in the short or medium term; it takes time to find, drill, refine, ship.  And now that we’ve passed the peak of oil production, there just isn’t additional, “excess” capacity to be tapped by a price increase.  

Before the TRC took on the role of setting production quotas in Texas in order to stabilize oil prices, the price of oil had fallen to 2 cents a barrel (!) thanks to the discovery of the enormous East Texas fields.  The oil was worth less than the barrel that held it.  At those prices, producers go broke, fold up shop–and a year later the price zooms to a hundred or more times its bottom, because there’s no one in the business of producing it.   OPEC was formed and began exercising its market power only after US domestic production hit its peak and began declining in 1971; as long as we still had the potential to increase our production, OPEC was powerless.  Market demand prorationing demands that there be a producer who can open or shut the valves at will–a producer whose stocks are so large, and whose oil fields have such a high MER, that it can serve as a balancer for the system, accordioning its production up or down to help the market clear at a stable price.  From 1939 until 1971, in the US that producer was Texas; since 1971, that producer has been Saudi Arabia.  

Because both the supply and the demand for oil are inelastic, the “natural” or free-market price of oil is extremely, disturbingly, disruptively volatile.  OPEC and the TRC smoothed out that volatility–providing us with a (relatively) stable price.  If Drum is right, and the Saudi fields are at or just past their peak, then before too long OPEC will go the way of the TRC:  it will no longer be able to control the price of oil.  As we come down the backslope of the global Hubbert’s Peak, we can expect the price of oil to be extremely volatile–and to tend nowhere but up.  

That volatility is reason enough to impose further and significant taxes on oil. The tax would give us a cushion that would let us, through policy, moderate the bouncing-around prices that the free market will soon be giving us.  It hardly needs saying that instability of energy prices creates pyschic insecurity, social unrest, commercial insecurity, economic instability.  And it’s the effort to avoid that that leads Sanders to propose his fourth short term fix:

* Stop the flow of oil into the Strategic Petroleum Reserve and immediately release oil from this federal stockpile. With the Reserve at 97 percent of capacity, the release of oil into the market will send a strong signal to the industry that the U.S. government is serious about lowering oil and gas prices. This strategy pushed down oil prices during the administrations of George H.W. Bush and Bill Clinton. Goldman Sachs has estimated that continuing to fill the Strategic Petroleum Reserve has increased gas prices at the pump by as much as 25 cents a gallon.

You can moot this back and forth until the cows come home; there are pros and cons.  The release of strategic reserves does indeed moderate price increases (and it may become our replacement for the balancing function that neither Texas nor Saudi Arabia can effectively perform).  But ask this difficult question:  in an era of declining production, when, exactly, are the strategic reserves going to be replenished? Or will they be reduced–drained–without a thought for their purpose and value?

Let’s linger on that adjective “strategic.”  These oil reserves used to be called the Naval Reserves, until the rise of the air force and the increasing mechanization of ground warfare made it clear that it isn’t just the navy that is dependent on oil.  The idea behind the strategic reserves was to ensure that our war machinery wouldn’t ever suffer the fate that Hitler’s war machine suffered in WWII, when, in the waning days of the war, it stalled for want of fuel.  

Do we want to draw down the strategic reserves, compromising our military power, in order to fuel our addiction to SUVs?  (Does your answer depend on your opinion about the purposes for which our wars might be fought?)  

So, all in all, Senator Sanders goes astray.  He’s saying some of the things that America needs to hear from its political leadership, and he’s courageous for saying it.  But I wish he hadn’t tempered his truths about energy with the other stuff–the appeals to popular misconceptions about those stingy Arabs who are holding back on us, the appeal to popular ignorance about how oil markets actually work, and what seems to me the sorry pandering of a gas tax holiday.