On November 6, 2014, immediately after the midterm election results became available, National Review Online published an article by Kevin D. Williamson titled With Energy, More Is More: An Economic Agenda for the New GOP Majority.
Long time readers of Atomic Insights will know that I lean way to the left on the political spectrum and often disagree strongly with the positions taken by writers at conservative publications like National Review.
Williamson’s article, however, includes a substantial number of statements with which I cannot argue.
There is no substitute for abundance. A country that produces more food and steel and aircraft and microprocessors is going to be, ceteris paribus, better off than one that produces less. A country with a larger share of its population working is going to produce more than a country with a smaller share of its population working
It is difficult to overstate the importance of energy in the U.S. economy: The energy market affects almost every company and every industry, from AAL to AAPL, and we have an abundant supply of it, from oil and gas to coal and other sources.
As Paul Johnson points out in his elegant new biography of Dwight Eisenhower, the postwar United States constituted an unparalleled and unprecedented economic force. It was a more-is-more economy, producing a third of the world’s grain and half its cotton, and the lion’s share of its iron, phosphates, copper, and precious metals, outstripping the combined production of the major nations. It was the world’s largest producer of minerals, with four times the output of the second-largest.
Republicans also should remind the country that, President Obama’s Jimmy Carteresque performance notwithstanding, this is not the 1970s. France uses nuclear power to generate 75 percent of its electricity; the United States, even though it is the world’s largest producer of nuclear power, manages to generate less than 20 percent of its electricity from nuclear sources. Much has changed in the nuclear-power business since its stagnation in the United States 30 years ago, with the emergence of small modular reactors and other promising technology redefining what is meant by “nuclear power plant.” And President Obama is better on this issue than conservatives might expect, supporting Georgia Power’s plan to build new reactors and issuing generally friendly noises from the White House Office of Energy and Climate Change Policy.
There are also a number of cause and effect arguments in Williamson’s piece that indicate that the two of us view the same events through significantly different lenses and thus see a completely different picture. I’m pretty sure that many, if not most, Atomic Insights readers lean towards Williamson’s interpretation of how we have arrived at our current situation with regard to energy production, especially nuclear energy production.
In his view, obstacles to production have been erected by progressives who want to limit abundance so we can return to some kind of bucolic past that includes less industry, fewer humans, and less negative impact on the environment. Under Williamson’s apparent paradigm, corporations are always interested in producing more and better products at lower costs to keep their customers happy, but they are slowed in their quest by the obstacles erected by progressives.
Under my paradigm, the more influential people who really dislike abundance and work to limit supplies of most commodities are the established producers, financiers, distributors and traders. Corporations in commodity businesses, both large and small, are interested in producing the right amount of product so that they sell at as high a price as a constrained market will bear. They want to have few, if any, left-overs.
Corporate leaders are taught in business schools that they should limit the overall supply of the commodities they sell by erecting barriers to entry. If they can devise ways to get away with it, they cooperate with other established suppliers to divide markets and fix prices. They even help draft regulations that favor their established position and slow the entry of any new suppliers.
I’m in a continuing effort to share what I have learned during a couple of decades of studying energy history. I continue to discover new material in my quest to more fully understand today’s energy business so that I can help shape tomorrow’s energy business.
I posted the following comment on Williamson’s article.
Established energy producers, especially the large, multinational ones, are often the largest obstacle to true energy abundance. Very early in the industry, John D. Rockefeller recognized that hydrocarbons, though exceedingly useful fuel sources, were either fabulously profitable, moderately profitable or extremely costly depending on whether the market was slightly undersupplied, properly supplied or slightly oversupplied.
It only takes a few percent change in the balance between supply and demand before a good news discovery and production story becomes very bad news for most producers. Prices — and profits — often fall dramatically as storage facilities become too full to accept more product. Note the recent behavior of world oil prices as just one of many examples of this truth.
Rockefeller figured out ways to control production and delivery to customers so that Standard Oil would be profitable — immensely so. His techniques left a trail of despair among other producers and often resulted in consumers paying prices that were several times the cost of production and delivery.
Following the breakup of Standard Oil, it was an open secret that the Seven Sisters of the multinational petroleum industry cooperated throughout the period from just after WWI through the early 1970s to control the rate of production so that they could retain some control of prices. In the US, the Texas Railroad Commission served the same function in a protected market.
The Atomic Age and growing independence of the countries with the easiest and cheapest to produce oil led to a new stage in the energy business beginning at the end of the 1960s. With key contributions and the cooperation of the “philanthropic” foundations that holders of long established oil wealth had established, the “Environmental” movement took on the role of limiting energy supplies to keep the industry as profitable as possible.
Publisher, Atomic Insights
There is, of course, far more to the story. It is a complex and fascinating high stakes game that has been influencing world events for a century and a half.
Since my contribution was one of more than 350 comments at the time i posted it, I suspect that it will not garner much attention and discussion on the National Review site.
Perhaps you have observations you want to share or questions you want to ask.