Mazal tov! :: Further thoughts on energy independence

Speaking of life, Kavanna has already heard from me about his new addition, little Jacob or "Jack," born this past Monday - but here I am in public: congratulations! Binah hopes he'll be posting some pictures soon. We want to see :)

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And speaking of making the world safer for Jacob's generation, here's a sensible discussion about US energy dependence and the need for international cooperation to moderate demand. It's a roundtable of academics and others associated with Stanford. They also discuss the strange nature of the oil-gas market, how it's both close to a perect market in some ways and, in others, thoroughly political. Here's one participant's take on the bad influence that natural resource extraction economics has on countries that heavily depend on it:

The real problem is that energy—oil, especially—doesn’t operate according to normal market principles. Something like 75 percent of the reserves of oil and gas are controlled by companies that are either wholly owned or in effect controlled by governments, and there’s enormous variation in how those companies perform. Some of them are just a disaster ... and others can work at world standards.... Some of these governments ... use oil revenues for political purposes that undermine U.S. influence. High prices do not automatically generate new supply or conservation, partly because suppliers can drop prices to undercut commercial investment in alternatives. Second, we have what has become known as “the resource curse.” There’s a lot of evidence that the presence of huge windfalls in poorly governed places makes governance even worse. Revenue that accrues to oil-exporting governments is particularly prone to being misspent, often in ways that work against U.S. interests.

Similar thoughts expressed by two other participants, who also note the need for stable higher prices, to promote both conservation and new investment:

The key factor in normalizing market conditions is assuring the market that high prices are here to stay [....] If oil is discovered in a country before democratic institutions are in place, the probability of that country becoming democratic is very low. In countries where the state does not rely on the taxation of its citizens for its revenues, it doesn’t have to listen to what its citizens want to do with that money. So instead of building roads or schools or doing things that taxpayers would demand of them, they use their money in ways that threaten the security of other countries, and, ultimately, their own.

Exactly. This is a refreshing departure from the depressing "realism" we keep hearing about, or the even more ridiculous "blood-for-oil" libels of a few years ago. It's especially important now that a new Democratic Congress is coming in, one with a distinctively anti-globalization, isolationist, and xenophobic tendency - the "Lou Dobbs Democrats." Read the whole thing.