Economy Divorces Oil

The central myth on which opposition to climate legislation rests is crumbling away.  This myth states that the American economy is completely dependent on fossil fuels, such that any increase in the price of fossil fuels threatens economic growth—an especially potent threat in a fragile economy.  Indeed, the myth of the economy’s linkage to fossil fuels is so pervasive that even progressive outlets like ClimateProgress argue that high oil prices could “smother the nascent economic recovery,” repeating the conventional wisdom that “a sustained $10 increase in oil prices would shave about two-tenths of a percentage point off economic growth.”

But things aren’t working out as conventional wisdom might have predicted.  I’ve long maintained that no matter what energy prices are, markets will work to mute the impact of higher prices; “if government policy increases the price of energy, smart businesses will invent new technologies that reduce the cost of compliance and spawn entire new industries.”

And now we’re beginning to see evidence that I was right, and economic growth is decoupling itself from energy consumption.  In the New York Times:

The increase in energy prices is beginning to resemble the rise in 2008. But this time, the American economy may be better prepared for higher fuel costs.

Gasoline prices have risen by nearly a third in the last year, and oil costs more than $100 a barrel for the first time in more than two years, driven by fears of extended Middle East supply disruptions and increased demand from an improving global economy.

While the latest surge in energy prices is likely to cause some pain and slow the recovery from the recession, economists say the spike is unlikely to derail the rebound unless prices rise a lot further.

One big reason is that consumers and businesses have learned lessons from the last oil shock. Many drivers, for example, have given up their gas-guzzling sport utility vehicles. Automakers, which are selling more fuel-efficient cars than five years ago, reported higher sales in February even as gas prices rose.

Industries like airlines and trucking, which are most severely affected by fuel prices, have passed on their higher costs almost immediately instead of waiting for the price increases to hammer profits.

And much of the rest of the United States economy is far less dependent on oil than it used to be. Oil consumption has dropped more than 5 percent since 2005, while natural gas use has risen 10 percent. A glut of domestic natural gas has kept prices low, providing a lift to industries like chemicals and pharmaceuticals and tempering the price of electricity, much of which is generated from natural gas.

[…]

But so far, consumers and businesses seem to have adapted to the higher prices much more quickly than in 2008, when gasoline reached an average of $4.11 a gallon and oil topped $145 a barrel. In part, that is because the last oil shock helped prompt a new focus on energy efficiency.

Take automobiles, for example. Congress got hundreds of thousands of the worst gas guzzlers off the road with the cash-for-clunkers program. And automakers changed their product mix to emphasize more small cars and fewer sport utility vehicles, reflecting consumer demand and tougher fuel-efficiency mandates from the government.

As a result, the industry is better prepared for high gas prices. Mike Jackson, the chief executive of AutoNation, the country’s largest chain of dealerships, said half of the vehicles on his lots are now cars, up from 40 percent in 2008, and just 8 percent are sport utility vehicles, down from 15 percent three years ago.

In other words, individuals and companies responded to a combination of high oil prices and government mandates by finding ways to do the same things with less oil.  And now that we’re facing high oil prices again, those government mandates and adaptations are paying off, insulating budgets from the effects of costly oil.

It’s very clear: over the long term, high energy prices don’t mean less growth—they mean less energy will eventually be needed to fuel the same growth.

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Global Warming Hits Wisconsin

Via Paul Krugman, global warming must really be getting out of hand if there are palm trees growing in Wisconsin… or else Fox News just showed stock footage of protests in sub-tropical areas to create the illusion of violent union protests.  Maybe both?

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The real GOP response

Was anyone else thinking this while Paul Ryan was speaking?

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Even Exxon believes in global warming

It’s an irony overload: Exxon Mobil is partnering with the US Navy to understand how the global warming it helped cause will affect shipping routes:

Executives from top U.S. companies, including Wal-Mart and Exxon, are teaming up with the U.S. Navy this week in a “gaming” exercise to study how a warming Arctic Ocean and the widening of the Panama Canal could dramatically change global shipping.

The complex two-day exercise, which begins Wednesday at the Naval War College in Newport, Rhode Island, will look at the security concerns and massive investments that may be necessary to cope with the shake up of global trade routes.

[…]

Other companies taking part in the “Global Shipping Game” include Lowe’s, shipping giant Maersk, Raytheon Co, computer maker Dell, Zurich Insurance, toymaker Hasbro Inc, General Electric Co and railway operator CSX.

[…]

Just a few years later, he says, the warming of the Arctic Ocean will open the world’s fifth ocean to fishing, tourism, oil and gas drilling, and eventually commercial shipping.

“We have not seen a change like that since the end of the ice age,” he told a conference last month. “It’s one that will have a significant effect on trade and on prosperity.”

ARCTIC SHIPPING ROUTES

A major Pentagon review released last February urged the military to reduce the risks associated with climate change, including cutting its dependence on fossil fuels.

Roughead said the Navy was working hard to develop biofuels and improve energy efficiency, but also needed to think about the impact of rising sea levels on big coastal areas and changes in the formerly frozen Arctic.

Navy scientists say commercial shippers could save 5,000 miles and lots of fuel by using sending goods from Asia to Europe via the Arctic beginning in the mid-2030s, when they expect ice-free conditions for a full month each year.

It’s quite telling, really.  Even while many people remain ignorant of global warming, profit-driven businesspeople are already planning for a warmer world.  If even Exxon is banking money on an ice-free arctic, isn’t it about time the rest of us acknowledge that this global warming thing is real?

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“Compromise” is toilet talk

In light of the controversy over President Obama’s latest unilateral concession on freezing federal employee pay, I’m starting to realize that compromise is a lot like toilets.

Guys will understand this – in a row of urinals in a public bathroom, there are usually three situations:

  1. No privacy dividers between toilets.  You feel a bit awkward, but at least the building saves money by not having to install dividers.  There’s no benefit, but also no cost.
  2. Big privacy dividers between toilets.  These are nice because they make it where you can’t even see the person next to you… but they do cost the building money to install.  There’s high cost, but also high benefit.
  3. Medium-sized privacy dividers between toilets.  These aren’t big enough to actually afford any privacy, but still cost the building a little bit of money to install.  In other words, they give you none of the benefit at some of the cost.

And unfortunately, the realities of politics often force us into the last category of low benefit at medium cost.

In America, we like to pretend that both extremes are wrong, and the truth is usually somewhere in the middle – that if you give and take from each side, you end up with the best of both worlds.  In reality, you usually need to go big or go home: each extreme usually has it’s upside and downside, but if you take a little from both, you end up with the worst of both.

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Climate science is like gravity

If there were an industry whose profits depended on falling up, gravity would be a political issue.

Fortunately, airlines make money by using technology to overcome gravity rather than denying its existence.  So if there’s ever a physicist on TV explaining how gravity works, CNN will never feel the need to “balance” out his views with a Heritage Foundation analyst.

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“I don’t know whether your grasp of theology or meteorology is more appalling”

In light of Rep. John Shimkus’s recent controversial remarks that we needn’t worry about global warming because “God said the Earth would not be destroyed by a flood,” I thought this was highly relevant:

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