CHEAP OIL: GOOD NEWS, OR BAD?

By Paul M. Lewis

Anyone who drives a gas-guzzling car these days is probably happier than they were just a few short months ago. In that space of time, the price of oil has dropped 29%. Brent crude, which serves as the global benchmark for oil, was at $82 a barrel as of mid October, the lowest in four years. This compares to almost $116 per barrel back in June. According to the U.S. Energy Information Administration, the average the cost of a gallon of gasoline has also gone down from an average of $3.51 to $3.39 in 2013 and 2014 respectively, and will undoubtedly slip below the three dollar mark next year, to an average of $2.94 per gallon. In some places, it already has.

The question is: who is this good and bad news for? Consumers are among the most obvious winners. Who doesn’t rejoice when it takes twenty to thirty dollars less to fill up your tank? With the possible exception of the wealthiest one percent, most of us count our dollars, and when we don’t have to spend as much to get to work, or to run errands, or to take the kids to soccer practice, then there’s that much more for other everyday needs. The same can be said, by the way, for the cost of heating oil, which has also decreased by almost the same trajectory. Especially for those living in colder climes, this all amounts to substantial savings, and there are a lot of people who are breathing a sigh of relief as a result.

Manufacturers, too, are happy about the current state of affairs. One way or another, it takes energy to produce anything, and although the cost of electricity has not been substantially affected by the volatility in oil prices, other costs certainly have, particularly that of shipping. Airlines are also dancing the cheap-oil jig since, after salaries, jet fuel amounts to their biggest outlay of capital. Maybe this will also result in the cancellation of some of those annoying “energy surcharges” airlines have for some time now been adding on to the cost of tickets; yet another bonus for consumers, and ultimately for businesses that have to send people around the country, or the world, to conduct affairs.

Surprisingly, yet another winner is the stock market, at least for those stocks that do not include oil. As referenced above, manufacturers and airlines, and even healthcare providers, all benefit from lower energy costs. Consequently, the overall value of these companies and corporations has concomitantly risen, and their stocks along with them. People’s investments are, therefore, worth more, and those retirees who live off their savings may be starting to feel less of a belt-tightening.

Even environmentalists may have some reason to rejoice, although not too much. Projects such as the XL pipeline are no longer looking as fiscally advantageous as they once did. If OPEC is selling its product that much cheaper these days, there is no longer such a compelling need – nor is there economic justification – for companies to spend what it takes to extract oil from the tar sands of Alberta and ship it a couple of thousand miles across the United States for processing

This all brings us to the basic reason why there is currently an oil glut, driving down the cost of the product. What happened is that OPEC, at the insistence of 800 pound gorilla Saudi Arabia, decided to keep on pumping lots of oil, almost literally, you might say, flooding the market. The obvious result is that this drives the cost per gallon down, which at first may appear counterintuitive as to how companies normally ought to work. However, it soon becomes clear that OPEC (aka Saudi Arabia) has decided to endure short-term pain for the explicit purpose of long-term gain. Lower energy prices, as noted above, make it far less profitable for newer technologies, such as extracting oil from tar sands, to compete in the open market. The hope is to drive these new sources of oil out of business, so as then to eventually raise prices again, once these companies are no longer viable competitors. After all, this is how capitalism works: do whatever you can to undercut your competitors and then, once they are no longer able to compete, raise your own prices. It all makes good economic sense.

But new energy companies, and in the short-term OPEC members, will not be the only losers in this global energy game of chicken. There are others as well. Governments of all sizes and political persuasions will suffer. Canada, for one, will lose a great deal of money. It’s been estimated that the province of Alberta alone will miss out on as much as 1.2 billion dollars annually because of the price of cheap oil. And that’s only if the price drops below $80 a barrel next year. What will happen if, as many analysts predict, it drops to as low as $65 a barrel? Saskatchewan currently has a budget based on projected revenue coming in with oil set at $100 a barrel. Other Canadian provinces will suffer, as well. And what of poor Vladimir Putin? The ruble has already lost some 40% of its value, and not just because of U.S. and EU sanctions. The plunging cost of oil has contributed majorly to this drop. Everyone knows that much of Putin’s popularity has been based on the fact that the Russian economy has been awash in oil money for years now. What will happen to pension payments, education, food subsidies, infrastructure, even the servicing of debt, to say nothing of the wrath of the oligarchs who have helped prop up his repressive and oppressive government, when people begin to really feel the pinch? Some economists predict deep recession for the Russian economy in 2015. Mexico, too, has reason to be concerned, to say nothing of countries like Nigeria and Venezuela.

But what of yet longer term losers? And by that, I mean all of us. It’s clear that one of the reasons why companies have been interested in investing in clean energy alternatives these past few years is because of the rising cost of oil. If the price of that commodity is now falling, what impetus do companies have to make such an investment? Companies are not philanthropic institutions. They exist for one purpose, and for one purpose only: to make money for themselves and their investors. If they aren’t making money doing a particular thing, they’d better stop doing it, or else they will fail. In addition, cheap oil spurs developing countries to invest in exactly the same kinds of dirty energy policies that richer countries have for years been engaging in.

The result is that all of us risk being washed away in that flood of oil. There are no easy answers. The way the system is set up, if the enormous wealth tied up in energy companies were magically to drop to zero tomorrow, the world would surely be plunged into a recession that would make the last one look like a Sunday afternoon picnic in the park. But if we don’t do something to lessen the impact of our dependence on Big Oil, we will continue down the same road we have long been traveling, to perhaps an even more catastrophic end.

Winners and losers there always will be, no matter what the game. That seems to be how humans are made. But is there a way for us to mitigate the losses, and maximize the gains, not for the few, but for everyone? The immediate issue of the glut of oil in the market is, of course, merely temporary, and a human created one at that. The bigger question by far is this: just how long will the planet be able to sustain the economic growth model of world development? There’s an answer that no one seems to be able to predict this, and one that ought to concern everybody who cares about the world we are living in, or the kind we are leaving for our children.

WIND TURBINES VS. WILD BURROS: OR CAN WE HAVE BOTH?

By Paul M. Lewis

No matter what, the impact human beings have on the natural environment is seldom entirely benign.   Often it is extremely destructive, as is the case with the proposed construction of the XL pipeline, which the House of Representatives recently passed a bill regarding. As is normally the case with most Republicans, environmental issues have taken a back seat, and a distant one at that, to other concerns. So-called energy independence and job-creation are the ones most often cited, but in reality even a little digging reveals instead ominous and disconcerting signs of covetousness and greed, particularly on the part of already well-heeled owners of energy supply companies.

But what are we to think when we are talking not about the transportation and use of fossil fuels, however it is to be done, but the creation of clean energy? Surely, this is a good thing, and one that Democrats and environmentalists of every stripe can get behind, right? Unfortunately, the answer is: not necessarily

As an example, take a look at the recent proposal that a Spanish company by the name of Iberdrola Renewables has made for a major project in California’s Silurian Valley. To get ourselves situated geographically, picture the familiar shape of California, and focus for a moment on the area near the Nevada border not far from Death Valley, about 100 miles southwest of Las Vegas. This is pristine desert territory par excellence. Death Valley itself is the largest National Park in the United States. And the nearby Silurian Valley is located in a prized location sitting astride the old Spanish Trail, itself managed by the National Parks Service. Although outside the park’s boundaries, the Silurian Valley is a well-known wildlife corridor in the Mojave Desert, to say nothing of a place visited by tourists who want a little solitude and a whole lot of open space.

Iberdrola has asked for a variance here, a legal term that indicates a kind of dispensation from the usual rules, in order to construct up to 133 wind turbines towering as high as 480 feet off the ground, as well as a 200-megawatt facility that would consist of 400 pairs of photovoltaic panels. The Bureau of Land Management, which oversees the area, is considering whether or not to allow this to happen.

Here, then, is the dilemma: on the one hand, clean, renewable energy that replaces polluting, greenhouse gas-causing fossil fuels is a good thing; on the other, cluttering up pristine land that also serves as irreplaceable wildlife habitat, and killing some of that wildlife in the process, or otherwise making it impossible for these creatures to live and reproduce there, is bad. The whole brouhaha might be thought of as a win-win for the no-federal-regulation types, who espouse unfettered free enterprise as the only way to live, and as the panacea for all freedom loving people everywhere. You can almost hear them jeering: these environmentalists can’t even agree among themselves. First they want to do away with fossil fuels and replace them with renewable energy, and then they won’t even allow entrepreneurial companies to build the very plants that produce renewable energy, because of what? They’re afraid it’ll harm the damn desert tortoise, or something!

But let’s slow down a bit and look more closely at the dilemma. Just because environmentalists object to a company building in one location in the desert, doesn’t mean that they object to building everywhere. In other words, not all desert parcels are equal. As Jenny Kordick, a renewable energy representative for the Wilderness Society says: “My job as renewable energy representative is to push forward an important part of protecting wilderness: replacing dirty forms of energy with clean, non-polluting options. But poorly located energy projects can scar wild areas and harm sensitive species. To prevent this, the Wilderness Society is working to guide wind and solar development to low-conflict areas and away from special places like Silurian Valley.” The key phrase here is “poorly located energy projects.”

An article on the subject by Julie Cart in last week’s Los Angeles Times (Sunday, Nov. 9, 2014) also points out that the Bureau of Land Management has 22 million acres that it can choose from in California’s deserts. And there are definitely portions of that desert that are far less environmentally fragile and susceptible to damage than the one proposed in the Silurian Valley. Not only is this locale, just off of Hwy 127, on the way to the magnificence of Death Valley National Park, it is in its own right a prime area of unspoiled beauty and ecological importance. It is clear that building such an enormous project in an easily spoiled area is not only bad for the animals who live and travel through there, but also for those humans who seek to experience true wilderness (or as close as we can get in the 21st century). Why not find a location where the impact is less destructive, and the clean-energy deliverables are, if not one hundred percent as good, at least good enough, given all of the drawbacks of the originally proposed site?

Not only would the Iberdrola project build the huge wind turbines and dangerous photovoltaic panels mentioned above (both of which, it is well know, kill birds, sometimes in their thousands), but it would also require construction of 45 miles of new roads and 11 miles of transmission lines through California’s Mojave Desert. Surely, we can do better than cluttering up and despoiling an area long known for its untrammeled vistas

As mentioned at the beginning of this essay, human intervention in any landscape is always and everywhere problematic. No matter where, it is dangerous for the creatures who had lived there before, because humans seldom take into consideration any other being on the planet, aside from ourselves and our own needs. The feral desert burros of the Silurian Valley that escaped from miners and explorers who traversed these same desert landscapes a hundred years ago have now fully acclimated to a sometimes unforgiving land. They have prospered and returned to a more natural life for themselves, one that up until now had been blissfully free from further human encroachment.   And now we want back what we once had so freely given away, when we thought the land was of no value to us.

Human beings seem to want everything. I remember an old friend of mine once saying of her then (now ex) husband: “He wants what he wants when he wants it.” But can’t most of us say the same thing about ourselves? We want modern life styles that provide all the energy we require at the flick of a switch; we want our ease and our comfort; and we surely want money, that blessed commodity that brings with it all good things, or so we are convinced.   But above all, we want power. We want control over everything.

It may be time for us to begin realizing that we’ve got to come to a place of compromise. In fact, the more we humans over-populate the world, the more we need to share what is left of that world with other life forms. It’s not even just as a matter of morality (why does everything always belong only to us?), but also simply of sustaining our own lives.

Humans and burros can coexist. So can birds, and even those much maligned desert tortoises. But we’ve got to make allowances for them, and to learn to be more generous in how we live our lives. Believe it or not, not everything is only about us. If we motivate ourselves, in the end we actually can find other places on earth – and here in the California deserts – where it’s possible to safely build turbines and photovoltaic panels. All in the hope that one day we will learn to tread more lightly on the planet that nourishes and sustains us all.