Paradox at the Pump

What more proof was needed?

The conventional wisdom among those who like to believe they never think conventionally was that drilling was futile. It would never produce sufficient quantities of oil to keep up with demand and, anyway, no such amount of oil even existed. The supply of oil was finite, and we had arrived at a point of diminishing returns, called “peak oil.” Henceforth, it would require more and more effort and expense to bring up less and less oil.

No drilling our way out of this impasse! It was time to move on to the next thing and to leave oil and its attend-ant sins, wickedness, and dirtiness behind. It was the dawning of the age of clean energy. And not a minute too soon, either, if we were to avoid planetary catastrophe.

There turned out to be two problems with this vision of oil and its place in the world. First, it was wrong. We could, and did, drill our way to lower gas prices. There was more oil than we thought, and new technology provided ways to get at it. And second, big events like the peaking of oil production take a long time to develop and impose their effects. Politicians, even the big thinkers among them, operate on shorter time spans. These are known as “election cycles.”

We all know, by now, that in the United States there has been a tremendous boom in oil production and, hence, its supply. It has come about as the result of techniques known colloquially as “fracking,” which were not developed through any long-term federal initiative. And the oil was pumped out of ground that was mostly in private hands. It was all a market phenomenon.

This boom resulted in, among other things, direct employment. Much of the job growth in the long and exceedingly slow recovery following the great recession has occurred in oil drilling states like Texas and North Dakota. This increased U.S. oil production has also fed a worldwide increase in supply that has driven the price of gasoline down dramatically—from the neighborhood of $4 a gallon to just over $2. And this, in turn, has led consumers (many, if not most, of whom are also voters) to feel more optimistic about the economy. Gasoline, after all, is the only price that they can follow every single day merely by looking at the signs along the road as they drive. Cheaper gas means more money for other things. And there are those ancillary effects, like the reduced cost of getting goods to market.

Hard to find anything not to like about increased oil production and cheaper gasoline, especially if you are a working man or woman trying to get by in an era of high unemployment and nonexistent wage growth. For you, the American oil boom is something to celebrate.

Not so much, though, if you belong to that segment of the political class that was, not so long ago, confidently saying that we couldn’t “drill our way .  .  .” You don’t necessarily have to say you were wrong. Nobody expects that. President Obama has, in fact, finessed things rhetorically so that he sounds like he is taking credit for the lower price at the pump and all those new jobs. In politics, there is no shame in being shameless.

But the problems don’t stop there.

The challenge now will be to square a hatred of oil and all its works with the blessings it brings to the average American. The hatred is real and almost embedded in the DNA of the true believers, and it is nothing new. The Texas oilman has been the stock villain in so many bad movies and books that you can see him coming in the opening scene or the first chapter. He will drive a car that is too big and have a wife/mistress who is too blonde, and he will keep her around mostly as an adornment since his real love is guns. Check out Chris Cooper in Syriana, a movie that starred Matt Damon, who went on to top billing in an antifracking number called Promised Land. That movie was partially funded with OPEC money, so it is double good news that it bombed. But the loathsome oilman isn’t going away as a Hollywood stereotype.

Playing to the oil-is-evil crowd is easy enough for Hollywood, which can afford the occasional film turkey. Positioning for a politician on the left end of the spectrum, though, is trickier. President Obama, for instance, seemed to be taking credit for the oil boom in his recent State of the Union address, boasting, “We believed we could reduce our dependence on foreign oil and protect our planet. And today, America is number one in oil and gas .  .  . and thanks to lower gas prices and higher fuel standards, the typical family this year should save about $750 at the pump.”

But .  .  . he will veto, he says, any bill that would result in construction of the Keystone pipeline, the purpose of which is to move oil that is going to come out of the ground no matter what he does. So the veto is not meant to stop extraction but as a symbolic defiance of oil.

It is meant to capture the Matt Damon vote.

Shortly after the State of the Union, the president flew to India, then detoured to Saudi Arabia to attend the funeral of that nation’s king. Now, Saudi Arabia has been happily holding the United States—and much of the industrialized world—hostage to its abundant oil for decades. There was no spontaneous outpouring of grief in the United States upon the news of King Abdullah’s demise. The president did not detour to Riyadh to convey this nation’s respect.

It was a gangster funeral, recalling that famous scene toward the climax of The Godfather. The racket in this case wasn’t prostitution, drugs, the numbers, etc. It was petroleum.

The kingdom and the United States are, in fact, in the early stages of an oil price war, which at least one spokesman for the Sierra Club is hoping the Saudis might win. Paul Rauber wrote recently in the organization’s periodical, Sierra, that while Congress might back the Keystone pipeline, “Environmentalists are depending on President Barack Obama’s veto pen to block the project—at least until the State Department issues its final ruling in the matter. But we have another, even more potent ally in the fight: the House of Saud. Rather than cutting back production in order to stabilize oil prices, the world’s largest oil producer is keeping its petroleum taps wide open, hoping to drown upstart competitors in Canada, North Dakota, and Russia in a sea of cheap oil.”

No question just which side in this contest the Sierra Club constituency is on. And it is true that while we seem able, at last, to drill our way out of dependence, the Saudis seem willing to pump profligately and sell cheap, hoping to drive the new American producers, using their relatively expensive techniques, out of business. After which, the Saudis can slowly ratchet the price back up into a range where they can comfortably afford the luxuries to which they have become accustomed.

So the president may have felt he needed to hedge his bets. Given the choice, most Americans would probably prefer that the president tell the Saudis that they do so at their own peril and encourage our own, domestic producers to frack away. They have had enough of the Saudis and their oil cartel. Had enough of that part of the world and the endless pursuit of that statesman’s chimera, stability. Enough of the bowing and scraping before the oil princes whom we seem obliged to refer to as “our good friends, the Saudis.” This is something the current president has in common with his predecessors. President George W. Bush and his retinue used the locution routinely, and it was enough to make you grind your molars. Of course, Bush also liked to say Americans were “addicted to oil.” The insult reveals a lot. What junkie is not humiliatingly, slavishly dependent on his dealer? And why should he not be patronized?

But millions of Americans don’t see it like that. Never did. To them, the problem is not that we are “addicted” to oil but that we’ve had to depend on others—especially hostile nations, like Venezuela and Saudi Arabia—for our supply of it. In this view, oil is good but you need to consider the source.

In fact, there is a sort of composite American voter whose economic satisfaction can be measured roughly by the amount of oil he uses, directly and indirectly, in the living of his life. He likes having his own car rather than being dependent on mass transit. He likes living out of the city in a house that is heated, if not by an oil-burning furnace, then by one that uses natural gas, the supply of which has boomed thanks to fracking.

He might have a yard the upkeep of which means that he can justify owning some tools that are powered by two-cycle engines. He might have an ATV or a snowmobile, depending on the weather and terrain where he lives. Could be he is a fan of NASCAR, where the burning of gasoline has an almost sacramental aspect.

For this cohort of Americans, consuming oil is a measure of economic health and well-being, not of craven addiction for which they must submit to lectures from their betters in the political class.

Of course, their betters like oil, too, but are ashamed to say so. Imagine if some global council of wise elders were to proclaim that a first step on the way to becoming an oil-free world would be an agreement where the rubes would give up NASCAR and gas hog pickups in exchange for the swells scrapping their private jets and learning how to fly coach. Which side would blink first?

According to Jonathan Allen at Bloomberg, “Hillary Clinton took more than 200 privately chartered flights at taxpayer expense during her eight years in the U.S. Senate, sometimes using the jets of corporations and major campaign donors as she racked up $225,756 in flight costs.” The money, of course, doesn’t matter if you belong to the 1 percent. But all that flying represents a lot of Jet A burned and a lot of carbon dioxide left around, like highway litter, in the upper atmosphere. 

But it isn’t likely that private jets will be going away, it being a measure of status to own one and lend it out to those less fortunate, like ambitious members of the political class, when you are not using it to swing over to Paris for lunch.

President Obama himself lives a sumptuous oil-fueled life. He made that flight to India on what is, essentially, his private 747. He is chauffeured around in up-armored limos that test very low on the EPA’s gas mileage standards. His non-oil-based activity is pretty much confined to riding electric golf carts on the weekend.

The challenge for him, and for politicians whose core constituency believes that we are, indeed, addicted to oil and that the world will not survive this dependency, is to keep those private jets flying and get the price of oil back up to a point where it becomes painful again to fill up the tank on the vehicles—even the fuel-efficient ones—that ordinary souls use to commute to work. And, by the way, somehow do it without snuffing out those first green shoots of economic good news for that middle class that the left element of the political class has so recently discovered and about which it cares so much. Chiefly, of course, because it cares about its own survival.

So far, the president is attempting to have it both ways. He is taking credit for the good economic news brought to us courtesy of fracking. His administration has opened coastal areas from Virginia south to Georgia to offshore exploration and drilling while simultaneously attempting to put a huge area in the high north of Alaska off limits. And then there is that Keystone pipeline, which has become the symbolic battlefield objective in the war between available oil and notional renewables.

The president will be obliged to deal with the political tensions that come with cheap and abundant American oil for only another two years. And in his comfortable retirement he will never need to know the price of a gallon of regular. But the anti-oil constituency will be around long after he is gone. Just as it was around long before he—and fracking—arrived on the scene. This constituency has been prophesying doom from, and for, oil for years now and promising salvation if we can just give up our wicked ways and embrace renewables. Nearly 40 years ago, Amory Lovins, patron saint of renewables, wrote, “Recent research suggests that a largely or wholly solar economy can be constructed in the United States with straightforward soft technologies that are now demonstrated and economic or nearly economic.”

We’re still waiting, and cheap oil means the waiting will go on that much longer. As the Boston Globe reported in late January, “Just 2 of 12 qualified bidders participated in the auction Thursday by the federal Bureau of Ocean Energy Management to sell wind development rights for a 1,161-square-mile swath of ocean about 14 miles south of Martha’s Vineyard. Two of the four leases did not receive any bids.”

Falling energy prices were blamed for this lack of interest.

But if the age of renewables is still not upon us, cheap oil makes the waiting a whole lot easier to endure. And we may need the extra time to do a little more basic engineering. So far, nobody has been able to explain how hedge fund managers will be able to fly to Switzerland for global economic conferences in wind-powered airplanes. Gliders, perhaps. Or why, despite lavish taxpayer subsidies, GM can’t make an electric automobile that succeeds in the marketplace.

But it has been established—empirically and conclusively—that we can “drill our way out of this problem.” For millions, what that means is “no problem.” But for those in politics who would capture the large, rich, and dedicated anti-oil constituency, it means many more problems. It won’t be easy to make people pay $5 a gallon again. And it’s impossible to make them pay up and like it.

Geoffrey Norman, a writer in Vermont, is a frequent contributor to The Weekly Standard.