Economy & Business

Fueling a Future Republican Majority

Natural gas platform in Parachute, Colo. (Jim Urquhart/Reuters)
The most important book of this election year makes the case for America’s energy exceptionalism.

Battle has been joined in a war that — fought right — promises to realign American politics. Leading environmental activist Bill McKibben says that economic growth is a problem to be “solved.” The economy has grown too large. A new trajectory is needed, a managed descent for relatively graceful decline, McKibben argues in his 2010 book Eaarth: Making a Life on a Tough New Planet. While Democrats are in hock to radical environmentalism, Steve Moore and Kathleen Hartnett White’s Fueling Freedom, perhaps the most important book of this otherwise dismal election yea​r, provides the ideas around which Republicans can unite and regroup.

“Never before have the rulers of a society intentionally driven it backwards to scarcer, more expensive, and less efficient energy,” Moore and Hartnett White write at the start of Fueling Freedom. There’s no letup in the rest of the book’s 252 pages. Modern economic growth is the “greatest surprise in economic history.” The authors demonstrate how industrialization is inseparable from access to abundant fossil fuels — first coal and then petroleum and other hydrocarbons. The good news is that cheap energy is here to stay, “as long as government doesn’t outlaw it.”

America has twice the reserves it had in 1950 and has produced nearly ten times as much oil as government surveys said there was.

They fell global-warming catastrophism with a series of swift, sharp blows. “How can a ‘greenhouse effect’ reduce food production?” they ask. As recently as 2008, when oil briefly went over $150 a barrel, peak oil was the rage. Today, the world is drowning in oil. Technology is outpacing depletion. America has twice the reserves it had in 1950 and has produced nearly ten times as much oil as government surveys said there was.

Moore and Hartnett White quote Robert Zubrin, who notes in Merchants of Despair that leftists used to claim that human activity must be limited because the resources are limited and will run out. Zubrin observes that leftists now insist that it’s not the resources themselves that are limited but the rights to use those resources. This new variant is morally worse than its previous incarnation. It is one thing to urge people to use less of something because it’s believed to be in short supply. It’s another to knowingly make people poorer and restrict their freedom to pursue prosperity and a better life — which is what we’d do by permanently locking up potential hydrocarbon wealth.

For no country are the costs so high and the implications so dire as in the United States. Fueling Freedom catalogues America’s energy exceptionalism. It has nearly half a trillion metric tons of coal reserves. In 2013, the United States surpassed Saudi Arabia and Russia to become the world’s No. 1 energy producer. This is about more than geology. What makes America unique is the combination of geology and capitalism: America is the only country in the world where mineral rights can be privately owned. No other country has the technology, the people, the capital to risk, and the entrepreneurial drive to have unleashed the shale boom. And that boom has upended the global oil market and supplanted Saudi Arabia as the swing oil producer, able to vary its output and shift the market. It is a stupendous achievement, one that could only have been made in America. But that’s only half — the good half — of the story.

The shale revolution on one side and environmentalism on the other have created a bipolar economy. “You can’t power a $15 trillion economy with wind and solar power,” the authors observe. Wind and solar receive 50 percent of all federal electricity subsidies, understating just how uneconomic they are. Wind subsidies are 88 times higher per megawatt hour of electricity than for coal and natural gas; while for solar, the bright hope of the so-called clean-energy crowd, federal subsidies per megawatt hour are over 1,200 times higher than they are for coal and gas.

Even this understates just how toxic the economics of wind and solar are. Because they are intermittent power sources dependent on the vagaries of the weather, wind and solar impose hidden costs on the rest of the grid: The more you have, the worse the economics are. Because it’s impractical to store electricity, conventional power stations have to be kept on standby to produce far less electricity than they can do efficiently. Green energy is a recipe for economic stagnation and de-industrialization, and it intensifies the squeeze on the middle class. In other words, green energy will only extend indefinitely the malaise of the Obama economy.

The contrast between slow asphyxiation by the green economy and the dynamism of America’s hydrocarbon economy is nothing short of spectacular.

The contrast between slow asphyxiation by the green economy and the dynamism of America’s hydrocarbon economy is nothing short of spectacular. In the worst economic recovery since the 1930s, Texas created more new jobs than the rest of the United States put together. Thanks to fracking and lower energy prices, steel plants are being rebuilt, the petrochemical industry is enjoying massive investment, and manufacturing is coming back to the United States. Without fracking, the Obama economy would have been a lot sicker.

The American domestic-energy market consists of 4,0000 small and mid-size companies. Fracking spreads wealth around, which is not the case with the Silicon Valley oligarchs sitting atop their IT billions. Nearly 400,000 Texans are employed in the oil and gas industry, where average salaries are as high as $100,000 a year, generating around $80 billion in economic activity. North Dakota, which has overtaken California and Alaska to rank No. 2 behind Texas, has more millionaires per capita than any other state.

Fueling Freedom tells a tale of two states. There is no shortage of hydrocarbons underneath California, but between 2001 and 2012, oil output fell by 21 percent. When a judge blocked fracking in the Monterey Shale, a local Sierra Club chapter head exulted, “I’m sure the champagne is flowing in San Francisco.” No doubt, say Moore and Hartnett White, adding: “Meanwhile, the oil is flowing in Texas.” Then they point out that if the rest of the United States had grown like Texas, in 2014 there would have been an extra 14 million jobs.

A 2011 report on the North American energy inventory concluded that the United States sits atop 1.4 trillion barrels of recoverable oil, 2,744 trillion cubic feet of natural gas, and nearly half a billion metric tons of recoverable coal. The federal government owns 700 million acres of land, nearly 30 percent of the total land area of the country. Yet only 5 percent of that has been leased for oil and natural-gas development. More than 90 percent of the drilling in the Obama years has been on private lands.

After the Paris climate conference, President Obama stated that America must keep these resources “in the ground.” At least $50 trillions’ worth of energy lies underneath federal lands and waters. Fueling Freedom offers a real alternative to President Obama’s prospectus of misery. If his successor were to allow drilling on federal lands, it would, over a 20-year period, unlock $2.7 trillion of federal revenues from royalties, lease payments, and direct federal-income taxes, Moore and Hartnett White estimate. Including federal income taxes paid by suppliers and other contractors, and state income, property, and other taxes, this could raise $4 trillion. This is a formula for turbo-charged growth. As the authors argue:

Nearly every economic problem that America faces — poverty, the national debt, stagnant middle-class incomes, state and local pension liabilities, an over-stretched military that can’t protect us, crumbling infrastructure — can be alleviated through faster economic growth.

Fueling Freedom is supply-side economics for the 21st century. Like Ronald Reagan’s supply-side revolution of the 1980s, the politics of prosperity can peel off blue-collar and middle-class, black, and Hispanic voters from the Democrats. “We have two energy paths to choose from,” Moore and Hartnett White conclude. “With the facts before you, we’re confident the right choice will be obvious.” Now it’s up to Republican politicians to give voters that choice.

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