Energy Independence and the Opportunity Cost of Iraq

Bush has provided one justification after another for invading Iraq.  Each has proven false.  The current justification, though only barely whispered,  is "oil."  It is what pretty much every person in every other nation in the world assumed as the purpose of the invasion from the start.

Suppose it had worked out, would it have been a good deal?  Here we argue that the same amount invested in  primary power generation projects  would have made the oil in Iraq essentially irrellevant as a primary energy source.  Instead, oil remains a strategic Achilles heel for America.  If energy is as important as Bush's commitment to it suggests, it is time to redeploy resources in a major way.

"Peak Oil" has recently become the trendy "scare du jour."  Probably much of the hype we hear about "Peak Oil" is designed to promote some hidden agenda item by some investment or policy huckster.  But even if it is a faddish scare, we might do well to believe it.  Oil may or may not be scarce today, but it is certainly getting ever more costly to extract and transport to the west. Interruptions in supply grow ever more likely as they grow ever more potentially costly.   The sooner Americans focus like a laser on replacing oil with more dependable locally supplied energy, the more secure our future will be.

Ironically,  Bush has done us all a favor.  He has proven that the US is incapable of prosecuting an effective war in the middle east, one that secures America's energy resources.  And knowing this must force us to adopt a new paradigm when thinking about energy security.  Ever since "Three Days of the Condor,"  a movie starring Robert Redford as a CIA agent who has uncovered a rather remarkable plot by the American government to secure oil in the middle east, it has been an axiom of US foreign policy that military intervention in the middle east would save our lifestyle.  And that it would do so indefinitely.

But the costs of doing that have proven astronomical.  Given $100 billion per year,  the US has been incapable of securing the oil fields of Iraq.  And that is in the absence of overt interference from local powers such as Syria or Iran.  It has been  in the absence of interference from regional powers such as Russia, China, Pakistan, or India.  Think about that for a moment.  How much would it cost in the presence of such interference?  Ten times as much? Fifty times as much?  More?  Can we afford that?

Now, let us imagine that the US spent $100 billion per year for the next five years developing local sources of power.    For the sake of argument, we will assume :
1)  The operating cost of the generation facilities will be no more than they would have been for oil-powered facilities.
2)  Given an ample supply of primary power at cheap prices Americans will figure out how to adapt from one form to another: gasoline to electric, for example.

The first assumption is a slamdunk.  The second, we can quibble about.  But if push came to shove, and America lost access to all petroleum sources outside her own borders, the availability of a primary energy source would guarantee the eventual availability of a replacement to gasoline.  

We present  a strawman proposal.  It has several very desirable properties:
1)  it is carbon neutral.  
2)  it employs a plentiful resource
3)  it draws on technologies we already have mastered
4)  it does not present many serious opportunity-cost consequences.

Let us examine a simple straw-man or benchmark proposal.  The cost of a modest sized nuclear power plant, 1000 MW, is roughly $2 billion.  For $100 billion America could buy 50,000 MW of electrical power generating capacity.  That amounts to 400 E12 Watt-hours of electricity per year.  

By comparison, in our cars Americans use 146 billion gallons of gasoline per year. Gasoline contains roughly 60 kWh of thermal energy, but when it is converted in an engine it produces roughly 15 kWh of work.  When all of the gasoline that Americans buy is converted to work, it amounts to the equivalent of 9.0 E15  Watt-hours of work.

Dividing the amount of work done by the generating capacity, we see that one year's expenditure in Iraq would have built us 20% of the generating capacity necessary to do the work done by gasoline in a year.  Given what America has spent in Iraq in five years, we could have built essentially enough primary power generating capacity so as not to use any gasoline at all!  Had Bush built power plants instead of invading Iraq, we simply would not have to worry any more about Iraq's oil.  Only how to run cars  using electricity or hydrogen.  And that is not a trillion dollar proposal.  That is not an insurmountable problem.

Think about it another way.  While you were paying three dollars per gallon at the pump, all the gasoline we bought was being "secured" by the Iraq war.  Or not.  If we allocate the cost of the war to the gasoline we consumed, it cost an extra $1.37 per gallon.  

That would be bad enough had the war been a total success. Had Iraq turned out to be a peaceful, stable, model democracy pumping lots of oil out of the ground, we might look back and still decide that in terms of energy policy the Iraq war was a senseless waste of human and capital resources.  But it failed not just to create a happy democracy. It actually made Iraq's resources unavailable. It destabilized a region. It put at risk oil resources in neighboring Kuwait and Saudi Arabia.   There is no sane measure by which the Iraq war might be considered anything other than a monumental policy failure.

As we have pointed out, had the same amount been spent on energy generating facilities, we would not have reason to care about Iraq's oil.  We could remain disinterested parties in the middle east.  This would give us a lot more leverage when it came to promoting peace.  We would be well on our way to being presumed to be a disinterested party.

There is no reason to believe that nuclear power is the whole answer.  Wind power, for example, is more cost effective right now.  We would advocate that at least one third of the $100 billion in question  be spent for wind power generation systems, transmission lines, and power storage systems to take advantage of wind power.  Wind power is cost effective now.  And we should use it.    Similarly, solar power is cost effective as a peak-shaving device in areas with large air conditioning loads through much of the year.  Many of these are areas where sunlight is likewise plentiful: the supply matches the demand almost perfectly. Solar power ought to be deployed to the point where at least ten percent of America's electrical needs are met by solar technologies.   It costs more than wind and more than nuclear, but it has a role to play as a renewable source.

I wish I could advocate biofuels.  They seem like such a logical idea.  But the opportunity cost may be too high.   Ehtanol, under the current technological practices, is not a breakeven energy proposal.  Ethanol from Corn - Is it a Good Deal Given plentiful primary energy sources such as nuclear, ethanol might play a vital role in America's energy future.  But right now it represents a net energy sink. Vegetable oils might prove more viable, at least on a small scale. And waste streams can be employed somewhat more efficiently.

Scale is a potentially big problem with biofuels because there is quite a bit of uncertainty that the arable land in the US can sustain both food production and energy production at current usage levels.  To press the land too hard is to invite disaster on both fronts.  Read Jared Diamond's Collapse.    

Energy is of critical importance to our civilization. Without a steady supply every economic activity stops.    It is  foolish to pretend otherwise.  We cannot afford to leave energy supplies to the outcomes of war; the outcome is too uncertain.

America's use of military force to get oil represents a broken paradigm.  That paradigm is the use of force to partition existing resources in a way that is favorable to ourselves when, instead, the same level of investment in manufacturing and technology would produce a more durable way of creating enough for everyone.

When will we stop grabbing for the weaker kid's toys "because we can?"  When will our leaders begin to behave better than a spoilt two year old?  When will we start facing resource shortages like adults, planning and investing wisely?  Are we capable of that?  Let's hope we are. Let's act like it.