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Breaking the Cartel

Fortnightly Magazine - September 2008

Energy issues took center stage this summer. Record gasoline prices drove the U.S. presidential campaign to focus on energy policy issues, especially offshore drilling. Investor T. Boone Pickens and former Vice President Al Gore initiated massive marketing campaigns to promote their energy plans. Even socialite Paris Hilton got into the act, responding to a John McCain ad with her own spoof video—which presented her surprisingly cogent solutions to the energy crisis.

To get a reality check, we sought out Gal Luft, executive director of the Institute for the Analysis of Global Security. The Washington, D.C.-based think tank focuses on the interplay between energy policy and national security.

 

Fortnightly: Politicians frequently talk about achieving energy independence, but arguably this idea is a pipedream—and maybe not desirable anyway. What’s your perspective on energy independence?

Luft: It depends on how you define energy independence. Some people view it as autarky, not importing anything from anybody. That’s not our definition. Energy independence means not having to kowtow to countries that control our energy supply.

We have no problem importing energy from countries that don’t use energy as a weapon, or manipulate the price of energy, or advocate the destruction of America. We wouldn’t be talking about energy independence if all our oil came from Scandinavia or Canada, because that’s not a security problem. The problem starts when you have a cartel that controls almost 80 percent of the world’s oil resources, and uses oil as a geopolitical weapon.

Oil isn’t like any other commodity. It’s not like corn flakes. It’s a strategic commodity because it dominates the transportation sector and underlies the global economy. You can’t look at it the same way as other commodities, because it has strategic value.

 

Fortnightly: T. Boone Pickens is promoting his vision for a massive windpower build-out to displace natural-gas fired power, so the gas can be used to fuel vehicles. On the surface this seems like an interesting idea. What do you think? Is it realistic?

Luft: No, I don’t think it’s realistic. It’s not a good plan, for various reasons.

Shifting from oil to natural gas means shifting from one resource that we don’t have—and that’s controlled by bad actors—to another resource we don’t have—and that’s controlled by pretty much the same bad actors. It’s like jumping from the frying pan into the fire.

But even if that weren’t the case, I have problems with Pickens’ assertion that by increasing wind generation we can free up natural gas to fuel autos. It’s a great idea to generate more power from wind, but who’s to say it will displace natural gas? Market forces will do what they’ll do. I think the Pickens plan would almost guarantee we’ll tie more natural gas-fired capacity into the grid to back up intermittent windpower.

I don’t think this is a plan at all. It’s just a compilation of assertions that don’t really add up. But Pickens has $58 million to spend on a PR campaign, and you can

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