Minsk’s Folly

Usually, the NYTimes is admirably progressive in its analysis of climate change and sustainability issues. It has recently, for example, come out in opposition to energy -intensive corn ethanol, and has brought up the idea of a national carbon tax several times.

But even the paper of record isn’t immune to shortsighted conventional thinking every once in a while. Guest columnist Ronald E. Minsk’s op-ed Praying at the Pump in yesterday’s edition sees our oil addiction through an exclusively economic lens – and therefore proposes an exlusively economic solution. “Simply put,” Minsk writes, “our oil addiction undermines our well-being because the volatility of oil prices threatens our economy.”
No, silly, our oil addiction undermines our well-being because it’s threatening our very ability to survive on this planet. As last year’s Stern Review and this week’s ballyhooed IPCC Report make abundantly clear, global climate change induced by continually rising emissions would bode far worse for the economy than what we’ll endure when the price of gas shoots past $5.00 a gallon. A world of massive weather changes resulting in hundreds of millions of environmental refugees is not so unforseeable given our current path; in order to stave off as much chaos as possible, it’s in our best interests to start making changes now – starting with mechanisms for reducing our carbon emissions and transitioning to renewable energy.

But Minsk’s agenda for breaking our addiction to foreign oil involves not investments in alternative fuels or plug-in hybrid technology, which he says would still leave us vulnerable to price spikes. Instead, his answer is to merely find a more secure supply for our addiction, shifting from “autocratic regimes in the middle east” to oil extracted from within our borders: “if we cannot find a way to increase production and inoculate ourselves from oil-supply interruptions, we are either going to have to develop cars that need no oil, or learn to live with the risks of the global market.”

Which is absolutely right. Would an oil shock like the OPEC embargo of 1973 put a damper on our already shaky economic growth? Sure. Would it affect millions of Americans whose lifestyles depend on cheap oil? Undoubtedly. But the fact is that the price of oil has never reflected its true cost to our society, and the sooner the correction comes, the less painful it’ll be. Increasing domestic production would indeed keep gas prices prices down – thus encouraging greater consumption and hastening peak oil, not to mention the disastrous effects on our atmosphere.

Perhaps Mink’s error lies in not appreciating the extent to which change is necessary. It’s not just our addiction to foreign oil that we need to break – it’s not even our addiction to fossil fuels in general. It’s our addiction to consumption, to ever-expanding growth that blatantly contradicts the natural law. We can’t even begin to tackle this problem until thinkers and policymakers like Minsk take the first step: recognizing that our current way of life is fundamentally unsustainable. Only then can the real work begin of transforming the way we build, make, and consume – and ultimately, the way we see ourselves embedded in the biological fabric.

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3 thoughts on “Minsk’s Folly

  1. Historicus says:

    Actually Minsk is subject to double folly. In economic terms Oil is quite inelastic and regardless of being subjected to the false scarcity prices of monopoly, the pubic will continue to consume petroleum at relatively the same pace. In other words, the demand for petroleum will remain more or less constant at different quantities supplied due to the necessity of oil in our capitalist economy. What this means is that consumers will cut back in other realms of consumption to compensate for the hike in prices, they may buy less clothing, luxury goods, or any other elastic commodity.

    This of course relegates the neo-classical theory of short-term supply and demand rather unconvincing. Due to the function and utility of the commodity oil, people are most likely not going to reduce consumption in response to changes in price. Hence, price gouging, or hyperinflation is likely to occur through the fabrication of false scarcity, i.e. OPEC 1973. Demand therefore, will remain steadfast as prices change and most likely offset other sectors of the economy. Minsk seems to understand this without understanding its implications, in fact he addresses the inelasticity of oil quite convincingly, however as you rightfully point out his premise of oil addiction undermining the stability of our economy is putting the cart before the horse, as economists often do, for an economy presupposes the existence of a society.

    Minsk’s second folly lies in his premise that some inexplicable force that terrorizes business and consumer confidence is somehow driving volatility of oil prices. What Minsk fails to address however, are the roots of this volatility that are grounded in the ability of monopoly to grope demand through their substantial market power. Minsk concludes, “real security can come only through finding a way to keep prices stable.” Again he is putting the cart before the horse by neglecting the functioning of monopoly and the role of U.S. foreign policy in establishing a foreign constituency favorable to monopoly interests e.g. the house of Saud, Saddam Hussein, the Hashemite kingdom, etc. A real solution Mr. Minsk would come from a break down of monopoly capitalism and its tendency to put profits over people, for one cannot have their economic security cake and eat their monopoly too.

  2. Brock says:

    Haha well put Historicus. What leads you to believe, however, that oil is an inelastic commodity? The demand for gasoline, at least, actually is to some extent based on its price at the pump – Americans showed a noticeable downtick in their driving habits when it rose above $3.00 per gallon after Katrina.

  3. Historicus says:

    Oil is an inelastic commodity, people are heavily dependent on every day and would sooner reduce their consumption of garments and even food than reduce their consumption of oil. Oil is not a purely inelastic commodity that would remain steadfast to price gouging, but relative to other commodities it would appear to be. The significance of elasticity in oil is that the giants of the oil industry are privy to manipulation of the market. The economic and social shocks oil crisis generates massive profits for these oligopolies that entice them into sustaining crisis and volatility. To quote Rick Wolff, professor of economics at UMass, “Their [the oil oligopolists] investment strategies aim both to take advantage of the wild oil price upswings and to protect themselves against the downswings. Not least among their strategies was widespread dissemination of arguments picturing the oil companies as merely passive responders to the “free” market and hence without substantial responsibility for that market’s volatility.”

    A price hike of $3.00 at the pump may indeed produce a reduction in demand for oil, however the significance of the curtailed demand is in the paucity of the curtailment. If oil were elastic, a hike of $3.00 would far surpass a “noticeable” downturn of driving habits.

    We should continue to expect feeble changes in driving habits following the predictable vicissitudes of oil prices, but we should not expect a dramatic change in oil consumption as long as our modus vivendi is under the auspice of a system indifferent to human needs, including breathable air and a modicum of a habitable environment.

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