Picking on governments is an easy sport. It’s not hard to find dumb policies or some initiative that goes against an ideological viewpoint and infuriates exactly 40 percent of any given population.
Instead of getting bogged down in provincial matters (both literally and legislatively provincial), I encourage you to expand your ire to the bigger picture where truly serious damage is happening. Current global policies are impacting not only energy but the whole economic framework. I’m not joking; stop scrapping over trifles and watch where trillions are going.
Since the real estate debacle of 2008 and the resulting near-collapse of the global financial system, we’ve entered into what feels like the eye of a hurricane. It’s a strange new world where financial problems just seem to go away. Think back to 2008. Hundreds of billions of real estate value vaporized, as did the mortgages on those houses, as did the collateral all along the chain that backstopped these loans. The financial world nearly stopped, and the sense of impending doom was palpable.
But all the problems just seemed to vaporize. People went back to work, and none of the big banks went under, as one would have expected. Stock markets have roared back, businesses are as healthy as ever, and no one went to prison for their part in orchestrating the biggest financial scam in history.
As you may have read about, the problem went away through the twin miracles of financial engineering and money-printing presses. A handful of economists have built a global financial structure that prevented one near-catastrophic financial crash, but they’ve set us up for a potentially much bigger one.
National governments now seem to have become not just wasteful but completely unhinged from reality. They no longer seem remotely interested in fiscal discipline or revenue streams or even expenses. Interest rates have been driven to historic lows. Greece can borrow money at just over 5 percent for 10 years, and the country has the fiscal discipline of a crackhead who’s just found a full wallet. In several countries interest rates are negative – entities actually do pay for the privilege of loaning others money – some $9 trillion worth. We’ve got the world’s economic powerhouse, the US, hitting the $20 trillion debt mark and their leader is only worried about a pudgy, vicious little dictator of a small nation on the other side of the world who is taunting him.
What does this have to do with energy? Well, governments are active in two segments of the energy world. On one hand, they are falling over each other to attack fossil fuels by announcing plans to ban internal combustion engines and harassing to death perfectly reasonable energy infrastructure projects. On the other, governments are forking out subsidies like Halloween candy for anything even remotely green, such as $10,000 subsidies for $80,000 electric cars.
For governments up to their eyes in debt, these policies are suicidal. It is incomprehensible to pursue both these policies simultaneously, like protesting against animal cruelty by beating a zookeeper with a small dog.
Strong economies allow green energy development. Many people who dream of an end to fossil fuels forget how much governments take in from gasoline taxes. If gasoline consumption falls significantly, that tax will have to come from somewhere, and electricity would be a likely replacement. These are tricky waters, as the government of Ontario found out through its scheme to promote green energy by paying top dollar for it – electricity bills skyrocketed and there were many cranky people. Electricity is a necessity of life, and its cost is not to be underestimated.
Consider these statistics from California. The state is planning a 12 cent hike in the gas tax, which is expected to add $5 billion per year towards the $52 billion infrastructure repair package California plans to spend to fix roads and alleviate congestion. Note that that is the increase in fuel taxes, not the tax itself, which totals 58 cents per gallon in California.
Now here’s the wild part. Because EVs pay no fuel tax, the state government wants to put on a $100 per car EV annual fee starting in 2020 that is expected to generate $20 million per year. This tax made all sorts of headlines and environmental advocates are howling like coyotes, mocking the state government’s claim to be “pro-environmental.”
Does anyone see a problem here? What sort of fee on EVs would it take to replace the actual 58 cent gasoline tax, should gasoline vehicles be snuffed out? The numbers provided in the article imply 200,000 EVs on the road every year to generate that amount of fees. If 2 million EVs replaced the average 25 mpg auto, to replace the gas taxes alone would take a $350 fee. On top of this, how would the charging infrastructure for 2 million vehicles be paid for? It would have to be replaced with either more fees or a huge electricity tax, which causes another set of problems that impacts every consumer, just like Ontario’s experience. To get rid of gasoline autos would drive the infrastructure costs into the stratosphere. And since fuel costs are a significant factor in vehicle purchases, rising electricity costs would deflate EV demand, which would necessitate further purchase subsidies. Unless the market can handle the revenues and costs without government distortion, it’s a death spiral of spending, which of course means more borrowing. Which is fun until the music stops.
As always, this is not an attack on EVs. They have their place, and hybrid technology makes all sorts of sense. The point here is far larger than what type of fuel orifice your next vehicle comes with.
It is an attack on the idea that governments can somehow keep up this insane attack on fossil fuels, which remain the backbone of the economy and modern life, while racking up incredible debt loads to subsidize something that the market will take care of when oil prices rise again. Debt is treated as though it is no longer a problem and it’s not even a nuisance; it’s become the most valuable tool in the toolbox. Governments are trying to kill one of their most important income sources, and spending vast sums to subsidize an industry that is not economic on its own.
Finally, and it is exasperating to try to find a way to make this point in a way that can enter those skulls, there is the fact that if the war on fossil fuels is won before green energy can take over that load, or even in part, the many citizens of the world that are subjected to winters will burn everything in sight to keep warm. As many of you may recall, winter can be very unfriendly. The sun doesn’t help and wind is the enemy. The only realistic heating alternative to fossil fuels in winter is to burn stuff. That is the only short-term replacement for fossil fuels if the industry is killed off. Climate change models need to factor that in, should the war on fossil fuels succeed quickly – global wood smoke so thick you could taste it wherever you go.
Those are storm clouds worth watching. No one thought global housing markets would crash in 2006, and we were treated to quite a ride. No one things this global debt is a problem, and it might not be, but if it is 2008 will have been but a prostate check compared to the spinal tap that’s coming.
Read more insightful analysis from Terry Etam here