takes a ride with his first son on their newly acquired motor bike.
Six months ago Jaisukh walked everywhere he went. His family
frequently fasted to make ends meet. He worked two jobs and went to
school in order to qualify for a white collar support job with a
Western company. Now he answers phones twelve hours each day, six
days each week and makes $113 US per week. This is 25% more than
the national average of his country.
his new wealth, Jaisukh can buy one gallon of gasoline each week to
power the motorbike while still feeding his family.
is not alone. He lives in a country with an economy that grew by 9%
in 2007. This is three times what would be considered a healthy
growth rate in the United States. The people of Eastern Europe,
Russia, India, China, Vietnam, Malaysia, Thailand, and many other
countries are experiencing an economic revolution.
that he can feed his family, he wants a newer bigger, faster
motorcycle. He wants a car. In fact he wants a BIG car! Jaisukh
wants a bigger house. More than anything Jaisukh dreams of
air-conditioning. With the exception of a few glorious hours in a
movie theater he has lived his life sweating and hot.
Air-conditioning is something only the very richest of his countrymen
can afford. Air-conditioning is heaven on earth. Someday, Jaisukh
prays he will be able to afford air-conditioning. The luxury of
fretting about global warming is far too expensive for Jaisukh to
economics the margins make the difference. The very rich and the
very poor set the trends. The people in the middle are along for the
ride. The fact the Jaisukh is poor makes him powerful. If he and
the other billionish people like him can afford to buy a gallon of
gasoline at $4.00 then the world will pay $4.00 for a gallon of
gasoline. If Jaisukh will only pay $3.50, then everyone will only
have to pay $3.50. It is Jaisukh’s “marginal gallon”
of gasoline that sets the price for the world. That “marginal
gallon” is the last gallon the oil company can sell. It is sold
to their toughest, most demanding customer. If that customer won’t
buy, they have to reduce the price to get rid of that gallon. If
that customer will buy, they can raise the price until the marginal
gallon does not sell.
is responsible for Jaisukh’s recent success?
are. We are the very rich of the world. On average Americans make
five times what Jaisukh makes. We make so much money that we can
afford to buy and benefit from his services. Further, we showed the
masses of the world how to be successful. We went from Jimmy
Carter’s malaise of high taxes, recession, 20% inflation, and
gas lines to Ronald Regan’s “Shining City” is less
than eight years. We did it by cutting taxes, cutting regulation,
and believing in the abilities of ordinary people to make rational
choices for themselves.
around the world noticed. The pebble of liberty and free markets
that Regan dropped into the pool that is America has rippled around
the world. From Budapest to Beijing the Regan tide has lifted boats.
what do we do now? Can we put Jaisukh and his billion or so brethren
back in a box of poverty? Can Al Gore convince him that he really
does not need or want air-conditioning? Can Al Gore even convince
himself to forgo air-conditioning? The answer is not and cannot be
more Carterist malaise and restriction of freedom. Only the rich can
afford or abide this solution and they can only do it until they
become poor as a consequence.
answer is to trust people and the invisible hand of the free market
to do the right thing. High energy prices will self-correct if
governments get out of the way. One of the reasons that so many
people are suddenly able to afford a gallon of gasoline is government
subsidy. The governments of the developing world realize how crucial
abundant energy is to quality of life. They know what we
once knew. OIL IS WONDERFUL STUFF! So they subsidize energy which
fosters rampant growth in demand. Now these governments have a
problem. Because energy prices have risen these governments cannot
continue meaningful subsidies and stay solvent. Subsidies are being
dropped or reduced across the globe. This will cause consumption and
prices to drop in the near future.
of the reasons that prices have risen in the United States is the
weak dollar. If a dollar is of less value it takes more of them to
buy a barrel of oil. What is a dollar worth? According to the
Congress of the United States as of July 24, 2008:
= 9 minutes and 16 seconds of unskilled US labor
July 23, 2007 that same dollar would buy 12 minutes of unskilled
labor. In one year and one day the US Congress has devalued the
dollar by 31% simply by redefining the marginal value of labor in the
United States. Not only did the value of the dollar decrease, the US
Congress increased the value of Jaisukh’s labor because his
services became even more attractive in the world market. As Jaisukh
makes more money he buys more gasoline (that bigger motorcycle) and
the global oil supply shrinks. Therefore US government minimum wage
policy has a strong primary and a lesser secondary impact on the
price of energy for US citizens.
Market is much smarter than the government. The Market always finds
the right solution if allowed to. In his 2003 State of the Union
Address, President Bush announced a $1.2 billion dollar initiative
touting hydrogen as an energy solution. hydrogen is neat stuff. If
you burn it you get heat, water, and no pollution (well maybe some
oxides of nitrogen but they hardly count). If you were driving a
hydrogen powered car and you crashed and ruptured the fuel tank the
hydrogen would disperse into the atmosphere so fast that lingering
fire would likely be avoided (unlike gasoline). If you were really
clever and had NASA’s funding, you might be able to convert the
hydrogen to electricity in a fuel cell without burning it. This can
be very efficient.
hydrogen is not an energy source and President Bush is ill-informed
to tout it as one. You can’t drill for or mine hydrogen unless
you live on Jupiter. Hydrogen is more like a bucket that holds
energy. You have to fill your hydrogen bucket at the expense of some
other form of energy. You can make very expensive hydrogen by
breaking water apart with electricity. The current commercially
viable way to make hydrogen is to take apart hydrocarbon fuels. To
put it another way, you take a perfectly wonderful fuel like natural
gas, add money and energy and end up with an inferior fuel called
hydrogen. There are more hydrogen atoms in a gallon of gasoline than
one can fit into a gallon-sized liquid hydrogen tank. So if you want
to use hydrogen as a fuel, burn gasoline. If you simply must use
hydrogen, liquefying it and cramming it into a tank and maintaining
it at −423.17 °F/−252.87°C is a trick for NASA
not the minimum wage guy at COSTCO. OK, so just put it in a
pressurized tank. To get the cruising range of a gasoline powered
car, the high pressure hydrogen tank will need to be seven times
bigger than the gasoline tank and must be either cylindrical or
spherical in shape to withstand the high pressure. The entire trunk
and some of the back seat become the fuel tank.
Bush’s limousine uses gasoline because it is a great fuel. It
has incredibly high energy content on both a volumetric and weight
basis, it burns clean and it is easy to handle and distribute. The
Market made an excellent choice and we are blessed to have such a
wonderful fuel. If hydrogen were a good fuel The Market would have
selected it. Limos would use it. And government money (read: your
money) would not be wasted on hydrogen promotion.
is just one of many alternatives touted by politicians and con men.
All these are “alternatives” only because The Market is
smart enough not to embrace them. Only fools and governments buy
energy is versatile and easy to distribute. The Market chose well
when it ushered in the age of electricity. But electricity has one
big flaw. It can’t be stored effectively. You must use it as
you produce it. This is one of the many reasons that The Market has
marginalized both wind and solar electrical energy. They only happen
when and where the sun shines or the wind blows – not
necessarily when and where the power is needed.
suppose for a moment that the USA had an infinite amount of
environmentally clean, cheap, and dependable electrical energy. We
could all air-condition our homes without guilt. We could all
simultaneously plug in our electric cars to charge them. We could
bring heavy industries like aluminum and steel back to the heartland.
We could export more manufactured goods, import less petroleum, and
improve the value of the dollar. We could export power to Canada,
Mexico, and Cuba. We could afford to make hydrogen from water in
high temperature reactors. Entrepreneurs, spurred by The Market,
would work to find ways to store the energy of electricity
effectively and economically. This could usher in a new era as good
for the world as was the adoption of petroleum 100 years ago.
stands between us and infinite clean, cheap, dependable electrical
energy? It is not technology. France has it today (70% of their
capacity). Nuclear energy is the only source of energy that The
Market has approved and blessed. Nuclear works. It is cost
effective and virtually pollution free.
in the way of Nuclear energy are politicians and environmentalists.
They also say no to coal, they want to tear down hydroelectric dams,
they fight against wind generation in many locations, they make it
difficult to find, extract, or import natural gas, and they do all
they can to prevent oil exploration and extraction.
argument is that nuclear power is dangerous. Not one life has ever
been lost in the US Commercial Nuclear Power industry. And today’s
nuclear technology is far safer than that of the past. New designs
are inherently failsafe. New fuel reprocessing technologies -
outlawed in the US - eliminate virtually all nuclear waste, and what
remains can easily and safely be stored at Yucca Mountain. The
reprocessing and storage of nuclear waste could and should be a
growth industry in the United States. If we don’t do it the
Iranians will be happy to. Jaisukh will have air-conditioning
powered by nuclear energy soon. Will you?