“It’s the economy, stupid.”
Whatever your politics, it’s hard to argue against that phrase standing as one of the most effective sound bites ever concocted.
It was conceived and promoted by James Carville, the brilliant campaign strategist for then-presidential candidate Bill Clinton who used the phrase to put the final nail in the coffin of President George H.W. Bush’s political career.
(Carville also has pulled off the neat trick of achieving success in the public sector while camouflaging, with aw-shucks folksiness, the most reptilian demeanor since Wormtongue; every time I see the man, I expect a foot-long forked tongue to dart out and snatch a passing mayfly. But I digress.)
“It’s the economy, stupid” has come roaring back with a vengeance as Wall Street’s meltdown continues and has us all staring nervously into a fiscal abyss. And despite OPEC agreeing to cut production, hurricane devastation crippling US oil and gas output, and continuing threats of oil supply cutoffs by key suppliers, energy prices continue to freefall.
I was reminded of this in contemplating yet the latest barrage of increasingly ubiquitous news features about tips for cutting energy costs (and saving the planet too, of course). According to Consumer Reports, making a number of “smart choices” can help the average homeowner save about $2,000 per year on energy costs. The magazine highlighted energy-saving alternatives in models of washers, refrigerators, dishwashers, furnaces, water heaters, light bulbs, computers, televisions, and automobiles to arrive at the annual savings.
Well, gee, that’s keen. Trouble is, the combined cost to acquire all of these “smart” alternatives totaled $23,000, according to my decidedly unscientific calculations (I even factored in my gas-guzzler’s trade-in on the Prius). Spend $23,000 today to save $2,000 over a year—that’s a federal government economizing strategy, right?
Yes, I know that these “smart choices” are supposed to be made when one is actually in the market to purchase one of these items. But that’s my point. For these savings to materialize, one must shell out the bucks now. At my house, a perfectly good 10-year-old GE refrigerator hums along nicely, doing everything I ask of a refrigerator without ever requiring a major repair. I expect it to last another 10 years. The refrigerator Consumer Reports holds up as an example costs about $1,500 and would save me $72/year in energy costs vs. a refrigerator built 15 years ago. Now my GE refrigerator, having been built only 10 years ago, is probably much more energy-efficient than the 15-year-old model yet not as energy-efficient as the snazzy new model. But why would I get rid of an appliance that works great and fulfills my needs to spend $1,500 on another appliance to save at best $6 per month? What’s the break-even for that investment? 20 years?
Of course, the eco-squawkers at this point will have invoked the other “green”—ostensibly nobler—rationale: environmental rectitude. You know these folks: the painfully earnest trust fund kiddies in their hemp Birkenstocks and free-range sisal ponchos grilling you on the whereabouts of your recycling bins, or the Hollywood celebrity who kvetches about evil Big Oil gouging the public before jumping in his limo to his Lear jet to attend an Earth Day concert 10 time zones away. It’s for the planet, you know.
So I end up ditching a nicely functioning appliance with another 10 years in it for an investment that won’t pay for itself until my (hypothetical) great-grandson enters pre-school? All to pat myself on the back?
The bottom line here is…the bottom line. There is a reason that US public opposition to offshore drilling has melted: It couldn’t stand the white-hot glare of $4 gasoline, regardless of how tenuous opponents say the connection is. The public is making a connection between an environmental piety and its collective wallet, and all the sanctimonious sermonizing won’t change that.
By the same token, US automakers report that demand for trucks and SUVs recently increased slightly as gasoline prices came well off their early summer peaks.
The economic outlook is still as bleak as it’s been in years, maybe decades. And if it’s true that high energy prices contribute to a recession, it’s equally true that a recession will pull down energy prices. Economic catastrophe looms, and energy prices have trended back down, sharply and suddenly. In such an economic climate, why expect anyone to be eager to invest significant capital in something they don’t really need now when the return is so negligible?
That view just underscores another kind of inconvenient truth: Energy environmentalism is a luxury of the affluent.
Don’t agree? Then offer this deal to a farmer in an impoverished developing country facing a possible drought: In order to get you to stop burning cattle dung or endangered rain forest trees for your energy needs, we’ll pay half the cost of your choice of 1) a solar energy system or 2) a diesel generator. The former costs $20,000 and doesn’t work all the time, but there are no fuel costs; the latter costs $400 and is reliable 24/7, but diesel could cost you as much as $2,000 per year. Then point out to him that while the diesel generator is better for his health and the environment than burning dung and wood, the solar option is really the best choice overall for the planet. Which do you think he’ll choose? Do you really think he has a choice?
To that end, I submit a slightly revised sound bite, this one about environmentalism dictating energy choices: “It’s the economics, stupid.”
September 25th, 2008 at 9:20 am
Wel Bob, easy to criticize but I don’t see your plan for the next 25 years. Do nothing because it’s still the good ole days where you live? Maybe one could consider using low energy alternatives when old appliances are worn out and need to be replaced. Maybe some encouragement by local communities could help lower prices on solar panels and take some demand off the grid for the future demands of growing populations and energy hungry manufacturing. Maybe what the public is looking for is solutions rather than cranky criticisms. Luxury of affluent?! Roll down the window of your Hummer and take a few deep breaths. Alternative energy solutions are poised to change the business landscape of America just like modern steel mills in Japan did in the ’70’s. Start getting creative or get left behind again. Hello Detroit, is anybody there?
September 25th, 2008 at 2:40 pm
Mark, I think you’re missing my overall point–and yet you seem to get it too, when you wrote that “one could consider using low-energy alternatives when old appliances are worn out and need to be replaced.” That was one of my points–it’s all in the timing.
When we’re faced with an economic crunch, it’s that much harder to take a step that requires a significant capital outlay now for something that won’t pay for itself for years–maybe never. That’s a tough pill to swallow no matter how well-intentioned you are. So, sure, I might want to save on energy costs the next time I buy a new refrigerator–10 years from now.
That example serves as an metaphor for alternative energy. That’s where you are missing my point. You’re just not going to convince a lot of people or businesses to switch to alternative fuels or invest substantial capital in energy-efficient alternatives NOW unless you force them on the market by making them less expensive than conventional energy through fiscal incentives and penalties or regulatory mandates. Is that what you mean by “encouragement” to lower prices on solar panels?
And ultimately that approach costs more. It’s common sense that replacing an entire existing energy infrastructure with something new will cost more. I’m just saying let’s not kid ourselves that we will save money TODAYwith energy alternatives.
The single most effective energy conservation measure in recent US history was crude oil hitting nearly $150 per barrel.
Demand has plummeted in response. Oil prices have dropped by a third in half the time it took to get to that record. The free market works.
Do nothing? Quite the contrary. I’m all about doing somethng.
You want solutions? Here you go:
1) Do everything you can to boost production of domestic resources. That’s a win-win: Billions more in lease payments and bonses and royalties. No subsidies required (but no windfall profits tax either).
2) Build a few dozen more nuclear power plants. Still the cheapest way to go on baseload power, especially assuming a carbon penalty, with the least environmental impact.
3) Step up R&D on clean coal technology. Still our cheapest domestic fossil fuel.
4) Step up R&D on carbon capture and sequestration. Combine this with clean coal technology and enhanced oil recovery (CO2 injection actually increases oil recovery), and you have another win-win solution. The oil industry is already doing this economically and without subsidies. Go figure.
5) Invest in energy efficiency when cost-effective; some solutions are not (e.g., tankless water heaters).
6) Keep up efforts to reduce solar and wind energy costs (plus other sources that are not quite there yet) but recognize that they won’t be practical solutions until we have cost-effective energy storage solutions.
7) Keep up R&D on the exotic stuff such as hydrogen, but be realistic about when they might make a cost-effective contribution to a global population that’s likely to be 9-10 billion in another generation or so.
We take the first 5 steps to cost-effectively sustain those billions, especially in the developing world, as a bridge to a low-cost, zero-emissions energy future that the last 2 steps represent. We have a moral obligation to not burden those Impoverished billions in the developing countries with sky-high energy costs because it’s a life-or-death situation for them. Conventional energy costs cycle up and down; doing more NOW to make more supply of conventional energy available helps bring the cycle back down. Market-forcing with alternatives always costs more–directly or indirectly–and those added costs tend to be permanent.
So alternative energy solutions are poised to change the business landscape, huh? I heard the same line in 1980. Some of those “solutions” were imposed by government and proved to be a joke (low-flush toilets, anyone?).
If we hadn’t hamstrung the energy industry in the first place we wouldn’t be dealing with an energy crisis now. So why not throw off those shackles to defuse the crisis for the short- and medium-term while we keep working to improve the economics of the long-term solutions?
There’s a 25-year plan for you.
Thanks for your comments.
September 28th, 2008 at 9:50 pm
Yes, I will agree that when the appliances that people currently have do NEED to be replaced ,then get an energy efficient unit.
What is wrong with the tankless water heaters? instead of heating the stored water, it is being heated as being used and not stored.
With a storage type water heater you are heating the water and then the same water gets cooled down and the heater warms it up again to maintain a constant temperature even when the water is not being used.
Thank you.
September 29th, 2008 at 9:52 am
Rusty,
I’ll double back to Consumer Reports, which conducted a study of tankless water heaters and found that, while they are 22% more energy-efficient than storage tank water heaters, the savings are only about $70-80 per year. Given their high cost, the break-even is 22 years, even though most models are designed to last only about 20 years. They also have more problems with corrosion and scale buildup, require special electric service upgrade, and are not that reliable in delivering hot water consistently. Check out the CR report at
http://www.consumerreports.org/cro/appliances/heating-cooling-and-air/water-heaters/tankless-water-heaters/overview/tankless-water-heaters-ov.htm
Apart from the performance problems and other issues, tankless water heaters are a perfect example of what I’m talking about. If you want to sell energy efficiency to the public, you will have to sell it in terms of cost savings. Drivers used less gasoline because the high cost hit them in the wallet. You can talk all you want about saving the planet, Middle East wars, and peak oil, but the bottom line for most folks is still the bottom line. If the cost savings aren’t there, it won’t fly. That’s true even more so when the economy is in a tailspin.
What irks me is that some of the same people who want to convince you that alternative energy won’t cost any more than conventional energy are feverishly working to impose carbon taxes (direct or indirect) in order to tilt the playing field in their favor.
To them I say: Don’t relieve yourself on my leg and tell me it’s raining.
Thanks for writing.
October 22nd, 2008 at 11:50 am
Bob,
I work in the energy sector and think your remarks are right on. Well put. Nuf said.
October 27th, 2008 at 5:28 pm
Thanks for the kind words, Noel.
Stay tuned: I won’t lack for material under the new DC regime.
May 20th, 2009 at 1:35 am
Good info. will come back again soon.
June 15th, 2009 at 3:47 am
water heaters…
recommend you look around first and check out the information on the best water heaters…..
June 27th, 2009 at 1:19 am
Awesome points, will definitely visit soon..
August 30th, 2009 at 8:49 pm
Rejection slips, or form letters, however tactfully phrased, are lacerations of the soul, if not quite inventions of the devil - but there is no way around them.
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February 8th, 2010 at 11:13 am
I was reading something else about this on another blog. Interesting. Your perspective on it is diametrically contradicted to what I read in the first place. I am still contemplating over the opposite points of view, but I’m inclined to a great extent toward yours. And no matter, that’s what is so good about modern democracy and the marketplace of ideas online.