Guest essay by Roger E. Sowell, Esq.5
Recently on WUWT, a post1 by Willis Eschenbach was made advocating the almost doubling of energy consumption worldwide, by increasing energy use per capita in the poorest countries. This post addresses the issue of increased energy consumption and poses a few questions. I say at the outset that I agree that improving the quality of life is an important goal, and energy consumption per capita is probably a good indicator of quality of life.
First, what do the following countries all have in common? Nigeria, Indonesia, Algeria, Libya, Iran, Iraq, Venezuela, Mexico, Russia, Canada, and United Kingdom?
Each country is a major oil producer and exporter, but with Indonesia and UK experiencing decreased exports recently. The first seven countries all are, or were, a member of OPEC, the Organization of Petroleum Exporting Countries.2 Yet, all but the last two, Canada and United Kingdom, have below-average GDP per capita, gross domestic product, according to the World Bank statistics.3
Second, while it is true that a correlation can be made between energy consumption per capita and quality of life, there must be something else at work that prevents the oil-rich countries Nigeria, Indonesia, Iran, Iraq, and the others from enjoying that high quality of life. There are fundamental issues that prevent energy-poor countries from copying the success of another energy-poor country, Japan. Japan has essentially no natural energy resources, but found the means to import energy as oil, coal, and liquefied natural gas, LNG, to power its industry, commerce, and residences.4
Until some fundamental issues are resolved, simply increasing energy consumption in the poorer parts of the world will not improve the quality of life.
Among these fundamental issues are, in no particular order, economic system, a fair justice system, and the political or governing system. I don’t imply that I am an expert on any of these countries, or their economic systems, justice systems, or political systems. I have done a fair amount of study, and also have traveled to and worked extensively in five of the countries mentioned above: Indonesia, Mexico, Canada, Japan, and UK.
Perhaps the most important issue is the political system, for the justice system and economic system may depend on who is in power and the type of power exerted. It may be that a representative constitutional democracy is a favored political system. It may be that the degree of official corruption is a major factor. It may also be that civil discord is a major factor. Having a modest degree of government regulation to ensure fair treatment, but not an onerous burden, is surely important.
A fair justice system ensures that those with a legal grievance will be heard, and treated fairly according to laws that do not change on someone’s whim. Having a contract honored, or being allowed to bring a lawsuit for breach of a contract, are important issues. Having a means to collect on a judgment is also important, as it does little good to win a lawsuit, be awarded money as damages, and be unable to collect the money.
A brief anecdote to illustrate the importance of a justice system: during my time in law school, US Supreme Court Justice Anthony Kennedy spoke to an assembly of professors, staff, students, and guests. Justice Kennedy spoke on many things that night, but what I most remember is him telling us that he had met recently with members of Iraq’s judiciary. It was soon after the war to remove Hussein ended and Iraq was building up its new government and judicial system. According to Justice Kennedy, the Iraq delegation thanked him tearfully for bringing to the world the US Constitution and its many provisions for legal rights, especially the first ten Amendments known as the Bill of Rights. They intended to copy as much of those rights as they could into their new governing documents.
The economic system may be important, perhaps not as important as other issues. Economic systems in the oil exporting countries range from absolute monarchies to dictators to elected representative.
It is interesting to note that OPEC has existed for more than 50 years, having been founded in 1960, so ample time has passed to allow oil-rich countries to improve their standard of living. A few have, such as Saudi Arabia, but most have not. Clearly, other factors must be addressed besides access to basic energy, if the goal is to improve quality of life.
It is further interesting to note that even within a country with high energy consumption per capita, such as the United States, enormous differences exist between citizens and their energy consumption. It may be that energy per capita in the US is distributed according to a bell curve, with a few percent of the population consuming vast amounts of energy in their mansions, jet airplanes, and fast motorcars. Likewise, a few percent of the population are poor and have very low energy consumption. The majority of the population likely fall in the middle, with about average energy consumption. Clearly, again, other factors must be at work that prevent the poorest from achieving a better quality of life along with higher energy consumption even in an energy-rich nation like the US.
Citations
1 WUWT, article of August 21, 2013 “Double The Burn Rate, Scotty”
2 OPEC membership at www.OPEC.org
3 World Bank GDP per capita, 2012 data.worldbank.org/indicator/NY.GDP.PCAP.CD
4 EIA data for Japan www.eia.gov
5 The author is an attorney in California, practicing in engineering, science and technology law. He is a frequent speaker on climate change, energy, and engineering issues. He worked worldwide as a chemical engineer in the energy industry with oil refining, petrochemicals, basic chemicals, and power plants. He blogs at http://sowellslawblog.blogspot.com
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I suppose the bottom line is that cheap, readily available energy facilitates wealth producing activities (just as judicial systems do).
If you have not got these activities in place, or in a position where they can grow, no amount of energy will help.
Roger E. Sowell:
That is an excellent essay. Thankyou.
As you imply, any benefits of anything (including greater energy supply) are accrued by the powerful alone in the absence of a Rule Of Law and its enforcement.
This was touched on in the thread which discussed the (also excellent) essay by Willis Eschenbach that has prompted your essay. But that thread demonstrated few who read his essay appreciated the limitations imposed by the issues which you raise.
Furthermore, many who post to WUWT often demonstrate a failure to understand that choice of a political system is irrelevant to any society which lacks a Rule Of Law and its enforcement. Local tyrants will always prevail where they are not constrained, and this true in all societies whether or not they are ‘developed’ (e.g. Al Capone, Kray twins, etc.). But in societies where people are at subsistence levels the effects of tyrants can reduce the living standards of the poor to below subsistence levels.
Again, thankyou for highlighting this important issue.
Richard
Roger – What you say is IMHO correct, but Willis’ argument was that increased energy availability is a necessary condition, not a sufficient one. Willis is therefore absolutely correct to argue that in order to lift more people out of poverty it is necessary to increase energy availability. I don’t think anyone is going to argue against the idea that other things are needed too.
The system correlates with the individual and the culture. Yes indeed there is more to it. The economy and the justice system correlate (depend on each other both being equally advanced).
How does a woman who is controlled by her family to not have any personal choice in whom she marries, and must follow a community imposed role all her life, imposed even by force, ever manage to extend her mind to understanding principles of democracy, which require free thinking individuals who can solve problems by thinking about their own personal choices?
How do you free the authorities and bureaucracy from corruption, unless the vast majority of individuals working in those institutions live by the principles of fairness and transparency, and so can weed out the bad apples?
I think we are still scratching our heads over how and why the West managed to free itself from feudal systems with mythic-membership tribes, serfdom, and warlordism.
Not to pick on Islam in particular, but if the culture (reinforced by all the authorities, religious and political) has people mumbling “if God is willing” every 5 minutes, it isn’t really much of an injunction to people to make something of their lives, nor does it encourage a self-critical mindset, a culture of critique, and open discourse.
The cultural mindset rather veers to other views, like how perhaps the fact that the West has a higher standard of living, must be evidence of its corruption, and an insult to God, and it was the West which plotted to undermine the Golden Age.
The problem is that there are certain ingredients needed in individuals, culture, and systems, to move a people from pre-modern to modern. But if we really knew what those were, perhaps we’d be having more luck than simply demanding this or that regime install ballot boxes.
“while it is true that a correlation can be made between energy consumption per capita and quality of life, there must be something else at work that prevents the oil-rich countries Nigeria, Indonesia, Iran, Iraq, and the others from enjoying that high quality of life.”
Yea, they don’t get to consume the energy they produce.
The legal and political systems are part of the infrastructure of a country.
The physical infrastructure (roads, phones, water…) are also part of the infrastructure of a country.
Without infrastructure the country cannot develop. Without infrastructure the country is stuck without any hope of building growth. Any wealth that does accrue leaches out to more fertile fields.
Energy is not needed for the social infrastructure.
But without energy the physical infrastructure cannot be created or maintained.
And both forms of infrastructure are required.
Mike Jonas hit the nail on the head.
The U.S. has by a wide margin the most oil wells drilled of any nation. And it has the most dry holes ever drilled. Now it has the most fracked wells drilled. It is the freedom of risk taking that underlies this set of observations rather than some special endowment of resources. Poor countries with large potential for energy resources or central government control of production and development tend to have adverse or inconsistent climates for risk taking and development. Energy development is a long term effort wherever it is conducted and this works against unstable nations lacking long term stability. If the U.S. were as dependent on a state run energy monopoly or a sanctioned foreign company as effective monopoly, there would be no such thing as fracking today and no shale oil plays. U.S oil company majors totally missed the boat on this energy tech play and had to buy into this trend before being left behind and out of favor by investors. Oil rich poor nations have to export oil to plug the holes on financial resources and use oil to buy political power or pay for weapons to maintain power.
Little Norway have become dirty rich on oil resources … Standard of living? Not better then Sweden, but in most cases far more expensive … (rent, food, energy, transportations …)
Nigeria, is this the African country that has been exploited by a US oil company, which Bill Gates (III) have been invested in (at the same time he and his wife have been engaged in charity work in Africa …)
Instead of looking at the Energy vs GDP effect as doubling the amount of energy consumption; one should look at it in terms of reducing the cost of energy in poor countries as well as doubling accessability (social and physical) and the utility of energy to improve lives.
In the full socio-economic cycle, the cost/accessability/utility factor doesn’t even have to halve to produce a doubling in GDP because the increasing use of cheap energy lets people be more productive and therefore more able to pay for energy to further improve their prosperity.
While it is certain that making energy more expensive reduces the quality of life, simply making energy cheaper or more abundant doesn’t automatically improve quality of life. Accessability and utility factors are fundamental to quality of life.
“Economic systems in the oil exporting countries range from absolute monarchies to dictators to elected representative.” Those are political systems. Economic systems would be market, mixed, or command economies, with a host of variations within the “mixed” category.
Some nations have more resources than others, but, as noted, the poorly endowed Japan is proof that culture can overcome almost all obstacles. Access to cheap energy is certainly desirous for the creation of wealth, but it won’t move a man off the couch nor will it ensure the most important prerequisite to economic growth: liberty.
richardscourtney on August 23, 2013 at 3:50 am
“Each country is a major oil producer and exporter, but with Indonesia and UK experiencing decreased exports recently. ”
This is false. Both countries have peaked production and now import oil http://en.wikipedia.org/wiki/List_of_countries_by_oil_imports
“Local tyrants will always prevail where they are not constrained,”
How does one constrain tyrants? Civil war? Syria, Egypt?
SasjaL:
I severely lack time so will be abrupt from necessity and not rudeness.
I am answering your request for clarification in your post at August 23, 2013 at 4:54 am
http://wattsupwiththat.com/2013/08/23/access-to-energy-not-the-entire-story/#comment-1398044
I answer,
The Rule Of Law is essential for any society (or nation) to function.
But, of course, corruption is a destruction of the Rule Of Law especially when it is corruption of the legal system and/or of those who apply or enforce it.
Richard
richardscourtney on August 23, 2013 at 5:09 am
Thanks, my example applies to my country – Sweden …
Good point about how much drilling the US has compared to other countries, Resourceguy. Legally, you can pinpoint the reason for that on the unique Property Rights regime that the US has, which exists almost nowhere else in the world. Few people realize how important this has been with respect to developing the vast and varied infrastructure. (an aside: Canada and the other English speaking countries are better than the rest of the world, but still don’t allow anywhere near as much freedom and room for private initiative as the US allows)
This is the incredible, world-shattering yet incredibly simple principle: The US allows private ownership of minerals. If you buy or inherit a piece of land, and the mineral rights are still intact (meaning they haven’t been stripped out and sold to a third party by some previous owner, which private owners are allowed to do) then you OWN all of the minerals in, under, and that run through your land. All the way down, thousands and thousands of feet. (there is a practical limit, but not a legal limit) That means private owners are *all* incentived to realize the value of their holdings, and that means that they will *invite* exploration and work themselves to try and figure out the best way to maximize production – all without needing any government planning at all. Of course, over the last century we now acknowledge that government has a function in monitoring and regulating such activity, in order to make sure that safety and health standards are upheld, and that no single operator infringes on the rights of his neighbors, but outside of that, government does not play any role in planning, exploring, or producing.
In every other country in the world, even where private property ownership is allowed, landowners only own the *surface* of the land, not the minerals beneath it, which are held by the central governing authority. For example, in Canada, which does allow private mineral ownership, that ownership only comes about when the private party has either purchased or leased those rights from the Crown. (as they say) In other words, no private mineral ownership without the specific approval of the central government at some point, and that is still considered a very *Liberal* system compared to the rest of the world.
The US is truly and completely unique with respect to the way our legal system deals with mineral rights. Our system allows private parties, providing only that they abide by safety and health regulations, and other such regulations such as spacing requirements that enhance total production for all, to act in any way they believe will maximize their production. This is why the Eagle Ford Shale development could come out of nowhere and get to where it is producing 1,000,000 barrels of oil per day before anyone on the Federal level even knew there was anything going on out there. This is why North Dakota exploded, this is why Ohio is about to explode with drilling and production, which will have a huge impact on restoring the county and state budgets in that quasi-depressed, post-industrial region.
This may seem counterintuitive, and every member at every level of every government in the world today, even the liberal ones, absolutely hate this statement with a passion – but the the LESS government involvement you have, the MORE energy production that nation will enjoy.
The US oil industry is the living, breathing, producing proof of that statement.
btw, the standard isn’t TOTAL production, it is about MAXIMIZING production from what you have. Saudi was blessed with incredible geology – without their government policies, they could have easily been producing double what they have been for the last 30 years. (Remember, OPEC was all about LIMITING production, not maximizing it) Iraq could be producing 5 times what it is – so could Iran. Mexico has the resources to produce 10 times what it has been producing, as does Venezuela. In every case, it is their own governments that destroy their producing potential.
“Mexico has the resources to produce 10 times what it has been producing”
Hard to see how since Cantarell, their biggest deposit, is in terminal decline, producing less than 400,000b/day from the 2.3mb/day at its peak. http://static.seekingalpha.com/uploads/2009/8/23/saupload_reuters_cantarell_through_june_20093.jpg
Mexico’s over all production is down: http://www.indexmundi.com/energy.aspx?country=mx&product=oil&graph=production
They rely on oil revenue to keep their country functioning. Thus there is the incentive to produce as much as possible, not as little as possible.
Economic historians, like Douglas North and J.R.T. Hughes, have pointed to property rights and the rule of law. It is not that these have to be perfect, ours in the US certainly are not, but you can go to a county courthouse and find who has title to a piece of property and the legal rules are enforced predictably. Without that, people end up holding, and hiding, wealth in rather unproductive ways.
A related question to my previous post, with respect to how detrimental governments usually are with respect to any given nations producing capability is the oft-noted observation that vast mineral wealth has more often turned out to be a great curse for the local population than it has turned out to be a blessing. Vast mineral wealth, controlled by a central government, removes any need or interest that government has in developing any other employment centers or income streams. Why bother, once they’ve got the money they need to run things? In fact, from that point on, any competing industry or source of employment becomes a competitor for political power, and thus is actively sabotaged and driven out. It is far too easy for a government with a good income to keep everyone on subsidies and dependent – you both achieve control, and have a wonderful tool to suppress dissent by withholding benefits. This is generally how the 3rd world operates.
And this would happen even if governments were generally benevolent, but in the real world, what we see time and again is that a small but very motivated faction captures the apparatus of the central government; and once that is achieved they gain sole control of the nation’s mineral wealth, which enables them to both enrich themselves and to permanently cement their hold on power. This has happened in Mexico with the PRI and the PEMEX unions (Mexico finally has a President trying to break that stranglehold), this has happened in the Gulf States, it’s happened with the Generals in Nigeria, it happened with Qaddafi, it happened with Saddam – over and over and over, this is the story of the 3rd world, and is the reason mineral wealth so often results in an advanced level of political oppression and societal decay.
A real world example of the problems this brings about can be seen in what many think is a successful country today, Saudi Arabia. In fact only about 10% if the population works seriously to provide the national income, and about 90% of the population survives off government subsidies in some way or other. Ever wonder why so many people there have so much free time and cause so much trouble? This is what the Royal Family there lives in fear of, and their fear of their personal situation has led to so much of the turmoil we deal with today. But they can’t abide the thought of Giving Up Control. No government ever really can, so the trick is to keep it out of their hands in the first place.
The issue is far more complex than I can fully explain in a post but the basics are the constitution and the bill of rights. Few people understand these documents today as they were understood for the first 150 years of our country.
The constitution is a list of the powers the people gave to the government and the government is given no powers beyond what is listed and the government is not allowed to add powers (except by the amendment process). In other words no living constitution allowed. The bill of rights is was not needed and was not a part of the constitutional approval process. The bill of rights came into being because the states when approving the constitution feared the government would soon forget this and start making powers beyond what the constitution allowed. The 9th and 10th amendment are the two most important amendments because they are the lock and key to the constitution. They say the government can’t create new powers for it’s self and the government only has the powers listed in the constitution. All other amendments are reminders to the government of the line they must not step over in personal freedoms.
The progressive movement disliked these restrictions because they are a socialist/communist form of government and found a way to obtain more power with the passage of the 17th amendment which resulted in the reduction of states rights (that was not the reason they gave) and the passage of the 16th amendment which allowed the creation of the IRS and the progressive tax structure. The 16th amendment was by far the most destructive to the country because it permitted the tax rate to be as high as 90% and to be applied unequally. The saying “money is power” is very true because with money the government is able to bribe people to look the other way when they step over the line the constitution draws. There are many examples but is staying with the thread, take the EPA. The EPA would never be permitted to exist under the constitution but because they have money like super fund clean up money they are able to go far beyond what the constitution allows.
The economy will only grow with a free people which explains how the United States was able to go from a small country to a power house by World War I. After 1913, we have been living on past glory but we have had a few leaders that did recall the rule of the constitution.
Pulling it all together, energy is important and the United States is blessed with it but having the free market to take advantage of it without government interference is what will make a country great and uplift the people.
Coal, Hydro and Nuclear energy/electricity generation.
[1 large coal-fired power plant provides the energy equivalent to 2 million people doing manual labor – this is WHAT made modern society – without it, we would still be 1 billion people working in the fields with a hoe – without it, there would be no oil, gasoline or vehicles or farm equipment or clean water or functioning health-care].
Democratic government (or at least turnover of leadership as in China).
Free enterprise economic system.
Balanced public sector budgets.
Public sector no more than 40% of GDP (even in a free enterprise economic system, there is still taxes and services like highways and water paid for through government – but taxation needs to be below 40% of GDP).
Law and order; protected real property rights; protected intellectual/invention property rights.
Well-functioning banking system with appropriate regulations to keep it stable and trustworthy.
Monetary system that maintains low inflation.
Education and job training system.
Women’s rights, birth control and washing machines (see Gapminder).
Green Party/environmentalists with less than 5% of the vote – no political power.
No climate change policies and no climate scientists with political power.
I’m told that the constitution of the USSR was even better than the US constitution. Unfortunately the USSR government ignored it. It’s not the written laws that counts , it’s the strength of character of those in the government and the public that matters most. It’s the laws in our hearts that matters
The Rule of Law, Free Market and the right to own Private Property. Affordable energy will follow.
Let freedom ring.