The generous social benefits being doled out by Saudi Arabia and other oil-rich Persian Gulf nations are contributing to high oil prices, according to a report by the energy advisory firm, PFC Energy.

The report said that populist spending programs, which have recently become even more generous in an effort to ward off the social unrest that has swept much of the Middle East, are forcing some Arab OPEC countries to keep oil prices high to pay for generous social policies.

Such policies include high government salaries, direct payments to citizens, “payoffs” to the religious establishment, housing allowances, and large subsidies to keep gasoline prices low. “Today’s high oil prices facilitate the financing of the expansive spending packages that [Saudi] King Abdullah has recently announced to prevent outbreaks of popular unrest within the country,” said the report, prepared for the firm’s private clients.

PFC Energy also cited the countries of the United Arab Emirates as funding growing social largesse with oil revenues. The report said increases in government spending among OPEC countries makes it unlikely that the oil cartel will allow oil prices to dip below $90 per barrel in the future.

Article appearing courtesy Yale Environment 360.

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While Americans hang out with their families today (Memorial Day), it might make sense for them to think a bit about the men and women that have perished while serving their country… it is because of them that we are taking the day off to eat hamburgers, drink beer, and prepare for summer.

While I live in San Francisco, I’m not the typical sappy hippie environmentalist denizen envisioned by some; but I do feel strongly about clean energy. I know that it is an investment that is worth the return for this country, even if that return is only measured by fewer armed conflicts and fewer mourning mothers.

Until a few years ago I was an active duty Marine Officer. When I came back to the United States from some time in Iraq, I got irked by a lot of things, some social, some political. One of my biggest frustrations was the profligate use of oil and electricity here in the United States general given how many lives* were negatively affected by the struggle I had just witnessed. A strong motivator, what ever your political persuasion, for “liberating” Iraq from Saddam was to liberate the oil that he represented for the world’s markets. We have to face the fact that energy security is inextricable from our economic success.

The pursuit of clean energy and energy efficiency is consistent with a strong national security posture by providing resilience to energy supply shocks, while mitigating geopolitical threats and the demographic stress associated with climate change. In other words, clean energy is going to obviate the need for us to fight with others for the scraps of land around the world that are rich with energy resources while at the same time keep us from quelling the violence that is sure to come from population migrations and scarce water resources.

It makes clear financial sense to invest in energy efficiency projects, but it also displaces imported energy, and we can do that further through the use of local renewable energy sources (like biofuels) and PHEVs (Plug In Electric Hybrids). We can make ourselves safer still by using more distributed generation systems (like solar) to reduce our exposure to pricing and supply shocks from distribution disruptions, and geopolitical posturing (like the time OPEC hiked up prices… or when Europe lost its natural gas because Russia didn’t like the way the Ukraine was getting chummy with the EU). This diversity isolates infrastructure disruptions, which pose a threat to our communication, information and emergency response systems and ultimately our economic output.

The US is a huge market. By supporting fossil fuels in the US, we further the incentive for the rest of the world to use products that use them, which means that these fuels will be the status quo for a long time. 50% of our trade deficit goes towards energy and that means that we are directly responsible for some aspects of global instability by widening income gaps and indirectly supporting non-state actors. By not setting up an infrastructure that uses energy feedstocks that we can source locally, we reinforce supplier power and aggravate the competition for resources in politically weak regions of the world, like Africa and, gulp…. increasingly, the Arctic.

The turmoil of large population displacements and the intense struggle for water and food resources associated with projected climate change will affect regions of the world that are not all that stable now and, not surprisingly, the United States directly.** This turmoil further jeopardizes our energy supply lines, and that means deploying more troops to keep the peace (which costs us tax payer dollars that could go towards developing renewables or educating our children).  And here is a scary thought… as the polar ice caps melt they will expose energy resources, which is a worrisome given the significant challenges the military will face as the US seeks to pursue and maintain its interests in a very hostile environment.

So, take it from me, a former Marine, a non-pinko, and a realistically scared idealistic San Franciscan: support clean energy programs. Your grand kids will appreciate it, and so will the mothers that celebrate Veteran’s Day with their sons and daughters in years to come – as opposed to remembering their brave service on Memorial Day.

Honor our fallen service members that died making this country free, by doing your part in the same.

Happy Memorial Day.

Semper Fidelis!

*I include not only the lives of the killed and injured combatants and bystanders, but the loved ones that mourn and care for them.

** 40 degrees North Lattitude surrounding the Americas is where the largest rises in Sea Level are projected. Check out New York and San Francisco’s lattitudes some time when you are bored and looking for a cause.

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A wave of Green Technology innovation is sweeping the world – is the United States willing, and ready, to lead?

That was the question that Andrea Larson presented to the audience a couple hours ago at the Stanford Institute for Economic Policy Research. I was a bit disappointed in most of her comments – beginning with the fact that she chose dwell on “the ignorance” of those that don’t believe in Global Warming… please!

There is nothing less important about this issue than fighting to convince those that don’t believe in it (Peyton speaks about the argument well – I welcome you to join that ongoing discussion).

Simply put, my favorite class in business school was negotiation – and if your aim is deriving policy that you think is going to effectively push renewables and reduce emissions, why fight about your belief structure, change the frame! (ie, don’t be silly, just give those that don’t believe in climate change – or that too much carbon in the atmosphere will likely have some detrimental effects – the Woolsey argument and they’ll write the policy for you).

While Professor Larson’s talk was not all together that compelling* I had serious concerns with one point in particular, as a citizen of the United States and as a tax payer. She discussed the need to stimulate demand for sustainable products while also pushing for innovation, but she did not think products necessarily needed to be made in the US.

I pose the question to you all… should we be content to only stimulate demand for the use of clean tech without stimulating the demand to produce the products we need an could one day export? I think the opportunity exists, like never before, to use our combined 50 states worth of demand to achieve rapid adoption through economies of scale, stimulate job creation and subsequent innovation while becoming the World’s supplier of clean technology solutions.

Frankly, I’m very afraid about transferring the torch of geopolitical power from one group of energy providers OPEC Nations** and Russia to another group*** of thus far benign but potentially hostile nations, but I think the graver long term concern is that the US fails to produce something that can right its trade imbalance.

Nothing is more empowering than self reliance (I encourage you to read Emerson’s take if you are so inclined) and I’m very afraid that if we are not careful, we will stimulate other countries’ production capacity, and let them achieve the economies of scale and subsequent bargaining power.  My question to you all, can I claim to be some weird freakish hybrid free market capitalist if I want to explore using policy to stimulate these things twice – through an RPS and placing a cost on externalities (to stimulate local demand of sustainable technologies) and imposing some sort of a quota (that would stimulate local production of these products)?

As a tax payer investing heavily in renewables and clean tech (north of $90Bn) I think it makes sense for me to want to invest in the supply chain – because I can justify these as infrastructure investments, and I want to do that through tax incentives and quotas… to make sure that the ARRA stamp has a resounding multiplier effect on our economy.

Would Milton Friedman still talk to me? Am I being too patriotic? Am I a protectionist? Am I being anti global? Is the UN going to yell at me? Am I ignoring the maxims of comparative advantage? Will the WTO send me death threats?

* I was impressed with the rest of the event – particularly the “Trillion Dollar Question” discussion between Bradford Delong and Peter Klelow after lunch.

** Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela

*** China is in a position to dominate the supply chain of Solar

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Last night I had the dubious distinction of being the guy sitting next to former director of the CIA, Ambassador, and Undersecretary of the Navy (a post he held before I was born), and current Senior Vice President of Booz Allen Hamilton and partner at Vantage Point Venture Partners, R. James Woolsey.

He has a fairly clear message that he is happy to share with anyone that will listen:

The United States is at grave risk to both “malignant” and “malevolent” disruptions to the grid and that threat can be addressed through distributed renewable generation which can simultaneously reduce the importance of oil to the ignominious fall from grace of salt.

I have had the pleasure of hearing him speak and spending some time with him before moderating last night’s event, and despite how highly I thought of him before, he did not disappoint.  His is a decidedly aggressive approach to the US’ energy future, and like the well trained litigator he is, he presents his case very well.  Electric vehicles and distributed renewables are the hallmarks of an utopian (utopic?) energy future, that would leave OPEC states reeling with the need to find, as he puts it,  honest work, and reducing the disposable cash reserves some currently use to fund terrorist activities.

His oil-salt analogy is profound, and may indeed be a good roadmap to making oil a non-strategic commodity – he argues that through electricity, humans found a better way to store meat, and as a result, salt’s value plummeted. He does not see the shift in oil’s value coming from cap & trade (even at $30/ton it does not produce enough of a tax on gasoline to curb behavior) or, while possibly effective, a direct tax to gasoline which will struggle to get meaningful support from legislators that can only look as far forward as practical for their aspirations for re-election.

The answer, in his opinion, lies squarely on the shoulders of a transportation system that is integrated into a robust and reliable electrical grid that relies heavily on locally generated renewable energy. Advanced battery technology and vehicles built to support them are at the core of his plan… I think his plan is great. I hope that A123, Better Place, Mission Motors and the companies that support them achieve the market penetrations their pitch book graphs said they could.

Woolsey’s speech in two lines or less:

The environmental case for renewables is strong, the economic case is compelling, and the geopolitical case is glaring.

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