Reason Magazine - Topics > Natural Resources

They Keep Killing Mr. Hooper

jwalker@reason.com (Jesse Walker) — Mon, 28 Apr 2008 15:47:00 EDT

The Baltimore Sun's Rona Kobell (full disclosure: she's my wife) describes the impact that unexpected new crabbing regulations will have on Hoopers Island and other Chesapeake communities:

Last week, the Maryland Department of Natural Resources announced it will end the season for female crabs Oct. 23, about seven weeks early. That will slash income for crabbers here at the most lucrative time - when the female crabs are migrating along the coast of the Lower Eastern Shore to Virginia, where they spawn. The state also is imposing limits on how many bushels of females watermen can take in September and October, further cutting their income.

"The main stream of our income is this crab, and without it, we are just destroyed," said Thomas "Bubby" Powley, a crabber who also owns a crab-picking house. "There is just no way we can live with the regulations that they are suggesting."

Whole thing here.

Our Precious National Fluids

kmw@reason.com (Katherine Mangu-Ward) — Fri, 28 Mar 2008 15:22:00 EDT

Lest we get high and mighty about living in the freest, best-est nation in the world--the Property and Environment Research Center reminds us that our water is basically communist:

It is one of the great ironies of America. In the most capitalist, free-market nation in the world, most citizens receive their water and wastewater services from government entities. Contrast this with the United Kingdom, where almost all water services are provided by private systems.
While more than half of drinking water utilities in the United States are privately owned (National Association of Water Companies, 2008), they provide only 13 percent of Americans with their drinking water. And about 3 percent of Americans get wastewater services from the 20 percent of wastewater utilities that are privately owned.

Former EPA water administrator G. Tracy Mehan reports on his thirst for freedom here [PDF].

Bisonomics

kmw@reason.com (Katherine Mangu-Ward) — Fri, 21 Sep 2007 10:32:00 EDT

Time magazine recently noted: "Sometimes you have to eat an animal to save it."

Admire the giant pile of bison skulls circa 1870 at right, then read a neat essay from this month's PERC reports on what drove the near-extinction of the buffalo, and how Ted Turner and his bison-burger restaurants are saving them:

Western orthodoxy suggests the white man’s irresistible drive for wealth led to the bison genocide. Reality, however, proved more complicated. Their near extinction was due to a host of factors ranging from adverse climate issues, introduction of the transcontinental railroad, emergence of a horse culture on the plains bringing more efficient hunting, the advent of the Sharp’s rifle known for its deadly accuracy and distance, as well as government policy that promoted the end of the bison as a means of calming hostilities with the Native Americans.
One underlying factor, however, may have contributed more than any other. The tragedy of the bison was one of the starkest examples of the tragedy of the commons. No one owned the bison. Those who were not the first to capture the economic benefits of a bison lost those benefits to someone else. This created a race to the finish—a bison derby. Recreation magazine captured the essence of the situation in 1901: “A wild buffalo is looked on as a small fortune walking around without an owner.”

Also included in the profile, an interview with a boutique bison outfit:

"If buffalo are going to make a comeback, they are going to have to pay their own way,” says [Dan O’Brien, owner of 300 bison and a company called Wild Idea Buffalo].

More on killing animals to save them here.

Crucified on a Cross of Goldmining

kmw@reason.com (Katherine Mangu-Ward) — Tue, 21 Aug 2007 11:19:00 EDT

There are two new films out on a contested gold mine in Romania, one airing on PBS tonight. Rosia Montana, a rural Transylvanian town (pictured right, in all of its glory), sits on top of $10 billion in gold.

PBS viewers will get one side of the story about the village:

PBS describes the film as a "David-and-Goliath story" [of poor villagers versus big mining corporations, but] viewers who see pristine shots of the Rosia valley won't realize the hills hide a huge, abandoned communist-era mine, leaking toxic heavy metals into local streams--or that while the modern mining project will level four hills to create an open pit, it will also clean up the old mess at no cost to the Romanian treasury.

Another documentary about the same mine, Mine Your Own Business, presents another angle. They say the biggest threat to the people of Rosia Montana "comes from upper-class Western environmentalism that seeks to keep them poor and unable to clean up the horrific pollution caused by Ceausescu's mining":

Local unemployed miner Gheorghe Lucian says it best: "People have no food to eat. . . . I know what I need--a job." Mr. Soros's Romanian Open Society Foundation is touting "alternative economic activities such as organic agriculture and eco-tourism," unrealistic at best.

Every Little Bit Helps... Right?

jsamuel@reason.com (Juliet Samuel) — Tue, 14 Aug 2007 11:09:00 EDT

Conscientious greens fix their sights on plastic water bottles:

In the last few months, bottled water — generally considered a benign, even beneficial, product — has been increasingly portrayed as an environmental villain by city leaders, activist groups and the media. The argument centers not on water, but oil. It takes 1.5 million barrels a year just to make the plastic water bottles Americans use, according to the Earth Policy Institute in Washington, plus countless barrels to transport it from as far as Fiji and refrigerate it. ...
Dave Byers, 65, from Silver Spring, Md., discussed the issue with his wife, Pat, on the steps of the Metropolitan Museum of Art on a 90-degree Saturday. “I think it should be banned, actually,” he said of bottled water.

The US currently uses 20 million barrels of oil per day. First we’re going to ban plastic bags, slicing away a giant 0.16% of that consumption. Now, bring on the plastic bottle ban, slashing a full 0.02% from the oil guzzling. Take that, global warming!

Rolling Over Ethanol

bdoherty@reason.com (Brian Doherty) — Thu, 02 Aug 2007 17:33:00 EDT

Following late in the footsteps of some observations about ethanol made in November 2003, May 2006, and June 2007 by reason's own Ron Bailey, Jeff Goodell at Rolling Stone pisses in Archer Daniels Midland's ethanol bowl (though I'm not saying that Ron necessarily agrees with every element of Goodell's indictment). As Goodell sums it up:

Ethanol doesn't burn cleaner than gasoline, nor is it cheaper. Our current ethanol production represents only 3.5 percent of our gasoline consumption -- yet it consumes twenty percent of the entire U.S. corn crop, causing the price of corn to double in the last two years and raising the threat of hunger in the Third World. And the increasing acreage devoted to corn for ethanol means less land for other staple crops, giving farmers in South America an incentive to carve fields out of tropical forests that help to cool the planet and stave off global warming.
So why bother? Because the whole point of corn ethanol is not to solve America's energy crisis, but to generate one of the great political boondoggles of our time. Corn is already the most subsidized crop in America, raking in a total of $51 billion in federal handouts between 1995 and 2005 -- twice as much as wheat subsidies and four times as much as soybeans. Ethanol itself is propped up by hefty subsidies, including a fifty-one-cent-per-gallon tax allowance for refiners. And a study by the International Institute for Sustainable Development found that ethanol subsidies amount to as much as $1.38 per gallon -- about half of ethanol's wholesale market price.

Google Earth: Jungle Home Security System

jwalker@reason.com (Jesse Walker) — Wed, 20 Jun 2007 14:21:00 EDT

When the Brazilian government fails to protect indigenous land rights, the Indians turn to Google instead:

Chief Almir Surui...says loggers and miners have already killed 11 Surui chiefs -- Surui is both the common surname and name of the tribe -- who tried to prevent them from entering their lands over the past five years, and he says Brazilian government officials have failed to stop the violence. So the 32-year-old indigenous leader, a stocky man who often dons a headdress made from feathers of Amazonian birds, opted for another route -- an appeal to Google.

During his visit to the Bay Area late last month, Almir, the first Surui to graduate from college, asked the folks at Google Earth for high-quality satellite imagery that would allow the tribe to monitor loggers and miners, who have no legal right to operate on the tribe's 600,000-acre reserve about 1,600 miles northwest of Rio de Janeiro.

His plea fell on receptive ears with company officials in Mountain View, who are now at work on a plan to let the Surui use Google's technology to raise awareness of their plight by working with satellite providers to vastly improve image resolution.

This (Wet)Land is My Land

kmw@reason.com (Katherine Mangu-Ward) — Tue, 12 Jun 2007 12:49:00 EDT

My kind of environmentalist: Douglas Tompkins, the American founder of North Face and Esprit clothing is "trying to save the planet by buying bits of it." He has already bought "a huge swath of southern Chile, and now he's hoping to save the northeast wetlands of neighboring Argentina":

"The land conservation budget was burning a hole in our pocket," Tompkins said.
He bought a 120,000-acre ranch in 1998 and has increased his Argentine holdings to nearly 600,000 acres since then. He now owns well over 1 million acres in Chile and Argentina, a combined area about the size of Rhode Island....
Tompkins' Conservation Land Trust recently released its first anteater into the wild and wants to reintroduce otters and even jaguars....
Tompkins insists he'll eventually return the land to both governments to be preserved as nature reserves or parks, but will hold onto it for now "as a very good example of what private conservation can do."

Naturally, everyone has complaints. American imperialism, water access, trespass on ancestral lands, etc. But Tompkins's project is a great retort to people who say that the market doesn't address environmental concerns. It's true that things get more complicated when it comes to pollution and global warming. But just letting people buy land on an open market is ideally suited to efficient conservation efforts, despite the conspicuous lack of support from conventional environmental organizations. Of course, an open market isn't always available. Despite previous courting of Tompkins by the Argentine government,

This month lawmakers in Corrientes province, where the wetlands are located, modified the local constitution to block foreigners from buying land considered a strategic resource. The law appeared to target any new attempts by Tompkins to increase his holdings.

Foolish Fuel Follies

rbailey@reason.com (Ronald Bailey) — Fri, 25 May 2007 13:36:00 EDT

Gasoline prices rose to historic highs this week and Americans are feeling all of that pain at the pump. Trilby Lundberg, the head of the California-based fuel market research firm, the Lundberg Survey, calculates that the national average price per gallon of regular gasoline is now $3.18. In inflation adjusted dollars this price breaks the all-time high record price of March 1981 by three cents. In 1981, regular gasoline sold for $1.35 per gallon which would be $3.15 in today's dollars. So what's going on?

The natural villain for high prices is, of course, Big Oil. And Congress is rushing yank the industry's greasy hands from our pockets. Chairman of Congress' Joint Economic Committee, Sen. Charles Schumer (D-N.Y.) held a hearing this week on whether or not the Big Oil companies should be broken up. Also on Wednesday, the House of Representatives passed the Federal Price Gouging Prevention Act which makes it "unlawful for any person to sell, at wholesale or at retail in an area and during a period of an energy emergency, gasoline or any other petroleum distillate ... at a price that is unconscionably excessive; and indicates the seller is taking unfair advantage of the circumstances related to an energy emergency to increase prices unreasonably." The act does allow that it would not be gouging if the price "was substantially attributable to local, regional, national, or international market conditions." And according to Lundberg that's exactly what has been happening in the past two months.

"Record breaking prices are the result of a record breaking number of refinery shutdowns and extended delays in returning to production from scheduled maintenance," says Lundberg. She points out that since March there have been over 30 events in which refineries have been shutdown or experienced maintenance delays. For example, three refineries were shut down when their power supplies were shorted out by a snake, a raccoon and an opposum. "We estimate the total effect of U.S. capacity use reductions to be at least 42 million barrels of gasoline," says Lundberg. "The lost barrels amount to approximately 7.4 percent of total 2007 U.S. gasoline production through May 11." So while supplies were falling, the demand for gasoline unexpectedly increased by 1.9 percent over last year. Falling supplies and rising demand equal higher prices.

Another factor affecting supplies is the increased complexity of refining modern gasoline.
"Today's gasoline is not your father's gasoline," says Mark Routt, a senior consultant with Energy Security Analysis Inc. For example, in 1981 half of all regular gasoline was still leaded. Since 2004, refiners have been required to produce ultra-low sulfur gasoline and in 2006, they were obliged by Congress to blend ethanol into their fuels. These ingredients are more expensive and producing them makes the refining process more finicky and prone to breakdown. Nevertheless, as Lundberg notes that as a result of high gasoline prices, refiners' margins are now "golden." On the other hand, she points out that the margins are only "golden" for those refineries that are actually producing gasoline. They don't make any money if they don't make any gasoline.

Earlier this week, Democratic presidential hopeful Sen. Hillary Clinton (D-N.Y.) called for a two-year tax on oil company profits. "What do you think oil companies are doing with their profits?," asks Routt. "They're doing what they should be doing—they're investing it to produce more fuel." Recent high gasoline prices may be finally persuading oil companies and other refiners to invest in and build the first new refineries in the U.S. since the 1970s. For example, Shell Oil will be spending $3 billion to double the capacity of its refinery in Port Arthur, Tex.

With regard to Congress' anti-gouging legislation, officials in the Office of Management and Budget (OMB) say that they would urge President Bush to veto it if it passes in the Senate. "I heartily and urgently agree that it should be vetoed," says Lundberg. "The idea of gouging is dangerously subjective." She fears that the legislation could essentially create a price cap on gasoline prices that would produce actual shortages. Routt laughs, "Why doesn't Congress set the price of green beans at the Winn Dixie and Piggly Wiggly while they're at?" OMB is right when the agency pointed out, "Gasoline price controls are an old—and failed—policy choice that will exacerbate shortages and increase fuel hoarding after natural disasters, denying fuel to people when they most need it." If you think that high prices are bad, just wait until you can't fill up at any price.

So what's going to happen to prices this summer? Lundberg and Routt both admit that they were wrong when they predicted that gasoline prices were about to peak back in March. However new trend may help lower prices. Routt notes that high prices have recently reduced the growth in the demand for gasoline. And Lundberg points out high prices have begun to bring more offshore gallons that will help rebalance supply. Lundberg says that her most recent survey of retail gasoline stations found that prices have actually fallen in some markets in California and other western states. Lundberg believes that we may now be near the peak and that prices could begin to fall after Memorial Day. However, if crude oil prices rise, and refineries continue to experience shutdowns, all bets are off. Whatever happens to the price of gasoline this summer, Lundberg's bottom line is "the worst thing that U.S. authorities could do is to 'fix' the gasoline market."

Ronald Bailey is Reason's science correspondent. His book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution is now available from Prometheus Books.

Discuss this article online.

What We Believe About Energy

bdoherty@reason.com (Brian Doherty) — Tue, 17 Apr 2007 14:12:00 EDT

From the Manhattan Institute, some "energy myths" that most Americans they polled believe. Some samples, from their press release:

MYTH: Most of our energy comes from oil.
Nearly two thirds of respondents believed this to be the case.
FACT: In reality, 60 percent of our energy comes from non-oil sources.
Growing electricity use accounts for over 85 percent of growth in our energy demand since 1980; this deserves greater focus from policy-makers and media.
MYTH: Saudi Arabia provides more oil to the United States than does any other foreign country. When asked for the largest source of foreign oil, 55 percent guessed Saudi Arabia.
FACT: Canada provides the USA with more foreign oil than any other country.
An erroneous belief in our dependence on Middle Eastern oil leads to an illegitimate fear of having energy used as an economic weapon against us.
.....
MYTH: Our cities are becoming more polluted and our forests are shrinking.
Nearly 84 percent believe cities are increasingly polluted; 67 percent believe logging and development are shrinking our forests.
FACT: Trends suggest that the air in our cities is becoming cleaner and we are
experiencing annual net gains for forest area. Inaccurate assumptions about our environment encourage onerous regulation and limit urban development.

Full report on the poll.

Now for the Good News

info@reason.com (Indur M. Goklany) — Fri, 23 Mar 2007 16:20:00 EDT

Environmentalists and globalization foes are united in their fear that greater population and consumption of energy, materials, and chemicals accompanying economic growth, technological change and free trade—the mainstays of globalization—degrade human and environmental well-being.

Indeed, the 20th century saw the United States' population multiply by four, income by seven, carbon dioxide emissions by nine, use of materials by 27, and use of chemicals by more than 100.

Yet life expectancy increased from 47 years to 77 years. Onset of major disease such as cancer, heart, and respiratory disease has been postponed between eight and eleven years in the past century. Heart disease and cancer rates have been in rapid decline over the last two decades, and total cancer deaths have actually declined the last two years, despite increases in population. Among the very young, infant mortality has declined from 100 deaths per 1,000 births in 1913 to just seven per 1,000 today.

These improvements haven't been restricted to the United States. It's a global phenomenon. Worldwide, life expectancy has more than doubled, from 31 years in 1900 to 67 years today. India's and China's infant mortalities exceeded 190 per 1,000 births in the early 1950s; today they are 62 and 26, respectively. In the developing world, the proportion of the population suffering from chronic hunger declined from 37 percent to 17 percent between 1970 and 2001 despite a 83 percent increase in population. Globally average annual incomes in real dollars have tripled since 1950. Consequently, the proportion of the planet's developing-world population living in absolute poverty has halved since 1981, from 40 percent to 20 percent. Child labor in low income countries declined from 30 percent to 18 percent between 1960 and 2003.

Equally important, the world is more literate and better educated than ever. People are freer politically, economically, and socially to pursue their well-being as they see fit. More people choose their own rulers, and have freedom of expression. They are more likely to live under rule of law, and less likely to be arbitrarily deprived of life, limb, and property.

Social and professional mobility have also never been greater. It's easier than ever for people across the world to transcend the bonds of caste, place, gender, and other accidents of birth. People today work fewer hours and have more money and better health to enjoy their leisure time than their ancestors.

Man's environmental record is more complex. The early stages of development can indeed cause some environmental deterioration as societies pursue first-order problems affecting human well-being. These include hunger, malnutrition, illiteracy, and lack of education, basic public health services, safe water, sanitation, mobility, and ready sources of energy.

Because greater wealth alleviates these problems while providing basic creature comforts, individuals and societies initially focus on economic development, often neglecting other aspects of environmental quality. In time, however, they recognize that environmental deterioration reduces their quality of life. Accordingly, they put more of their recently acquired wealth and human capital into developing and implementing cleaner technologies. This brings about an environmental transition via the twin forces of economic development and technological progress, which begin to provide solutions to environmental problems instead of creating those problems.

All of which is why we today find that the richest countries are also the cleanest. And while many developing countries have yet to get past the "green ceiling," they are nevertheless ahead of where today's developed countries used to be when they were equally wealthy. The point of transition from "industrial period" to "environmental conscious" continues to fall. For example, the US introduced unleaded gasoline only after its GDP per capita exceeded $16,000. India and China did the same before they reached $3,000 per capita.

This progress is a testament to the power of globalization and the transfer of ideas and knowledge (that lead is harmful, for example). It's also testament to the importance of trade in transferring technology from developed to developing countries—in this case, the technology needed to remove lead from gasoline.

This hints at the answer to the question of why some parts of the world have been left behind while the rest of the world has thrived. Why have improvements in well-being stalled in areas such as Sub-Saharan Africa and the Arab world?

The proximate cause of improvements in well-being is a "cycle of progress" composed of the mutually reinforcing forces of economic development and technological progress. But that cycle itself is propelled by a web of essential institutions, particularly property rights, free markets, and rule of law. Other important institutions would include science- and technology-based problem-solving founded on skepticism and experimentation; receptiveness to new technologies and ideas; and freer trade in goods, services—most importantly in knowledge and ideas.

In short, free and open societies prosper. Isolation, intolerance, and hostility to the free exchange of knowledge, technology, people, and goods breed stagnation or regression.

Despite all of this progress and good news, then, there is still much unfinished business. Millions of people die from hunger, malnutrition, and preventable disease such as malaria, tuberculosis, and diarrhea. Over a billion people still live in absolute poverty, defined as less than a dollar per day. A third of the world's eligible population is still not enrolled in secondary school. Barriers to globalization, economic development, and technological change—such as the use of DDT to eradicate malaria, genetic engineering, and biotechnology—are a big source of the problem.

Moreover, the global population will grow 50 percent to 100 percent this century, and per capita consumption of energy and materials will likely increase with wealth. Merely preserving the status quo is not enough. We need to protect the important sustaining institutions responsible for all of this progress in the developed world, and we need to foster and nurture them in countries that are still developing.

Man's remarkable progress over the last 100 years is unprecedented in human history. It's also one of the more neglected big-picture stories. Ensuring that our incredible progress continues will require not only recognizing and appreciating the progress itself, but also recognizing and preserving the important ideas and institutions that caused it, and ensuring that they endure.

Indur M. Goklany is the author of The Improving State of the World: Why We're Living Longer, Healthier, More Comfortable Lives on a Cleaner Planet (Cato Institute, Washington, DC, 2007)

Woodpecker Massacre

rbailey@reason.com (Ronald Bailey) — Fri, 08 Dec 2006 17:47:00 EST

According to the U.S. Fish and Wildlife Service (FWS), only 15,000 red-cockaded woodpeckers remain in the United States. Eager to protect the mature pine forests in which they nest, the agency recently informed the residents of Boiling Spring Lakes, North Carolina, that it had detected the endangered birds in the vicinity.

Thus informed, the landowners moved to protect their property rights—by mowing down mature pine trees. Residents feared the FWS would designate whole neighborhoods as woodpecker habitat and impose stringent building restrictions, slashing the value of their real estate. As soon as the agency notified residents that its mapmakers were looking for areas to designate as protected habitat, landowners applied for lot-clearing permits. One dejected resident told the Associated Press, “It’s ruined the beauty of our city.”

The obvious solution is for FWS to offer compensation to landowners who agree to protect the bird, but in the past the agency has chosen sticks over carrots. As Holly Fretwell of the Property and Environment Research Center has noted, “Under the Third Amendment to the Constitution, Americans cannot be forced to quarter soldiers in their houses, but under the [Endangered Species Act] Americans can be forced to harbor listed birds, snails, wolves and bears.”

It's "Buy Nothing Day" in North Korea Every Day of the Year...

Sat, 25 Nov 2006 07:16:00 EST

The following commentary orginally on Friday, November 24, 2006 on Marketplace, which is broadcast on over 300 NPR stations around the country.

For audio of the commentary, go here.

For an ongoing HIt & Run discussion of Buy Nothing Day, go here.

BOB MOON: So how did you handle the big sales today? Did you sleep in this morning? Resist all enticements to hit the mall at dawn? If so you cheered up the backers of "Buy Nothing Day." It's a protest against the post-Thanksgiving shop-a-thon. But according to commentator Nick Gillespie, "Buy Nothing Day" is a very bad deal.

NICK GILLESPIE: Buy Nothing Day originated in Vancouver in the early '90s and since then the trendy, anticapitalist magazine Adbusters has spread it far and wide.

Protestors have staged some fun stunts to raise awareness about our supposedly frantic consumer binging. They've organized zombie marches through malls — get it? Publicly chopped up credit cards, and organized clinics for shopaholics.

This year, protesters are highlighting global warming and the predicted depletion of the planet's open-ocean fisheries as the inevitable consequence of our urge to splurge. But I'm not buying it.

Fisheries aren't being depleted because we eat too many fish. It's because, unlike cattle ranches or chicken farms, no one owns those fisheries. So, fishermen have no incentive to manage, much less increase, their stock. Think about it: When was the last time you heard of a chicken farm — or for that matter, a fish farm — running out of meat?

When it comes to global warming, whether we try to stop it or learn to live with it, buying nothing isn't really an option, especially when it comes to protection from nature's fury.

The weather in South Florida and Bangladesh isn't that different. Each region gets rocked by storms every year. The difference is that Sunshine Staters have better-built, more expensive homes that let them withstand the fierce weather more easily.

Buy Nothing Day's core message, "We have to consume less," especially those of us who are relatively wealthy, has got it all wrong.

Instead, we should be breaking down trade barriers and subsidies to help the world's poor consume more of everything: from food, to education, to healthcare, to technology.

There's nothing wrong with trading. It's a basic impulse observed in all human societies. Of course, there are unfortunate exceptions. It's Buy Nothing Day in North Korea every day of the year and look where it's gotten them.

BOB MOON: Nick Gillespie is editor-in-chief of Reason Magazine. He comes to us courtesy of WMUB in Oxford, Ohio.

Fuel vs. Food or Fuel vs. Forests: Both Eco-Alarmists and Eco-Skeptics Are Worried About Ethanol From Corn

rbailey@reason.com (Ronald Bailey) — Tue, 07 Nov 2006 15:48:00 EST

On the left , perennial predictor of imminent global famine Lester Brown at the Earth Policy Institute warns "Exploding U.S. Grain Demand for Automotive Fuel Threatens World Food Security and Political Stability." On the right, Dennis Avery at the Hudson Institute's Center for Global Food Issues is also worried about the food vs. fuel issue, noting in a recent report:

There are significant trade-offs, however, involved in the massive expansion of the production of corn and other crops for fuel. Chief among these would be a shift of major amounts of the world’s food supply to fuel use when significant elements of the human population remains ill-fed.

But that's not all:

Even without ethanol, the world is facing a clash between food and forests.... Ethanol mandates may force the local loss of many wildlife species, and perhaps trigger some species extinctions. Soil erosion will increase radically as large quantities of low-quality land are put into fuel crops on steep slopes and in drought-prone regions.

However, there is a telling difference between Brown and Avery. Brown wants more government mandates to "solve" the problem, specifically an automotive fuel efficiecy mandate. Avery, on the other hand, argues that "if markets are allowed to discover the winners and losers in future alternative energy sources without government intervention through subsidies and fuel mandates, and with a clear assessment of the trade-offs that may be involved."

As I've asked before, if ethanol makes such economic sense, why does it need federal subsidies or even worse, a California initiative to subsidize venture capitalists?

Disclosure: As far as I know, I own no stocks in any ethanol producing companies. But I do ocassionally drink immoderate amounts of ethanol in the form of Lagavulin.

Is America Over A Barrel?

rbailey@reason.com (Ronald Bailey) — Tue, 08 Aug 2006 09:09:00 EDT

BP's unexpected shutdown of its oil production facilities in Alaska's Prudhoe Bay cuts U.S. domestic production by 400,000 barrels per day. That amounts to about 8 percent of domestic production and about 2.6 percent of daily consumption. The oil fields on the North Slope of Alaska produce a total of about 900,000 barrels of oil per day. Skittish world oil markets reacted by running up the price of oil by $2 to almost $78 per barrel (which is still a far cry from the $100 price achieved after the 1979 Iranian revolution).

The BP shutdown comes at a particularly nervous time for oil traders. Iraqi production has never returned to pre-war levels and is threatened by a potential civil war. According to some reports, Nigerian production has been reduced by almost 700,000 barrels per day by attacks from separatist groups in the Niger delta. Iran threatens to withhold its daily exports of 2.5 million barrels of oil if the United Nations imposes sanctions on it in an effort to halt its nuclear program. The state-owned oil companies in Russia, Venezuela and Mexico are under-investing in their production facilities. Meanwhile, global demand for oil continues to grow, if at a somewhat slacker pace than a year ago. Interestingly, Saudi Arabia announced yesterday that it would boost its production to make up for the shortfall from Prudhoe Bay.

Since there is essentially no excess global oil production capacity, prices rise rapidly in response to any disruption or possible disruption. For example, oil prices rose last week when tropical storm Chris looked like it might spin up into hurricane and shut down oil production in the Gulf of Mexico. As late as 2002, the world enjoyed a production cushion of 6 million barrels per day. Today, excess capacity has fallen to less than 1 million barrels per day. What happened? In the 1990s oil sold for around $10 per barrel, so cash-strapped oil companies effectively ceased to develop current fields or explore for new fields. They are now playing catch-up to try to meet burgeoning demand.

U.S. domestic oil production peaked in the 1970s and wealthier and more environmentally conscious Americans increasingly adopted a not-in-my-backyard attitude toward various plans to boost domestic production. Consequently, the Arctic National Wildlife Refuge (ANWR), sections of the Gulf of Mexico and both the East and West Coasts have been closed for about three decades to oil exploration and production. Estimates of oil reserves in ANWR vary, but a 2004 report by the Energy Information Administration (EIA) offered a mean estimate of 10.4 billion barrels and predicted the field could eventually produce around 1 million barrels per day. Oil production from the North Slope of Alaska peaked at 2 million barrels per day in 1988 and will continue to decline unless ANWR is opened to production.

Last week, the Senate voted to allow the Interior Department to lift a 25-year moratorium on oil and gas drilling on 8.3 million acres in the eastern Gulf of Mexico. This area is about 100 miles from the nearest land and 125 to 310 miles from Florida's beaches. Ironically, while American oil companies are forbidden to drill close to Florida, Cuba has given China's state-owned oil company permission to explore for oil within 50 miles of Florida's coast on Cuba's side of the Florida Strait. In 2005, the U.S. Geological Survey estimated the North Cuba Basin may contain 4.6 billion barrels of oil.

Again, estimates vary, but one EIA report projects that deepwater Gulf oil production could rise from 1 million to 2.2 million barrels per day by 2016. The House of Representatives is considering legislation that would open up oil and gas drilling in areas more than 100 miles from U.S. shores and permit individual states to authorize drilling within 50 miles of their shores. The good environmental news is that the amount of oil spilled in the United States has steeply declined over the past three decades.

Opening up currently closed domestic reserves is not a silver bullet for high oil prices. However, any boost of production here combined with increased production in other areas of the world could eventually ease prices. One econometric model by the consulting group DRI-WEFA suggests that excess production capacity exceeding 5 percent of world demand would result in oil prices falling to around $35 per barrel. The latest report from the International Energy Agency foresees oil prices falling to $35 per barrel by 2010 and rising to around $40 by 2030. The IEA projects that even if future oil production is constrained by underinvestment the price in 2030 should be around $52 per barrel. Higher oil prices naturally inspire thoughts that the world may have finally reached the peak of oil production. However, most analysts do not think so.

To conclude: Oil markets and prices will settle down as soon as: peace comes to Iraq; Iran's ayatollahs halt uranium enrichment; the demands of Nigerian separatists are satisfied; and Venezuela's Hugo Chavez and Russia's Vladimir Putin boost investment in production. In other words, it may be a while.

Moonshine Mirage

rbailey@reason.com (Ronald Bailey) — Fri, 12 May 2006 11:08:00 EDT

The U.S. should emulate Brazil's "energy independence miracle" declared headlines, editorialists, environmentalists and policymakers all throughout the first half of 2006. The Brazilian "miracle" was achieved in part by substituting ethanol (produced by fermenting sugar cane) for gasoline (made from imported oil).

Let's look at the elements of the Brazilian miracle and see if it is possible for the United States to replicate it. First, Brazil's economy is one-tenth the size of ours, and Brazil's motor fleet is about 100 vehicles per 1,000 people. Brazil's cars and trucks consume about 15 billion gallons of motor fuels annually. Also, Brazil produces 1.7 million barrels of oil per day, enough to fulfill about 90 percent of the country's daily requirements. Finally, Brazil produces 4.5 billion gallons of ethanol from sugar cane and blends it with gasoline in a 20 percent ethanol/80 percent gasoline mixture to burn in flex fuel automobiles.

In contrast, there are 765 vehicles per 1000 people in the U.S. consuming about 150 billion gallons of gasoline per year. The United States already produces about 4.5 billion gallons of ethanol (about the same as Brazil) which meets only about 3 percent of U.S. transport fuel needs. The U.S. pumps about 5 million barrels of oil per day domestically and imports another 15 million barrels daily.

Replacing one-third of our gasoline consumption with ethanol, as Brazil has done, would reduce oil imports—but "energy independence" would remain a mirage. One bushel of corn yields about three gallons of ethanol. In 2004 U.S. farmers harvested 11.8 billion bushels of corn. In other words it would take the country's entire corn crop to produce 35 billion gallons of ethanol, an amount equal to about one-fifth of the gasoline Americans currently burn each year. This would also leave no corn for food and some residues for feed. Burning food for fuel raises some interesting moral questions in world in which 800 million people are still malnourished.

Assuming that it would be undesirable to turn our entire corn crop into fuel and feed residues, growing another 12 billion bushels of corn for ethanol production would require plowing up an additional area double the size of the entire state of Illinois. So ethanol produced from corn is not the answer to drastically lowering U.S. oil imports. However, biotechnologists are hard at work on creating processes that will break down cellulose, the complex carbohydrates that make up a good part of the stems and leaves of plants, into sugars that can be fermented into ethanol. In his 2006 State of the Union address, President George W. Bush suggested that switch grass might be a good source of cellulosic biomass to produce ethanol.

Last year, the U.S. Departments of Energy and Agriculture estimated that it would take one billion tons of dry biomass to produce enough ethanol to replace one-third of current U.S. demand for transport fuels. Assuming a high yield of 10 tons per acre of switch grass would mean harvesting 100 million acres of land for fuel each year—an area about the size of California. In 2005, the USDA reckoned that there were 39 million acres idle in the conservation reserve program and 67 million acres of cropland being used as pasture, so dedicating that much land to grow fuel crops is not impossible. But planting idle cropland and pasture with fuel crops could have some deleterious effects on the natural environment and wildlife and possibly spark a fight between the naturalist and energy wings of the environmentalist movement.

Strangely, the Fed's billion-ton biomass vision doesn't factor in the amount of energy needed to make ethanol. Just how much energy it takes to churn out ethanol is hotly contested, but for simplicity's sake let's assume that the process produces twice as much energy as it uses. That means that with even the most optimistic calculation, in which one billion tons of biomass are converted into ethanol, the amount produced could ultimately replace one-sixth of annual U.S. oil imports. That's not nothing, but it's not "energy independence"—and it's not much of a "miracle," either. Finally, it has to be asked, if producing ethanol is such a profitable idea, why does it need federal subsidies?

Peak Oil Panic

rbailey@reason.com (Ronald Bailey) — Fri, 05 May 2006 00:00:00 EDT

The Princeton geologist Ken Deffeyes warns that the imminent peak of global oil production will result in “war, famine, pestilence and death.” Deffeyes, author of 2001’s Hubbert’s Peak: The Impending World Oil Shortage and 2005’s Beyond Oil: The View from Hubbert’s Peak, predicted that the peak of global oil production would occur this past Thanksgiving.

Deffeyes isn’t alone. The Houston investment banker Matthew Simmons claims in his 2005 book Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy that the Saudis are lying about the size of their reserves and that they are really running on empty; last September he announced that “we could be looking at $10-a-gallon gas this winter.” Colin Campbell, a former petroleum geologist who is now a trustee of the U.K.-based Oil Depletion Analysis Centre, warned way back in 2002 that we were headed for peak oil production, and that this would lead to “war, starvation, economic recession, possibly even the extinction of homo sapiens.” In his 2004 book Out of Gas: The End of the Age of Oil, the Caltech physicist David Goodstein wrote that the peak of world production is imminent and that “we can, all too easily, envision a dying civilization, the landscape littered with the rusting hulks of SUVs.” Jim Motavalli, editor of the environmentalist magazine E, writes in the January/February 2006 issue, “It is impossible to escape the conclusion that we’re steaming full speed ahead into a train wreck of monumental proportions.”

And James Schlesinger, the country’s first secretary of energy, declared in the Winter 2005–06 issue of the neoconservative foreign policy journal The National Interest that “a growing consensus accepts that the peak is not that far off.” He added, “The inability readily to expand the supply of oil, given rising demand, will in the future impose a severe economic shock.”

Even some traditionally calm voices are starting to sound panicky. In March 2005, the New York investment bank Goldman Sachs issued a report suggesting that oil prices would experience a “super spike” in 2006, reaching up to $105 per barrel. ChevronTexaco’s willyoujoinus.com campaign, featuring a series of full-page newspaper ads that urge Americans to conserve energy, flatly declares, “The era of easy oil is over.”

Such forecasts have been bolstered by a steep rise in oil prices over the last three years, going from $18 a barrel in 2002 to $70 last fall. If the price of something goes up, after all, that means it’s becoming scarcer.

The good news is that the peak oil doomsters are probably wrong that world oil production is about to decline forever. Most analysts believe that world petroleum supplies will meet projected demand at reasonable prices for at least another generation. The bad news is that much of the world’s oil reserves are in the custody of unstable and sometimes hostile regimes. But the oil producing nations would be the ultimate losers if they provoked an “oil crisis,” since that would spur industrialized countries to cut back on imports and develop alternative energy technologies.

Apocalypse Yesterday

Predictions of imminent catastrophic depletion are almost as old as the oil industry. An 1855 advertisement for Kier’s Rock Oil, a patent medicine whose key ingredient was petroleum bubbling up from salt wells near Pittsburgh, urged customers to buy soon before “this wonderful product is depleted from Nature’s laboratory.” The ad appeared four years before Pennsylvania’s first oil well was drilled. In 1919 David White of the U.S. Geological Survey (USGS) predicted that world oil production would peak in nine years. And in 1943 the Standard Oil geologist Wallace Pratt calculated that the world would ultimately produce 600 billion barrels of oil. (In fact, more than 1 trillion barrels of oil had been pumped by 2006.)

During the 1970s, the Club of Rome report The Limits to Growth projected that, assuming consumption remained flat, all known oil reserves would be entirely consumed in just 31 years. With exponential growth in consumption, it added, all the known oil reserves would be consumed in 20 years. These dour predictions gained credibility when the Arab oil crisis of 1973 quadrupled prices from $3 to $12 per barrel (from $16 to $48 in 2006 dollars) and when the Iranian oil crisis more than doubled oil prices from $14 per barrel in 1978 to $35 per barrel by 1981 (from $45 to $98 in 2006 dollars).

In response, the federal government imposed price controls on oil and gas in the 1970s and established fuel economy standards to encourage the sale of more efficient automobiles. The sense of doom did not dissolve. In 1979 Energy Secretary Schlesinger proclaimed, “The energy future is bleak and is likely to grow bleaker in the decade ahead.” The Global 2000 Report to President Carter, issued in 1980, predicted that the price of oil would rise by 50 percent, reaching $100 per barrel by 2000.

Most of today’s petro-doomsters base their forecasts on the work of the geologist M. King Hubbert, who correctly predicted in 1956 that U.S. domestic oil production in the lower 48 states would peak around 1970 and begin to decline. In 1969 Hubbert predicted that world oil production would peak around 2000.

Hubbert argued that oil production grows until half the recoverable resources in a field have been extracted, after which production falls off at the same rate at which it expanded. This theory suggests a bell-shaped curve rising from first discovery to peak and descending to depletion. Hubbert calculated that peak oil production follows peak oil discovery with a time lag. Globally, discoveries of new oil fields peaked in 1962. The time lag between peak global discoveries and peak production was estimated to be around 32 years, but peak oilers claim that the two oil crises of the 1970s reduced consumption and thereby delayed the peak until now. Hubbert’s modern disciples argue that humanity has now used up half of the world’s ultimately recoverable reserves of oil, which means we are at or over the peak.

The prophets of oily doom are opposed by preachers of energy abundance. Chief among the latter is the energy economist Michael Lynch, president of the Massachusetts-based Global Petroleum Service consultancy. “Colin Campbell has the worst forecasting record on oil supply,” says Lynch, “and that’s saying a lot.” He points out that in a 1989 article for the journal Noroil, Campbell claimed the peak of world oil production had already passed and incorrectly predicted that oil would soon cost $30 to $50 a barrel. As for Matthew Simmons, Lynch dismisses him with a sneer: “Petroleum engineers know a lot more about petroleum engineering than a Harvard MBA.”

One petroleum engineer— Michael Economides of the University of Houston—calls peak oil predictions “the figments of the imaginations of born-again pessimist geologists.” Like Lynch, Economides, who worked in Russia to boost that country’s oil production in the last decade, rejects Simmons’ analysis. Saudi Arabia, which currently produces about 10 million barrels of oil a day, “is underproducing every one of their wells,” he claims. “I can produce 20 million barrels of oil in Saudi Arabia.”

The Tank Is Still More Than Half Full

So who’s right? Fortunately, it looks like humanity is at least a generation away from peak oil production. Unfortunately, there could be another “oil crisis” any day now.

The world consumes about 87 million barrels of oil per day, or nearly 30 billion barrels of oil per year. How much oil is left? It’s hard to be sure. Proven oil reserves—i.e., oil that is recoverable under current economic and operating conditions—are estimated to be 1.1 trillion barrels by the industry journal World Oil, 1.2 trillion by the oil company BP, and 1.3 trillion by the Oil and Gas Journal. In March 2005 the private U.K.-based energy consultancy IHS Energy estimated that the world’s remaining recoverable reserves, excluding unconventional sources such as heavy oil or tar sands, are between 1.3 trillion and 2.4 trillion barrels.

But are proven reserves all that’s left? Several analyses put ultimate reserves at much higher levels. For example, the USGS undertook a comprehensive analysis of world oil reserves in 2000. It calculated that the total world endowment of recoverable oil is 3 trillion barrels. (Its figure is higher because it includes estimates for undiscovered resources and projected increases in already producing fields.) In addition, the total world endowment of natural gas is equivalent to 2.6 trillion barrels of oil, plus 330 billion barrels of natural gas liquids such as propane and butane. The USGS figures that the total world endowment of conventional oil resources is equivalent to about 5.9 trillion barrels of oil. Proven reserves of oil, gas, and natural gas liquids are equivalent to 2 trillion barrels of oil. The USGS calculates that humanity has already consumed about 1 trillion barrels of oil equivalent, which means 82 percent of the world’s endowment of oil and gas resources remains to be used.

In its 2005 Energy Outlook, ExxonMobil estimates “global conventional oil resources total 3.2 trillion barrels…with non-conventional ‘frontier’ resources such as heavy oil bringing that total to over 4 trillion barrels.” In November 2005, the International Energy Agency, an organization created in 1974 by 26 industrialized countries to assess global energy issues, released its annual World Energy Outlook report, which accepted the USGS numbers and concluded that “the world’s energy resources are adequate to meet projected growth in energy demand” until at least 2030. The report predicted that oil production would grow from the 2004 level of 82 million barrels a day to 115 million barrels a day and that any “peak” would occur after 2030. It suggested that world oil prices will decline to around $35 per barrel (in 2004 dollars) by 2010 and eventually rise to $39 per barrel by 2030. At the Montreal Climate Change Conference in December, Claude Mandil, head of the International Energy Agency, declared: “We don’t share the tenets of the peak oil theory. We feel that they underestimate technological developments. For many decades to come there is no geological problem.”

Probably the most respected private oil consultancy in the world is Cambridge Energy Research Associates (CERA) in Boston. On December 7, 2005, CERA senior consultant Robert W. Esser testified at a House Energy and Air Quality Subcommittee hearing on the peak oil theory. “CERA’s belief is that the world is not running out of oil imminently or in the near to medium term,” Esser said. “Indeed, CERA projects that world oil production capacity has the potential to rise from 87 million barrels per day [mbd] in 2005 to as much as 108 mbd by 2015.…We see no evidence to suggest a peak before 2020, nor do we see a transparent and technically sound analysis from another source that justifies belief in an imminent peak.” Instead of a sharp peak followed by a production decline, CERA’s analysts foresee an “undulating plateau” in which global oil production remains more or less steady. “It will be a number of decades into this century before we get to an inflection point that will herald the arrival of the undulating plateau,” said Esser.

Peak oilers discount these rosy scenarios, insisting the relevant fact is that new oil discoveries have been falling during the last couple of decades. But the petroleum optimists, such as the analysts at the USGS, say there is more to it than that. They point out that reserve growth and new discoveries have been outpacing oil consumption. (Reserve growth is the increase in production in already discovered and developed fields.) From 1995 and 2003 the world consumed 236 billion barrels of oil. It also saw reserve growth of 175 billion barrels, combined with 138 billion barrels from new discoveries, added a total of 313 billion barrels to the world’s proven oil reserves. In the U.S., oil field reserves typically turn out to be four to nine times as high as the original estimates. The increase in production is a result of improved recovery technologies, further discoveries in the field, and improved field management.

Consider the Kern River field in California, which was discovered in 1899. In 1942 it was estimated that only 54 million barrels remained to be produced there. During the next 44 years the field produced 736 million barrels and had another 970 million barrels remaining. For geological reasons, petroleum engineers cannot pump every drop of oil out of a reservoir. But by 2004 technological advances enabled them to recover 35 percent of a conventional reservoir’s oil, up from an average of 22 percent in 1980. If this recovery factor can be increased by another five percentage points, that would boost worldwide recoverable reserves by more than all of Saudi Arabia’s current proven reserves. Economides points out that in 1976 the U.S. was estimated to have 23 billion barrels of reserves remaining. In 2005 it still had 23 billion barrels of oil reserves, even though American oil fields produced almost 40 billion barrels of oil between 1976 and 2005.

Matthew Simmons claims to have found that the Saudis are greatly exaggerating the size of their reserves. If true, this is bad news, because the Saudis have more than 30 percent of the world’s reserves and have served as the world’s supplier of last resort for a couple of decades. Simmons argues that the Saudis and others are exaggerating what they have because the supply quotas set by the Organization of Petroleum Exporting Countries (OPEC) were tied to the size of a country’s reserves—the bigger its reserves, the more oil it was permitted to sell. But the desire to boost quotas cannot account for the fact that non-OPEC reserves grew nearly three times faster than OPEC reserves between 1981 and 1996. And whatever incentive OPEC members had to lie about their reserves should have dissipated as the price of oil rose during the last couple of years. Economides notes that the Saudis are investing $100 billion in new production projects, which undercuts the notion that they know they are running out of oil.

At a November meeting of the Council on Foreign Relations, chief International Energy Agency economist Fatih Birol responded to the assertion that Saudi Arabia can’t raise its oil production by outlining a scenario in which he assumed that Saudi oil reserves were 35 percent lower than claimed. Birol noted that experts believe forcing water into reserves to maintain pressure would raise the cost of producing oil by 70 percent at most. In his analysis, Birol assumed it would raise the cost by 300 percent. Considering that it costs about $1.50 to produce a barrel of Saudi crude oil, that means the cost would rise to $6 per barrel. Even with these two assumptions, Birol argues the Saudis could easily produce 18 million barrels of oil per day by 2020, up from the current level of around 10 million.

So if the world has adequate oil supplies for the next generation, can we all go back to driving Hummers? Not so fast.

The Real Oil Crisis

Simmons has been wrong so far: Gasoline does not cost $10 a gallon. Oil prices hovered between $55 and $65 per barrel in late 2005 and early 2006, down from $70 in September 2005. The U.S. Energy Information Administration believes gasoline prices will remain below $3 per gallon in 2006.

What about the future? The International Energy Agency calculates that $3 trillion must be invested in oil production and refining facilities during the next 25 years to meet world demand in 2030. In principle that target could easily be met, since producing 1 trillion barrels at $30 per barrel yields $30 trillion in income over 25 years.

The problem is that the vast majority of the world’s remaining oil reserves are not possessed by private enterprises. Seventy-seven percent of known reserves belong to government-owned companies. That means oil will be produced with all the efficiency associated with central planning. Michael Economides estimates, for example, that it will take $4 billion in investment to keep Venezuela’s oil production at current levels. Yet that country’s Castro-wannabe president, Hugo Chavez, is investing just half that.

If ChevronTexaco, ExxonMobil, or other private companies actually owned the reserves, the world would be in a much more secure position with regard to oil production. Instead, we are subject to the whims of figures like Chavez, Russia’s Vladimir Putin, and Iran’s Mahmoud Ahmadinejad, and must worry about the doubtful stability of their personalities and regimes. (To be sure, even a private reserve under such a regime would face the constant threat of nationalization or other interference.) In the mid-1990s, the world had more than 10 million barrels per day of spare production capacity. That figure has fallen to between 1 and 2 million barrels, which means that any significant disruption in supplies can cause prices to soar.

Economides worries that the conventional wisdom that oil-producing countries do not want to cause a global economic recession is wrong. “The danger posed by the axis of energy militants—Venezuela, Iran, and, increasingly, Russia under President Vladimir Putin—is that they could not care less,” he says. “These militants hardly have functioning real economies whose workings would be adversely affected by a recession.” Economides’ views looked prophetic when oil prices jumped to a three-and-half-month high after Iran’s threat in January to retaliate against any United Nations sanctions imposed to curb its nuclear ambitions by cutting its oil exports.

Despite the recent jump in oil prices, the world’s economy has not slowed down. Why not? Goldman Sachs notes that oil is less important than it was a generation ago. At the height of the Iranian oil crisis in 1980–81, paying for gasoline took up 4.5 percent of U.S. GDP and 7.2 percent of U.S. consumer expenditures. In 2005, even though U.S. gas prices peaked at $3.07 per gallon after Hurricane Katrina, only 2.6 percent of GDP went to pay for gas and consumers spent only 3.7 percent of their incomes to fuel their cars and SUVs. Goldman Sachs believes gasoline prices would need to exceed $4 per gallon before consumers really started to cut back.

As the oil crisis of the 1970s demonstrated, while the demand for oil is inelastic in the short run, consumers do eventually adjust to higher prices. U.S. oil consumption declined by 13 percent between 1973 and 1983. According to Frederick Cedoz, vice president of the D.C.-based energy and political risk consulting group Global Water and Energy Strategy Team, “We get three times more GDP out of a barrel of oil than we did in the 1970s.”

The higher prices of the 1970s led eventually to an oil glut and prices below $10 a barrel by 1986. Should one or more of the “energy militants” choose to deploy the “oil weapon” again, they will cause considerable economic pain to the developed countries. But detonating the oil weapon would end up disarming the energy militants for a generation, after consumer cutbacks produce a new glut.

Oil War Hawks

Unfortunately, you don’t have to go to Iran, Russia, or Venezuela to find energy militants. We have some homegrown ones right here in America, and they think the world is already in the opening stages of a global energy war. Last July, the conservative Heritage Foundation in Washington, D.C., assembled some of the scariest American oil war hawks for a program called “The Coming Energy Wars: A 21st Century Time Bomb?”

All the participants apparently accept the idea that world oil supplies are about to decline, and they all share a zero-sum view of natural resources. According to the Heritage panelists, the chief villain in the coming energy wars is China. Referring to China as the “Thirsty Dragon,” Cedoz warned, “China wants to lock up supplies at the wellhead with long-term purchase contracts.” He darkly pointed to Chinese negotiations over oil supplies in Sudan, Ecuador, and Colombia. (Actually, if the Chinese sign up for long-term contracts, that would encourage producers to invest more in production. That would benefit all consumers, not just the Chinese.)

Refurbished cold warrior Frank Gaffney, president of the Center for Security Policy, opposed the $18.5 billion bid by the China National Offshore Oil Corporation for the California-based oil company Unocal last year. “It’s a very ill-advised transaction,” said Gaffney. “It’s not in our interests to turn over more of our finite resources to others. They should be taken off the market.” Our finite resources? Seventy percent of Unocal’s reserves and production are located in East Asia and the Caspian Sea region.

The Chinese company withdrew its bid after a number of congressmen promised to outlaw the sale. But Gaffney isn’t breathing easier. China’s oil grab, he announced, “is only part of a larger plan to deny us strategic minerals, strategic choke points, and strategic regions. Their purpose is to deny the U.S. a dominant role in the world and if necessary to defeat us.”

Ilan Berman, vice president for policy at the American Foreign Policy Council, regretted that “energy is not viewed through a national security prism. We should be competing to lock up supplies and diversifying and exploring new technologies.” Berman argued that as resources become scarcer there is no way to avoid a zero-sum game. “We have to approach this through the lens of the haves and have-nots,” he declared.

One dissenting voice at the Heritage Foundation session was Harvey Feldman, a former ambassador to Papua New Guinea and an East Asian specialist. “Berman is suggesting that we change from a paradigm of relying on the market,” said Feldman. “OK, we’re going to be in competition with the British, Japanese, French, Germans, Indians, and everybody else. Is this really in the interest of the United States?” Given that most of the experts in the oil business don’t think the world is about to run out of oil, this is one time to hope that President Bush is listening to his buddies in the oil industry.

Instead of preparing for an energy war, the best policy is to let markets have free rein. Even if, say, the Iranians make the political decision to disrupt the flow of oil to world markets, those markets left to themselves will eventually discipline them. The temporarily higher prices will encourage more exploration and technological advances, which will bring energy prices back down. On the day of his inauguration in 1981, President Ronald Reagan lifted oil price controls. Five years later oil prices fell below $10 a barrel.

One day, the oil age will end. As with all resources, there is ultimately a finite supply of oil. So it is not yet clear how the world will power itself for the bulk of the coming century. But we have at least another three decades to find alternatives to petroleum. “Trusting markets is the only way we can assure energy abundance in the future,” notes the University of Houston’s Economides. “It’s also the only way that we will ever transition to something other than oil and gas.”

Oil Addicts Run Starving Hysterical Naked

tcavanaugh@reason.com (Tim Cavanaugh) — Thu, 27 Apr 2006 09:19:00 EDT

It all comes back to Lee Raymond's dewlap. When the history of the 2006 oil panic is written, we will realize it was the retired Exxon CEO's bulbous bullfrog wattle, dangling grotesquely in photo after photo, that leavened public distaste for oil company executives, cemented the idea that some shadowy cabal is responsible for $3-a-gallon gasoline, and paved the way for the various bad improvements the government has in mind now.

The solutions to the gas problem that are currently on the table recall the compromise position on the Heimlich Maneuver the American Red Cross maintained for many years. After decades of advocating backslaps (which tend to push lodged objects down the esophagus) as a treatment for choking victims, the Red Cross finally adopted Henry Heimlich's technique (which is designed to drive objects up and out of the throat), but advocated it in combination with the old backslapping technique, thus advocating two methods working at cross purposes—undoubtedly amusing for bystanders, but doubly lethal for the victim.

In the same vein, America is currently enjoying a full array of mutually exclusive proposals to solve the gas crisis, and with any luck we may get them all. A hike in the gas tax, in combination with a three-month holiday from the gas tax, should set things straight in a jiffy. President Bush's decision to relax clean air standards for the duration of the crisis may help—so long as state governments continue to raise their ethanol requirements. Gas rationing (still a lovely mirage in the distance, but as Adam said to Eve, we don't know how big this thing's gonna get) should help us reduce our fuel consumption—and we'll need all the help we can get, what with the $100 gas rebate checks that every American will soon be receiving from the government.

But the best of the double whammies are aimed at those oil company execs who, don't you know, are driven by greed. The way to get tough with big oil is through a combination of windfall-profit taxes and tax breaks. These things can be done in conjunction with an investigation of Big Oil's profit-seeking behavior. In fact, we should do them before the investigation, just to show we mean business.

But the real weapon against the oil profiteers is to use all the government's power to ensure that Americans keep buying as much of their product as possible. They won't know what hit 'em! Some of the ideas laid out above will help to that end, but Bush's decision to stop filling the strategic oil reserve will be the masterstroke.

But since no policy is complete unless it negates itself, that price relief must be coupled with a foreign policy that should make every American entitled to an "Our Troops Invaded the Second Most Oil Rich Country in the World, and All We Got Was This Stupid T-Shirt" t-shirt. "Some people believe we're subsidizing cheap oil with our military presence in the Middle East," says Robert L. Bradley, Jr., president of the Institute for Energy Research, "but the truth may be that we've contributed to the price increase."

For all the whirring of political machinery at home, $75-a-barrel oil will not be wished away by manipulating additives or guaranteeing free ponies to voters. (As of this mid-morning writing, oil has been dropping for two days, and now sells for $71.05 per barrel). As Bradley notes, the United States is facing down Iran, Russia's oil industry has been consistently underperforming, and Iraq is a basket case in the oil export market. Some of these situations are related to American policy, but most of them share an important factor: state control of oil production, a more critical factor than gas-guzzling Americans or the hobgoblin of Chinese demand. "Nature's cupboard has not gone bare," Bradley says. "This is a classic lack of capitalist institutions. It's the role of entrepreneurship to anticipate demand, and that's what you're not seeing. The problem is on the supply side, not the demand side."

The solution there is to let the price continue to rise, which would either encourage more greedy, jowly fatcats to get into the production game or encourage consumers to reduce their oil consumption. Instead, Bush, having diagnosed America's oil addiction, proposes a weird solution: trying to get the addicts a better price for the drug. The oil spike of 2006 is a Seinfeld news cycle, a story about nothing.

But the cures being offered may get us some real tragedy. "These prices are a signal that the market is working, not that it's failing," says Donald J. Boudreaux, professor of economics at George Mason University. "I can remember the seventies, when there was actual gas rationing—on a first come, first serve basis, on odd/even days. Believe me, it's much better to pay an extra dollar a gallon rather than endure any of those things."

Like Starting Over

jsanchez@reason.com (Julian Sanchez) matt.welch@reason.com (Matt Welch) — Thu, 01 Dec 2005 00:00:00 EST

On January 28, 1981, when freshly sworn-in President Ronald Reagan abruptly lifted federal price controls on gasoline, the No. 1 song in the country was the late John Lennon's "(Just Like) Starting Over." On September 1, 2005, it was just like starting over all over again, when the state of Hawaii became the first American jurisdiction in a quarter century to adopt the long-discredited policy of placing bureaucrats in charge of petroleum prices.

This wasn't just an isolated case of Island Fever. With Hurricane Katrina disrupting oil flows along the refinery-rich Gulf Coast, unrest in the Middle East throwing access to future reserves in doubt, and demand in the developing world continuing to outpace supply, prices at the pump topped $3 a gallon nationwide, giving politicians a unique opportunity to demonstrate their economic ignorance or cynical opportunism.

Legislators in at least four other states are mulling bills like Hawaii's; attorneys general in at least 30 states have made preliminary noises about investigating gas "profiteering"; governors from both major parties have promised to prosecute what Massachusetts Republican Mitt Romney calls "white collar looting"; and President George W. Bush himself has condemned "price gouging." Sen. Byron Dorgan (D-N.D.) called for a windfall profits tax on oil companies; the Department of Energy placed a Gas Price Hotline link prominently on its homepage; and Sen. Maria Cantwell (D-Wash.) proposed building a bridge to the 1970s by reintroducing Richard Nixon's dreaded price controls.

Severin Borenste, director of the University of California Energy Institute, says he and other resource economists have been fielding calls from reporters all summer. Still, he says, "It's not stopping politicians from doing stupid things on both sides of the aisle."

That's at least partly because price controls never stopped being popular. The Pew Research Center released a study in mid-September showing that "Almost seven in 10 want the government to establish price controls" on gasoline, despite the fact that price controls caused shortages in the '70s. "I don't think the public as a whole ever made the connection," Borenste says.

So is central planning making a comeback in academia as well? "Where there's a true scarcity and you control prices, you cause shortages," he says. "Among economists who are not rabid right-wing or rabid left-wing guys, everyone understands."

Behind the Boom

Engineering the housing bubble

Julian Sanchez

As market watchers puzzle over the current housing boom, a recent study suggests government may be fueling price increases.

In a paper to be published in the American Economic Review, two Harvard economists, Edward L. Glaeser and Raven E. Saks, and Joseph Gyourko, a professor of finance and real estate at the University of Pennsylvania, note that housing prices have been rising at a brisk clip since 1950. Until about 1970, they increased more or less in tandem with construction costs. But in recent decades, the gap between house prices and construction costs has been increasing in many metropolitan areas, especially in the highest-priced markets. Normally, rising prices lead to a corresponding construction boom, yet new building seems to have lagged behind ballooning price tags. Evidence points to manmade scarcity, in the form of government regulations on new housing, as the culprit.

One factor, Glaeser and his co-authors note, is a trend toward court decisions hostile to new development. But what explains that change? One intriguing possibility is that media scrutiny has made it more difficult for developers to grease the regulatory wheels by means of under-the-table payments to local politicians. But the most plausible explanation is the increasing organization, sophistication, and political participation of homeowners' groups and neighborhood associations, which have become adept at using political pressure, courts, and the media to block new construction.

Aside from the aesthetic benefits of a low-density neighborhood, people who already own homes benefit from less competition when it comes time to put their houses on the market. If the paper's explanation is right, the American dream of home ownership may have matured into a cartel.

Puddle Jumpers in the Great Lakes State

info@reason.com (Shikha Dalmia) — Mon, 24 Oct 2005 00:00:00 EDT

You can count on your constitutional due process rights if you are a thief, a rapist, or a murderer. But if you're accused of committing a crime against the environment, you may as well tear up the Constitution and bury it in a landfill—or better yet, send it for recycling.

That, at least, is the message of the legal tactics that the government has employed in its two-decade-long crusade against John Rapanos, a Michigan developer. Rapanos' crime? He shifted sand from one part of his property to another without a wetland permit, a felony under the Clean Water Act.

Rapanos' legal saga, which has had more twists and turns than a snail darter in heat, came closer to its dénouement earlier this month when the U.S. Supreme Court agreed to hear his appeal in the civil case against him. (The Supreme Court declined to hear the companion criminal case two years ago.) If Rapanos loses, he faces a whopping $10 million in fines, $3 million in environmental mitigation fees and forfeiture of 80 acres of his property.

This is in addition to the $185,000 in fines and 200 hours of community service Rapanos has already received for the criminal conviction. He escaped a jail term the federal prosecutors wanted to impose on him only because Judge Lawrence Zatkoff, the federal district court judge who presided over the trial and witnessed the prosecutor's underhanded legal maneuvering first hand, rejected the prosecutor's demand earlier this year.

In fact, so prejudicial were some of the government's tactics that Judge Zatkoff ordered a new trial after the jury broke its deadlock and convicted Rapanos on the criminal charges in 1997. However, later that year, the 6th Circuit Court—notorious for its soft spot for big government causes—overruled Judge Zatkoff.

Rapanos' troubles began back in 1985, when he decided to develop 175 acres of farmland he had bought in the 1950s in bucolic mid-Michigan. With the exception of two small areas, his property was bone dry, thanks to its sandy soil and the drainage ditches the county had dug in the area at the turn of the century.

Because Rapanos was not planning to touch the wet spots, he began to clear shrubs and even out the sand to prepare his land for development without feeling the necessity of obtaining a wetland permit. That's when agents from Michigan's Department of Natural Resources (DNR)—the state enforcement arm of the federal Environmental Protection Agency—showed up at his door with cease-and-desist orders, their first of many visits.

Rapanos, by all accounts, is rude, arrogant, and obscene. In other words, he's precisely the kind of person whom—Judge Zarkoff notes—"the Constitution was passed to protect."

But Rapanos cooperated with the agents during the first few visits when it seemed they intended only to inspect his property visually. However, during one visit when Rapanos and his lawyer were convinced that the agents meant to collect soil samples and other evidence to use against him in court, they demanded a search warrant—a perfectly appropriate demand.

But during the 1997 jury trial, the government prosecutors "raked [Rapanos] over the coals"—in the words of a dissenting 6th Circuit Court judge—for electing to exercise his Fourth Amendment rights.

The prosecutors also questioned why Rapanos would insist on a warrant if he was not destroying wetlands. "What were you trying to hide?" the prosecutors demanded. Finally, the attorneys for the government likened Rapanos to a devil and compared his "treeless property" to the "Warsaw ghetto without Jews."

The government's prejudicial conduct and violation of Rapanos' civil rights is not directly at issue in the current case before the Supreme Court. Rather, the court will consider a novel theory that the federal government—backed by the Bush Justice Department—is putting forward to defend its decision to prosecute Rapanos, given that the nearest federally protected navigable water is 20 miles away from his property. The government is arguing that it has the authority to regulate any property whose runoffs could reach navigable waters.

A nod from the court will put virtually every puddle and pond on anyone's property within the reach of wetland bureaucrats. But the question is not only if this would be allowed under a fair reading of the law—although the government's expansive interpretation is audacious, to say the least.

The court also ought to consider this question: How is the federal government likely to use these expanded powers?

Rapanos' treatment suggests a one-word answer: abusively.

Shikha Dalmia is a senior analyst at Reason Foundation.

The End of Physician Assisted Suicide?

rbailey@reason.com (Ronald Bailey) — Wed, 05 Oct 2005 00:00:00 EDT

If you're planning to kill yourself under the aegis of Oregon's Death with Dignity Act, you'd better get a prescription for the needed medications now. Why? Because the U.S. Supreme Court heard Gonzales v. Oregon yesterday and is likely to rule in favor the U.S. Attorney General's assertion that he can regulate the prescription of barbiturates used in assisted suicide.

University of Redlands government professor Arthur Svenson argues, on the basis of recent precedents, that the Supreme Court is likely to effectively gut the Oregon law this term. Svenson's legal analysis, offered during a panel at the annual conference of the Association of Politics and Life Sciences, turns on the precedent established in the medical marijuana case Gonzales v. Raich, decided by the court earlier this year.

The majority opinion in Raich, written by Justice John Paul Stevens, concluded that the government need only show a rational basis for laws regulating interstate commerce. It doesn't have to prove that what it is regulating is actually in interstate commerce. So in the case of Raich, Congress established a rational basis according to Justice Stevens because (1) marijuana is fungible; (2) the war on drugs is not over; and (3) California established no limit on how much marijuana a patient can own.

In his opinion, Stevens cited the 1942 case Wickard v. Filburn, in which the Court ruled that the Federal government could, under the Commerce Clause, regulate how much wheat a farmer grew, even if he was growing it just for home consumption, because it could have an effect on interstate commerce. Clearly, if patients grow their own marijuana for medicinal use in California, it could mean that they are not buying marijuana produced by growers in, say, Oregon, thus affecting interstate commerce in illegal hemp products. In his blistering dissent in Raich, Justice Clarence Thomas observed, "If the majority is to be taken seriously, the Federal Government may now regulate quilting bees, clothes drives, and potluck suppers throughout the 50 States." He's right.

In 2001, former U.S. Attorney General John Ashcroft, who has long opposed the Oregon Death with Dignity Act, argued that the Controlled Substances Act gives him the authority to revoke a physician's registration to distribute controlled substances if he determines that it is in the public interest to do so. The Feds are arguing that their interpretation of the Controlled Substances Act meets the standard set in Chevron v. Natural Resources Defense Council in 1984. Specifically, Stevens wrote the unanimous opinion in that case, which found that if a "statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute." So, the Attorney General is arguing that it is reasonable to conclude under the Controlled Substances Act that "taking of drugs to commit suicide is 'drug abuse.'"

Ashcroft further argued that all prescriptions must be for legitimate medical purposes only. The final step in his argument was that physician assisted suicide is not a legitimate medical purpose. The Feds claim that physician assisted suicide is clearly illegitimate because 49 out of 50 states forbid it. Furthermore, they cite the fact that leading medical associations oppose it. Finally, they note that it is a crime to assist suicides in nearly all states. This reasoning is reminiscent of the Court's recent ruling that it is unconstiutional to execute murderers who committed their crimes when they were juveniles, in part on the grounds that a majority of the states were against it.

Oregon responded with a two part argument in the Ninth Circuit Court of Appeals. The first argument is that the Controlled Substances Act does not explicitly authorize the U.S. Attorney General to regulate controlled substances used in physician assisted suicides. The second is that the Attorney General is seeking to displace the traditional exercise of police power which gives states, not the federal government, the power to license and control the practice of medicine. Oregon also argued that the amount of controlled substances at issue is not remarkable and has no discernible effect on interstate commerce.

Svenson argues that the Supreme Court's decision in Raich guarantees that the it will rule in favor the Attorney General's interpretation of the Controlled Substances Act. Why? If homegrown medical marijuana is in interstate commerce, then surely so too are the barbiturates, which are clearly commercial and move across state lines, patients use to end their lives.

As Svenson puts it, "The Attorney General is saying that you can kill yourself if you want, but you can't get the drugs that would help you to do it. It's like telling someone that they can play the violin, but refusing to give them a bow."

I am personally conflicted about legally sanctioned physician assisted suicide. The creation of a formal legal procedure gives the government an opportunity to start down the slippery slope toward meddling in this most personal of decisions. I fear that some future government concerned about rising Medicare expenses will seek to establish rules that encourage physicians to "assist" their most desperately ill and expensive patients to shuffle off this mortal coil a bit earlier. On the other hand, denying patients access to drugs that they feel will give them control over their lives and their deaths also seems wrong. Many people who never actually use the drugs may just want access to them in case their suffering becomes unbearable. Since 1994, only 208 Oregonians have resorted to officially sanctioned physician assisted suicide.

If Svenson is right and the Supreme Court rules against Oregon, physician assisted suicide in the United States is nevertheless going to increase. Over the next couple of decades, medicine will become better and better at rescuing people from immediate death. That means that many will survive mortal illness, only to endure a slow, painful, and inevitable decline. They will no longer be able count on medical crises such as a heart attack or pneumonia, to end their sufferings. Instead, they will have to make conscious decisions to end their lives either slowly by discontinuing medical care or more directly by committing suicide. Whatever the Supreme Court decides in Gonzales v. Oregon, patients and physicians will be having more and more quiet conversations about what to do when the awful time comes to each of us when we are beyond the help of modern medicine.

The Nature of Poverty

rbailey@reason.com (Ronald Bailey) — Wed, 13 Jul 2005 00:00:00 EDT

Friends of the Earth International (FOE) has just issued its report Nature: Poor People's Wealth in conjunction with the G8 Summit of rich nations at Gleneagles in Scotland. The FOE report aims to highlight the importance of natural resources in poverty eradication.

"Poverty is the greatest shame and scandal of our era," according to FOE. All too predictably, a good bit of the report consists of a tiresome standard-issue anti-globalization screed against "neoliberal" economic policies and evil "transnational corporations." FOE notes that policy debates over how to alleviate poverty "tend to emphasize the monetary aspect of poverty, whereas many other factors—including access to and control over natural resources and land, employment, health, nutrition, education, access to services, conflict, political power and social inclusion—also play crucial roles."

Of course, the reason that people might focus on the monetary aspect of poverty is that having a bit of ready cash tends to give one access to all those other good things, such as employment, education, and social inclusion. But never mind, let's move on.

After this initial anti-globalization throat clearing, the FOE report becomes unintentionally interesting. Much of the rest of the report offers brief case studies of poverty from around the world, often among indigenous peoples. ("Indigenous" being the preferred word to describe the least modern peoples; note that the Japanese are never described as an "indigenous people.") Why unintentionally interesting? Because FOE is so busy indicting liberal economic policies that the group completely misses the significance of one of chief reasons for why so many of the people in the report's case studies are mired in poverty. Let's go through some of FOE's cases.

In Cameroon, the Bagyeli "pygmies" have been tossed out of their traditional foraging areas, which have been turned into a national park by the government.

In Chile, the Araucaria forests of the Pehuenche people were cut down by logging companies to whom the national government sold the land.

In Malaysia, the government authorized logging, the creation of plantations and dam building on the customary lands of several Sarawak forest communities

In Togo, local fisheries are being overfished by modern fishing fleets, leaving none for Togolese fishers.

In Russia, over the past 70 years oil and gas projects on Sakhalin Island have degraded the oceanic and freshwater fisheries of the Nivkhi people.

In Laos, the Nam Theun 2 dam project financed by the World Bank and Asian Development Bank will displace 6,000 villagers, who are being resettled on insufficient land.

In Paraguay, ranchers seized and are continuing to encroach upon the ancestral territory of the Ayoreo people.

In India, the government has never recognized nor given title to the traditional lands occupied by the Katkari people, with the result that they are vulnerable to outside land developers.

Do you see a pattern here? In many of the instances cited by FOE where poor people and natural resources are being misused or abused, there are no clear property rights. In some cases, the governments simply assert ownership and ride roughshod over the desires of the local people who were under the impression that the land was theirs. In others, corrupt national governments collude with powerful interests to seize poor peoples' lands and resources.

Amusingly, while the FOE report insists on all kinds of rights for the world's poor, including environmental, human, political, collective, legal, and women's rights, there is in the report not a single mention of the word "property," as in "property rights." While FOE is to be commended for its support for restoring stolen land to poor people around the globe, it just cannot bring itself to permit individual poor people to own land. Consequently, most of the "sustainable development" schemes endorsed by FOE involve collective ownership of land and natural resources. (By collective ownership, FOE most emphatically does not mean corporate ownership.) Collective ownership by a defined group is better than government theft, but it limits the options of the joint owners who are subject to the tyranny of generally conservative majorities who stifle entrepreneurship. Evidently, FOE would prefer that poor people sit around voting all day rather than getting rich. Think church vestries or condo association meetings.

Friends of the Earth would do well to read the work of Peruvian economist Hernando de Soto, who has minutely detailed how the lack of property rights throughout the developing world keeps billions poor. Without clear title to their land, houses, stores, and so forth, the poor cannot sell their assets or borrow against them. Since their "properties" are subject to seizure at the whim of a government bureaucrat, the poor are understandably reluctant to invest in improving them. Thus they remain poor. FOE researchers who put together the group's report are so devoted to an anti-capitalist and anti-globalization ideology that they don't notice how strongly their case studies support De Soto's larger point. The poor benefit from secure private property rights even more than the rich do.

Global Ecological Collapse?

rbailey@reason.com (Ronald Bailey) — Thu, 31 Mar 2005 00:00:00 EST

Most ecosystem services that support life and human society are being degraded and used unsustainably, according to the Millennium Ecosystem Assessment (MA) just released by the United Nations. According to the report, efforts to achieve the UN's Millennium Development Goals, which include halving the number of people living on less than $1 per day, reducing child and maternal mortality, and establishing universal primary education by 2015, will be significantly impeded if these ecosystem services are allowed to deteriorate further.

Consider the bounty of nature in terms of human services. Ecosystems provide humanity with provisioning services such food, water, timber, and fiber; regulating services that affect climate, floods, disease, wastes, and water supply; cultural services that provide recreational, aesthetic, and spiritual benefits; and supporting services such as soil formation, photosynthesis, and nutrient cycling. The MA, compiled by more than 1300 experts from 95 countries, looked at 24 different ecosystem services and found that 15 of them (see page 41 of the report for a list of some of them) are being degraded or used unsustainably.

One of the chief findings is that "over the past 50 years, humans have changed ecosystems more rapidly and extensively than in any comparable period of time in human history." And why not? After all, as the report notes, since 1960 human population doubled while the world's economic output increased six-fold. The report alarmingly asserts that "more land was converted to cropland since 1945 than in the eighteenth and nineteenth centuries combined." This claim evidently depends on the selection of the baseline. If the UN authors had chosen 1961 as the baseline, as U.S. Department of Interior analyst Indur Goklany points out, between 1961 and 1995 cropland increased by only 10 percent (from 1.34 billion hectares to 1.48 billion hectares) and total land area devoted to agriculture also increased only 10 percent (from 4.5 billion hectares to 4.9 billion hectares). That sounds a lot less alarming. In fact, deeper in the report, the UN authors acknowledge, "Most of the increase in food demand of the past 50 years has been met by intensification of crop, livestock, and aquaculture systems rather than expansion of production area." Land area devoted to cropland is falling in developed countries like the United States and members of the European Union.

The report also points to continued deforestation in poor countries, but notes that tree plantations comprising just 5 percent of global forest cover provide 35 percent of the world's industrial round wood supplies. Assuming no improvements in plantation forestry management, this implies that plantation forests could supply all the world's industrial wood needs from just 15 percent of the world's forested area, conceivably leaving 85 percent for nature. Furthermore, take a look at Figure 2 on page 42 of the report, which shows high rates of land change. Note the areas where forest cover is increasing.

Disease regulation is another ecosystem service analyzed by the UN report. Changes in ecosystems influence the abundance of human pathogens such as malaria and cholera according to the authors. The MA asserts that sub-Saharan Africa's annual total economic output would be $100 billion higher if malaria had been eliminated from the continent 35 years ago. (Distressing thought—the U.S. banned DDT 33 years ago.) Cholera and malaria, once endemic to most of the United States, were extirpated by means of public health measures such as water chlorination and spraying DDT to eliminate malarial mosquitoes. Similarly, rather than clumsily trying to manage ecosystems to control the diseases that still afflict the world's poor, surely it is much more promising to focus resources on developing a combination of new vaccines, better medicines, and improved sanitation to control them.

The MA also worries about declining biodiversity. In all of the scenarios considered by the report, "biodiversity continues to be lost and thus the long-term sustainability of actions to mitigate degradation of ecosystem services is uncertain." For example, the authors estimate that 10 to 15 percent of the world's plant species will go extinct by 2050. But putting the effects of even a large number of extinctions into perspective, a November 2003 Science article "Prospects for Biodiversity" pointed out that such extinctions "will not, in themselves, threaten the survival of humans as a species." The Science article further notes, "In truth, ecologists and conservationists have struggled to demonstrate the increased material benefits to humans of 'intact' wild systems over largely anthropogenic ones [like farms]... Where increased benefits of natural systems have been shown, they are usually marginal and local." The new UN report is another such failed attempt. All other things being equal, extinctions are unfortunate, but they are not likely to impede the implementation of the UN Millennium Development Goals.

Although in many ways this new report is another recitation of the standard litany of ecological doom that we've all been hearing from the past 50 years, there are some surprising and even helpful aspects to it. For example, instead of pushing population doom as so many others have, the UN authors reckon that there will be "a likely three- to six-fold increase in global GDP by 2050 even while population growth is expected to slow and level off in mid-century."

Of course, there are global ecological problems. And one of the starkest facts highlighted in the report is that nearly all of the ecosystem services identified as deteriorating are common-pool resources. Common-pool resources are owned by no one; therefore no one has any incentive to protect them, and everyone has an incentive to take as much as they can because they know that if they don't get it, the next guy will. For example, the report cites the well-known fact that the catch from capture fisheries have stagnated for the past decade and that many of them are being badly overharvested. The same situation explains excessive freshwater withdrawals from rivers and aquifers and the emissions of various pollutants. The report recognizes that historically, as natural resources become overharvested, assigning property rights to specific owners has been the traditional and effective way to prevent their total destruction.

And although the report can't resist earnest recommendations such as "raising public awareness" and eco-labeling mandates, the UN authors do see property rights and markets as essential to protecting and improving the natural environment. They advocate the removal of all crop and irrigation subsidies, investment in new agricultural technologies including genetically enhanced crops to expand food supplies, adoption of property rights in fisheries in the form of individually tradable quotas, allocation of water rights, and establishment of water markets, among other things.

In one of the more astonishing passages, the UN authors declare their fealty to globalization: "Actions that focus on improving the lives of the poor by reducing barriers to international flows of goods, services, and capital tend to lead to the most improvement in health and social relations for the currently most disadvantaged people. But human vulnerability to ecological surprises is high. Globally integrated approaches that focus on technology and property rights for ecosystem services generally improve human well-being in terms of health, security, social relations, and material needs."

Although the report exaggerates the dangers of some ecological problems, the good news is that its authors are rejecting no-growth, anti-globalist, neo-luddite ideological environmentalism and are on the right track toward solving the problems that do exist.