Chapter 10: Fiat Fuels

Table of Contents

One of the most notable consequences of the closing of the gold exchange window in the 1970s was the significant and unprecedented increase in the prices of oil, the first significant increase in the costs of energy after centuries of steady decline had immensely improved the lives of people. The economic shock was very significant for Americans whose modern lives were increasingly reliant on high energy consumption: gasoline for cars, and electricity for a growing number of household appliances.

As with food, government attempted to fix the problem of rising prices by manipulating the market for oil, rather than addressing its underlying monetary cause. Instead of reducing inflationary credit expansion and government spending, bureaucracies sought to find cheaper and better alternatives to oil. Most fiat academics and textbooks continue to this day to blame the energy crisis on the Arab oil embargo of 1973, an astonishingly absurd explanation for several reasons. The shortages had started in 1972, before the embargo. The embargo failed to reduce the imports of oil to the United States in any meaningful sense, as the oil market was liquid and large enough for the US to find oil from other sources. Further, oil prices continued to rise long after the Arab-Israeli War and the embargo had ended.

The U.S. Department of Energy was set up in 1977, and the central planning of energy markets was to proceed along a half-century quest for an elusive “alternative energy,” which has resulted in a very expensive and highly destructive mission to replace oil and hydrocarbons with inferior alternatives through subsidies, favorable lending, and government mandates. For an ever-shifting variety of reasons, government agents viewed the market selection of oil as a failure, and correct and better fuels had to be imposed by fiat. Since then, the seemingly indomitable power of governments with a money printer has been at war with the laws of thermodynamics and the basics of engineering.

Centuries of human engineering progress and quality of life improvement had been based on channeling hydrocarbons’ high power—high quantities of energy per unit of time—as well as their high energy density per unit of weight, which made them nature’s cheap, powerful, and ubiquitous batteries. But to avoid the rise in oil prices, the U.S. government’s fiat sought to ignore half a millennium of technological advancement and build the modern world using premodern solar, wind, and biofuel energy. With their low power, intermittency, unreliability, and massive bulk, these sources were only ever predominant in primitive societies precariously living on the brink of survival, at the mercy of nature, with very little in the way of technological progress. Against all logic and reason, these were designated by government fiat to be the fuels of the future. 

For the first time in history, centrally planning the sources of energy humans use became viewed as a legitimate function of government, and it led to the emergence of large industries reliant on government subsidies, mandates, and subsidized credit to operate, while constantly making promises of achieving technical and economic success in a few years. The consequences of this megalomaniac quest to override the laws of thermodynamics are predictable for anyone familiar with the inevitable fate of all attempts to centrally plan market outcomes. Yet, as is the custom for failed central plans, fiat universities and academics spend little time dwelling on them, and those who do are largely ignored. Perhaps the best treatment of the episode comes from Energy Aftermath, a good overview book published in 1990 by Ben Ball, Thomas Lee, and Richard Tabors.

The authors of this book detail how the U.S. government sought to promote five main sources of energy in response to the “energy crisis” (actually just an inflation crisis) of the 1970s, and these sources were synfuels, photovoltaics, biofuels, natural gas, and nuclear energy. Synfuels were never produced commercially, and photovoltaics failed commercially. Biofuel policies succeeded in initiating a large wealth transfer of fiat holders to corn farmers and biofuel producers, but the fuels came nowhere near replacing oil for cars. And with nuclear and natural gas, the authors detail how the crushing embrace of regulatory fiat actually hampered the development of these energy sources. The authors concluded, “The major portion of this blunder was assuming that it was possible, in effect, to dictate the supply-demand relationship in advance and that by having the government establish the market through forced, prestated quantity purchases, it would be possible to drive the price of the technology down.” The second problem was the assumption that it was possible to predict the advancement of technology and the cost curve for the future. As the price inflation of the 1970s subsided and hydrocarbon prices dropped in the 1980s, the economic rationale for replacing oil with fiat fuels became less pressing, and many of these projects diminished in importance. But by the 1990s, the fiat fuel industry found fresh winds in its sails from the threat of catastrophic global warming and in marketing its fiat fuels as salvation.

The drive for environmental panic, like the drive for industrial junk fiat foods, represented a confluence of interests. The “alternative energy” industries that sprang up in the 1970s stand to benefit from promoting any narrative that supports the replacement of hydrocarbon fuels with their inadequate alternatives, justifying more government subsidies for these energy sources. But there is also a religious element to this environmentalism, based on pagan conceptions of the earth as pristine and humans as a destructive consuming force. The undertone of much of modern environmental hysteria is the idea that earth left alone and free from human influence is something good and desirable for its own sake. What philosopher Alex Epstein astutely calls antihuman environmentalism views humans as a burden on earth and seeks to minimize this burden to allow the earth to thrive. Epstein analyzes this viewpoint and persuasively argues that any assessment of environmental issues needs to be understood from the perspective of humanity, with the goal of increasing human flourishing. Viewed in that regard, humans are not a destructive force on earth; our actions are what make the earth habitable for us, allowing us to survive, prosper, and flourish.

With modern industrialization picking up in the twentieth century, the environmentalist movement long warned about the dangers of human consumption and industry to the planet and the likely devastating consequences it would cause. These warnings came to a head in the 1970s, where the inflationary rise in the price of most commodities was presented as evidence that earth had reached carrying capacity, and conflicts, famines, and destitution were the inevitable fate awaiting humanity. Throughout the 1960s and 1970s, leading environmentalists made dire predictions of the horrific fate awaiting humanity from the depletion of resources, and as inflation increased, these environmentalists became increasingly popular.

But as inflation waned in the 1980s, all of these claims became suspect. How could we be running out of oil, steel, nickel, and various industrial materials when their prices had begun a steady decline in real, if not nominal terms, while consumption continued to rise unabated. The environmental doomsday cults had a major branding problem on hand, and they only successfully resolved it by pivoting the existential threat to humanity away from the depletion of resources to the overconsumption of resources. We were no longer doomed because we were going to run out of oil and essentials; we were now doomed because we consume so much oil and essentials, and that consumption is going to destroy the atmosphere and boil the oceans. The reasoning had pivoted to its diametrical opposite, but the conclusion remained the same: apocalypse by fiat.

Fiat Apocalypse

The previous chapter examined the underlying distortions to the scientific method caused by fiat money providing governments with outsized influence on the direction and results of scientific research. As funding decisions end up under the control of bureaucrats isolated from market feedback and consequences, the incentives of researchers are skewed toward publication and bureaucratic metrics and away from truth and relevance to the real world. Further, with public funding of science motivated primarily by notions of the public interest, it is more likely to be granted to researchers who identify potential catastrophes than those who arrive at comforting conclusions.
Fiat science is optimized for panicking, and the more concerning a scientist’s finding, the more likely they are to receive more funding and grow their department. Since funding has no opportunity cost to the funder, there is no rational calculation of the costs and benefits of constant hysterical Chicken Littleism as the scientific method. In a free market, scientists would have to demonstrate the validity and value of their research to justify free people paying their hard money to finance it.

Only with this context can one understand the astonishing phenomenon of many intelligent and educated people worldwide hysterically concerned about carbon dioxide causing the destruction of the planet. Carbon dioxide is a gas that is an essential component of all living creatures, and it has always existed as part of the earth’s atmosphere in trace amounts, currently at a concentration of around 418 parts per million, or 0.0418%. Preindustrialization, the concentration of carbon dioxide in the atmosphere was closer to 280 parts per million, and modern climate science has been converted into a weird monomaniacal cult that attributes every single problem in the natural environment to the increase of the concentration of this trace gas.

The greenhouse effect, upon which most of this hysteria is based, is an effect that is well demonstrated in laboratory settings. But try as they may, fiat scientists have completely failed to demonstrate, using the scientific method of testable hypotheses, what the increase in CO2 is causing in the real world. The initial hysteria was primarily concerned with increasing global temperatures, with many decades of doom-mongering predictions about the temperatures of the world rising to the point that large parts of the world would be rendered uninhabitable. And yet, the instrumental record of temperatures worldwide shows very little upward trend over the last century, and whatever variation exists is well within the range of the normal variation experienced by earth before industrialization.

In the early years of carbon hysteria, there was a general consensus around the idea that global temperatures had begun rising in the shape of a hockey stick, coinciding with the beginning of industrialization, and the fear was that continued increases in CO2 emissions would lead to runaway temperature increases that would have devastating consequences for the planet and the humans that inhabit it. Based on a highly publicized scientific study by highly prestigious fiat scientific research centers, the hockey stick captured the world’s imagination, and was used in Al Gore’s panic porn flick An Inconvenient Truth. Gore famously got into an elevator that raised him to track the rises in temperature on a giant wall to drive home the point that industrialization was changing the planet irreversibly.

But in 2010, one of the most eye-opening episodes of modern fiat science took place, when hackers managed to expose the emails of the researchers who were working on producing this study. In very clear terms, fiat scientists discussed applying different tricks with the data in order to “hide the decline” in temperatures witnessed in the second half of the twentieth century. This being fiat science, of course, nobody involved in this blatant fraud suffered any consequences for it. They all continue to promote hysteria worldwide. But the exposition of this fraud has thankfully led to the disappearance of the “hockey stick” as the totem and talisman of the carbon hysterics. Contrary to fiat scientists’ illusions, there is very little reason to believe that atmospheric CO2 levels are earth’s thermostat knob.

Ocean acidification is another common supposed impact of increased concentration of CO2. Dozens of academic papers discussed this effect. But as scientists tried to replicate the findings of these papers, it became apparent they were based on extremely liberal methodology to arrive at the desired results. When fiat scientists studied the fish in fish tanks, they noticed the fish not thriving. But when researchers tested them in the sea, they found little preference among fish for water with lower levels of CO2.

Without a clear demonstrable effect of increased CO2 emissions worldwide, carbon hysteria has moved on to promoting an endless list of natural phenomena as being the product of CO2. The panic survives from one field to another, with the conclusion foregone, but the theories and mechanisms a constantly shifting variety of motivated reasoning by fiat. Since our earth is moving, not static, it is constantly oscillating between night and day and four seasons, and since it is surrounded by a complex atmosphere, nothing is constant in weather and climate, so the hysterics never run out of changes to attribute to CO2, in the same way witch doctors and shamans have always blamed extreme weather on their followers, demanding they sacrifice to fix it.

Blaming carbon dioxide has reached pathological levels of delusion at this point. A website has collected hundreds of press articles based on scientific studies blaming CO2 for an endless list of bad things happening worldwide. These range from increases in cases of depression among pets, to earthquakes, cancer, declines in bird populations, the creation of ISIS, traffic jams, earlier squirrel reproduction, increased aggression by polar bears, floods, sea-level rise, hurricanes, and decline in whale populations. This is just a random sampling of the many horrors attributed to the increase in the concentration of a gas essential to all living things from 0.028% to 0.042%.

Once it has been established that “the science says” carbon dioxide emissions are bad and a cause to panic, the fiat scientific method is set in motion: the path to publication, promotion, research grants, and increased importance goes through magnifying the panic, finding more reasons for it, and asking for more funding. The path to irrelevance and career suicide comes from soberly assessing the evidence and finding little cause for concern.

All of the “evidence” for the link between carbon dioxide and these calamities comes entirely from observational studies. All of these things are changing while the concentration of carbon dioxide is rising, and since there is research money to be made from assuming causality, the causality is always concluded, and any doubters are immediately dismissed as heretics. In fact, a closer look at the studies behind these sensationalist headlines shows that the causal link between CO2 emissions and the phenomenon concerned is usually assumed as a given, and the paper does not make any attempt to prove it but will instead switch to discussing the details of the phenomenon observed. These papers continue to provide the grist for the mill of news items constantly beating the drums of fear. It is well known to fiat academics that including a few paragraphs with a tangential link to global warming in your paper increases its chances of securing publication and funding.

What would a proper scientific study need to do to convincingly illustrate a causal link between carbon dioxide emissions and these various phenomena? It would need to posit a testable hypothesis based on the impact of carbon dioxide emissions, and test whether the predictions of the hypothesis accurately map against reality, and continuously fail to reject the null hypothesis that there is no link between CO2 and the phenomenon. In other words, a proper scientist would measure bird populations, sea levels, or temperature and make a testable prediction conditional on CO2 emission levels along the lines of: “If CO2 emissions increase by X% over the period between Year X and Year X+10, there will be no impact on bird populations/sea levels/temperature.” Repeatedly rejecting the null hypothesis, and then developing accurate numerical predictions for the studied relationship would go a long way to establishing the credibility of the evidence linking carbon dioxide to this particular phenomenon.

The global government lockdowns initiated in 2020 have provided climate scientists with a natural experiment of sorts with which to test the robustness of their claims on the link between CO2 emissions and atmospheric concentrations of CO2, and between emissions and climate phenomena. As the world economy went into a debilitating shutdown starting in March 2020, there was a very significant reduction in aviation and car driving, two major sources of CO2 emissions. The shutdowns were devastating for the livelihoods of billions worldwide who lost their jobs and their earnings and is an extreme example of the kind of economic reform that environmentalists propose to alleviate climate change. What was the impact of these shutdowns on the atmosphere and climate? One year later, we are beginning to see studies estimate this.

The results so far are a complete slap in the face for the delusion that humans control the climate through our emissions of an essential trace gas. Most fascinating is the discovery that all of these lockdowns had no discernible impact on the trend in CO2 atmospheric concentration growth, which continued with no perceptible change.

Another study examined the impact of lockdowns on temperature and rainfall and found no discernible effect. To the best of my knowledge, there has not been a single study to find evidence that the global shutdown had any discernible impact on any aspect of the earth’s climate or atmosphere. If locking billions of people at home, with their cars parked and global aviation coming to a near-complete halt, had no detectable effect on climate, there is no good reason to believe any of the dire predictions of fiat climatologists. Nor, for that matter, is there any good reason to countenance the hubristic notion that central governments have the power to control the very air of earth.


Source: Monthly Average Mauna Loa CO 

Similarly, there is no good reason to think that the greenhouse gas effect as studied in laboratory settings will translate to the world at large, where the environment is far more complex than any lab could ever be. One cannot dismiss the hypothesis that humans are having an impact on atmospheric CO2 concentrations and the climate, but the burden of proof is on the people making these extraordinary claims to present convincing evidence that illustrates the causal mechanisms involved, the likely impacts, the value of the mitigation measures they propose, and their true cost. Without testable hypotheses, the entirety of modern climate science is at best conjecture but more likely motivated reasoning in search of a predetermined conclusion to secure more funding. Without testable hypotheses, climate scientists ought to be far humbler and more modest about whatever conclusions they arrive at.

It is debatable whether the findings of the modern field of climatology would exist in a free market for research without fiat funding, but it is pretty clear that a society running on hard money, which would force everyone to constantly think about the opportunity costs of action, would come nowhere near contemplating the precautions and measures called for by carbon hysterics. The threats of climate change are an ever-shifting set of vague hypothetical threats of doom, while the threat from the transitioning of energy sources from reliable hydrocarbons to unreliable “renewables” is a matter of life and death for billions on the planet, as discussed below.

As time has gone by and the many calamitous predictions of the climate hysteria industry have failed to materialize, a more sober and reasonable assessment of the dangers of CO2 emissions is becoming possible. The last year has witnessed the publication of two extremely important books on the topic of climate, whose authors come with impeccable scientific and environmentalist credentials. Physicist Steven Koonin, a former chief scientist for the Obama Administration, has just published Unsettled: What Climate Science Tells Us, What It Doesn’t, and Why It Matters, the culmination of many years of examining the scientific studies published on climate change, the supposed consensus around it, and the real-world evidence for
it. Koonin’s conclusion is unabashedly nonpanicky. One by one, he takes apart the major tenets of the climate hysteria religion and shows how little evidence there is to support them. Most importantly, Koonin absolutely destroys the antiscientific and totalitarian claim that “the science is settled” and not up for debate.

In Apocalypse Never: Why Environmental Alarmism Hurts Us All, lifelong environmental activist Michael Shellenberger takes a very sober look at similar topics and shows why the popular alarm and hysteria around climate change is very misplaced.78 Beyond just dispelling the fears of climate alarmists, Shellenberger provides a very thoughtful and eye-opening treatment of the social and psychological impacts of the growing number of people who
have been conditioned by fiat scientists into a state of despair, panic, and constant fear over the weather. Moreover, he illustrates how the obsession with CO2 has overshadowed and displaced the interest in other pressing environmental phenomena.

Reading these two books is a massively relieving let-off for anyone still suffering under the delusion that driving a car or taking a flight is causing irreparable damage to the planet and our environment. There is little reason to believe whatever changes in temperature we’ve witnessed over the last century are in any way out of the ordinary for our planet, which has witnessed far greater variation in the past without our CO2 emissions affecting it. There is also no reason to suspect changes in CO2 concentration in the atmosphere will cause catastrophic ocean acidification. Beyond these two headline threats, what remains is an ever-shifting endless list of supposed threats, each with a very tenuous link to CO2 emissions.

But more important than the hallucinations of fiat scientists looking to get published is the state of the planet and the livability of the climate, for which we have very reliable data. If CO2 emissions were in fact causing dangerous damage to the climate, we would expect to see this reflected in an increasing number of deaths caused by climate and natural disasters. Yet reality shows us the exact opposite: deaths from hydrological, climatological, and meteorological disasters have declined drastically throughout the past century, thanks to the amazing technological advancements of the past century, which have made survival into old age far less uncertain than it was at any point in history. As humans have mastered our natural environment, we have steadily tamed the harms of nature and protected ourselves from them. Perhaps the most significant factor in the mastery of our climate has been the use of high-power energy sources to meet our needs. It gave us modern sanitation and indoor plumbing, modern wastewater treatment, ubiquitous cheap steel to fortify our houses and protect them from the elements, drained swamps that stopped breeding insects and diseases, warm homes at little cost, hospitals full of modern equipment, and pharmaceuticals that save our lives. The irony completely lost on the climate alarmists is that the materials they want to ban are our best weapon to survive the natural dangers of climate.


Fiat thermodynamics

Fiat society thinks it can decree new laws for thermodynamics and override engineering reality by government fiat. The eternal adolescents of fiat want to live in modern homes, easily survive winters, travel faster than walking, use modern electronic devices and medical equipment, and have electricity on demand, but they don’t want to use the substance that makes all of these possible. Any person with a familiarity with the engineering realities of modern life will realize that the policies and demands of fiat people when it comes to energy are as reasonable as the child who wants to go to Disney Land, but throws tantrums refusing to get into the car taking him to Disney Land, because he doesn’t want to get into the car, he just wants to be in Disney Land. It is difficult to communicate to a child in a tantrum that the car is his only realistic option for getting to Disney Land, and that the only possible alternative is walking for days, and not some magical teleportation device. This is exactly the plight of trying to explain to fiat people that hydrocarbons are the only reason most of our modern life is possible, and that the only realistic alternative is grinding poverty and a precarious existence, not some absurd Star Trek world where all that we want materializes with the flick of a switch without any combustion taking place. The child who wants to be teleported to Disney Land should present their teleportation device before throwing a tantrum, and similarly, it is time for fiat fuel enthusiasts to first show the rest of us how they manage to survive on fiat fuels before demanding we give up the hydrocarbons that are essential for us.

There is no evil conspiracy of oil companies and oil producing nations to force fiat fuel enthusiasts to consume oil. They consume it because their actions are grounded in the real world, unlike their insane ideas. The intellectual brain, being largely used for insignificant entertainment purposes, can contemplate insane and meaningless ideas like a modern world free of hydrocarbons, but the acting man looking to survive and thrive, cannot. Even as they virtue-signal about wanting to get rid of hydrocarbons, they do so from the safety of a house built with hydrocarbons, lit with hydrocarbons, powered by hydrocarbons, using electronic devices that would be impossible to make without hydrocarbons.

Initially, you might expect that solar energy, being so plentiful and abundant, would be far cheaper than hydrocarbon energy, which needs extensive prospecting, drilling, extraction, and transporting to utilize. The sun shines down on every inch of the earth for significant parts of the year, and its rays bring large quantities of energy. It is estimated that the solar energy that falls on earth in one hour is larger than the energy that all humans consume in a full year. Why would solar energy then not be cheaper than hydrocarbon energy?

The answer is that in its raw form, solar power is cheaper than hydrocarbons, but in its raw form solar power can only satisfy the human needs for skin exposure to sunlight, and for growing plants. Solar energy in its raw form cannot satisfy the majority of our modern energy needs, since humans do not need large quantities of energy in the aggregate; we require high amounts of energy at the margin, in large quantities over short periods of time in order to produce power (defined as unit of energy per unit of time). High power is the driving force of modern technologies that makes modern construction, industry, transportation, electronics, and many more modern accomplishments possible.  One cannot use the rays of sunlight directly to move a car or power a factory, and their absolute quantities are irrelevant. Whereas solar energy is plentiful, being able to concentrate it into high power is a very complex operation that requires significant investment in capital infrastructure through solar panels and batteries. As a form of energy in the abstract, solar is infinitely cheap. But as an economic good that meets our need for power, solar energy requires highly sophisticated and expensive equipment to become usable, and that is why it remains far more expensive as a source of energy than hydrocarbons, and continues to require subsidies, mandates, and subsidized fiat credit. It is not the aggregate quantity of the good that matters, but its ability to satisfy our particular needs, at the time and place where we need them. 

The term “alternative” is a misnomer when used to refer to fiat fuels, as no “alternative” energy source constitutes a satisfactory alternative to hydrocarbons. None of these energy sources could be used exclusively for building and transporting the equipment that makes its production possible. It would be extremely expensive, if not impossible, to build a windmill factory that operates purely on wind power, or a solar panel factory that operates purely on solar energy. The low power associated with these energy sources make a factory operating powered by them very difficult. An attempt to collect these energy sources into high power applications would require extremely expensive equipment, the production of which is also highly energy-intensive. And even if someone had managed, against all common sense, to build a windmill factory running on windmills, it would be far more difficult to transport these enormous wind turbines to the locations where they need to be installed using wind energy. The technology needed to transform wind energy into electric energy, and then store it into a battery is far more expensive than just refining oil and putting into a car engine. The more familiar one becomes with the industrial processes involved, the more you realize how utterly contingent they all are on the presence of hydrocarbon fuels.

The production of electrical batteries and solar panels is extremely energy intensive. The extraction of the rare earth metals that go into them is a highly sophisticated process requiring large amounts of power to dig very deep holes into the crust of the earth. None of these processes would be practically possible without hydrocarbons, in a technical sense. In an economic sense, they are even less feasible when one remembers that in a world without hydrocarbons, we will have far more pressing and basic needs to invest our time and resources into. While engineers might in theory devise roundabout ways of producing batteries and windmills without hydrocarbons, in reality, without fossil fuels humans will have nowhere near the resources available to invest in such highly sophisticated methods of production, when survival in the winter is far from certain, and when basic transportation has become massively expensive. The entire division of labor on which our modern economy depends is impossible without hydrocarbons.

Beyond very small-scale non-commercial applications employing windmills and solar energy sources, the vast majority of humans’ actions (and not their empty virtue-signaling) clearly show that humans prefer and require hydrocarbons. The growth of the renewables energy industry has simply been almost entirely a function of growing government subsidies. This was the case in the 1970s, and that left behind a large number of white elephant projects. Today, easy money is creating a similar misallocation of resources in these industries. 

The only viable alternatives to hydrocarbons are hydroelectric power and nuclear power, but these are extremely limited in their scope for growth. Hydroelectric is only economical in areas near large sources of hydroelectric power, while nuclear faces very strong political and regulatory barriers to its expansion, and is itself dependent on hydrocarbons for the industrial materials that make it possible. Even if all political and regulatory barriers to nuclear adoption were removed tomorrow, it would still take many decades before the infrastructure for nuclear energy can be built to match hydrocarbon fuels, and it would still require hydrocarbons as inputs into the process. Building the plants, training and educating the engineers, and generating enough market demand to invest heavily in nuclear fuels will be very time-consuming and expensive when one remembers that existing fossil fuel infrastructure is still highly functional.

In the conclusion to Energy Aftermath, Lee, Ball, and Tabors explain how the environmental crusade against hydrocarbons followed the same failed playbook of the 1970s’ anti-inflationary crusade against hydrocarbons. Thirty years after publication, they continue to be proven correct: 

“A second set of events is occurring as this book goes to press. The academic, business, and governmental worlds are beginning to focus on the issues of global change, specifically global warming and the effect that increased combustion of fossil fuels plays in the production of the greenhouse gasses. The debate has opened, the research potential is clearly there, the opportunity to look forward and backward to identify new alternatives is also there. It is discouraging to the authors to note that many of the technologies trotted out for inspection are those we evaluated in the 1970’. Most of the modeling tools that w tried—and largely rejected—in the 1970’s are being dusted off, updated to produce environmental residual measures, and running again. There were lessons, as we have pointed out, that do apply to the questions of global warming. Learning implies that the mistakes of the past need not be repeated.”

The cost of fiat fuels

I studied these questions in depth when doing my PhD more than a decade ago and became disillusioned with the state of the scholarship on these questions and the enormous and blatant theft these policies encourage. It appeared to me clear at that time that the renewable energy scam was fast becoming as entrenched as the corn subsidies that are a permanent fixture of world and US politics. There were powerful interests making a significant income from these scams, and they set the terms of debate around these questions. Trying to discuss these issues with sanity was just an invitation for ostracism and abuse. Intellectually and professionally, there was little point in trying to confront these terrible ideas. Hydrocarbons would continue to provide the vast majority of energy in our world anyway, as people’s market choices will inevitably triumph over their vacant virtue-signaling.

More recently, it has become clear to me these questions are far more significant than the economic inefficiency and theft they entail. As the utilization of unreliable and uneconomical energy sources has increased, the cost of power has begun to rise again, reversing the essential process of progress that is human civilization itself. In all of our history, humans have sought ways to increase the amount, and reduce the cost, of the power they are able to deploy to meeting their own needs in life. From lighting fire, to domesticating horses, building waterwheels and windmills, burning coal, oil, gas, and utilizing nuclear energy, humans have constantly sought and found the technologies and raw materials that can bring them more and cheaper power to meet their daily needs. And with this growth came the constant improvements in the quality of life which most of us take for granted today. By mandating the use of primitive low-power unreliable energy sources, governments are raising the cost of all economic activity, making life more difficult, and effectively rolling back human civilization.

All over the world, places that have aggressively mandated the use of fiat fuels for the grid are witnessing a steady rise in the cost of electricity. Germany has witnessed a 51% rise in the cost of electricity between 2006 and 2018, and a doubling in price between 2000 and 2020. California, the US leader in mandating fiat fuel, has witnessed a 39% rise in the cost of electricity between 2011 and 2020. The United Kingdom’s electricity prices rose by 27% in the decade leading up to 2020.  Energy price increases seem to be normalized and accepted by many in these economies, but the implications are severe in the long term, in three particular ways. First, higher energy prices badly impact the poorest in society, who usually spend a much higher percentage of their income on energy. Second, higher energy prices translate to rising prices in all goods and services, as energy is an input into every production process. Finally, rising energy prices are debilitating for energy-intensive industries, particularly manufacturing, which effectively means these societies are deindustrializing and destroying their high-productivity industries. It is astonishing to imagine that Germany, the industrial powerhouse whose efficiently engineered and manufactured goods have blanketed the planet, allowing the world to increase its productivity drastically, is now committing industrial suicide by making manufacturing prohibitively expensive in order to promote the engineering scam that is fiat fuels.

Energy prices rise with the deployment of fiat fuels due to their intermittent nature, which means that they produce energy according to the whims of nature and not the demands of consumers,, resulting in expensive problems of under-production and over-production. Since there are times in which renewable energy sources will produce no energy whatsoever, and these times can coincide with peak demand, all power grids must maintain reliable power plants able to provide them with peak demand when needed or else face brownouts or blackouts. As a result, the investment in fiat fuel plants is almost entirely an added cost to the grid, not a replacement. To ensure that electricity users have full power when they need it, there can be no reduction in the capacity of reliable power sources. Overproduction is another major contribution to cost. When demand is low but fiat fuel plants are running at high capacity (such as windy nights for wind turbines, or cool sunny weekend days where there is little demand for heating, cooling, or industrial production), the grid must invest significantly to find ways to safely dispose of the excess energy, and this energy can cause damage to the grid, leading to blackouts.

Beyond the rise in the direct market price of electricity, the imposition of fiat fuels has also led to plummeting power grid reliability in much of the industrialized world, which entails significant indirect costs. The transformative power of hydrocarbons lies not just in the high power they deliver but also in their ability to deliver power on demand, when required, anywhere on earth, freeing humans from having to tailor their actions around the weather. Fiat energy is reversing this enormous leap forward for humans. It is astonishing to watch a place like California, which had managed to secure twenty four- hour reliable electricity for its citizens many decades ago, reduced to having its governor call on its citizens to avoid doing activities requiring high power in the evening as the sun sets and solar power generation slows down.

Years of investment in unreliable energy sources, and underinvestment in gas and nuclear plants, have left the infrastructure of many advanced economies teetering at the brink, one natural disaster away from collapse. Shellenberger’s Apocalypse Never provides a good overview of the extent of this malinvestment in California, and as the rest of the world continues to head in the direction of California with fiat fuels, it is hard to escape the conclusion that these catastrophic grid failures will become far more common, leaving humans to fend for themselves against the challenges of the natural environment without the power technologies that have made survival progressively easier over the past few centuries.

Once one strips away the carefully crafted and expertly marketed romantic pseudoscientific halo around fiat fuels, there is no escaping the conclusion that they represent nothing less than the reversal of the process of civilization and the devastation of human progress achieved through centuries of hard toil, sacrifice, capital accumulation, and technological ingenuity. Providing twenty-four-hour electricity reliably, regardless of the weather or time of day, is an engineering problem that advanced industrial societies like California and Texas solved many decades ago. The failure to have this luxury in the twenty-first century cannot be explained through any technological or natural reasons; it is the work of fiat fuels. But the disasters of fiat fuels are not limited to the developed industrial societies forsaking development and progress. Fiat fuels have arguably been more devastating for many undeveloped and predominantly preindustrial societies, countries with low levels of capital for which spending on these luxuries is an unconscionable waste. Poverty is the inevitable consequence and symptom of a lack of available power, and the only proven technologies for delivering high power on demand at low prices are based on hydrocarbon, nuclear, and hydroelectric energy. Yet the last three decades have witnessed a proliferation of development projects aimed at helping poor countries “transition” to renewable energies instead of investing in reliable energy. The track record of these projects has been dreadful. Western donors and “misery industry” bureaucrats get to write their virtue-signaling reports full of rosy language on the transformative potential of these energy sources, but the people who have to rely on them end up with unreliable low power available intermittently, and usually, they still have to pay enormous costs in debt servicing and maintenance. At a time when reliable power generation from hydrocarbons is becoming cheaper than ever, burdening the world’s poor with the expensive, useless, virtue-signaling toys of the West is no less than criminal.

In his book Where Is My Flying Car? A Memoir of Future Past, J. Storrs Hall finds a steady trend, stretching for three centuries, of usable energy growing at about 7% per year, which can be approximated as a result of a 2% increase in energy efficiency, 3% population growth, and 2% growth in actual energy consumed per capita. The growth in energy consumption per capita at 2% is a relationship that has held since the beginning of the nineteenth century, with the beginning of the utilization of fossil fuels, until the 1970s. The material of this chapter can go a long way toward explaining why the growth in per capita energy consumption stopped rising in the past fifty years. With inflation causing the prices of energy to rise, and increased interventions in energy markets, the growth in energy consumption has slowed.

An industry that best illustrates this trend is aviation, which I have written about before.85 It is a remarkable feature of the modern world that airplanes today travel at slower speeds than they did in the 1970s. Commercial flight times have not only failed to get shorter; they actually take longer than they did in the 1960s, at least in the U.S. where I was able to obtain reliable data.

Forty years after its introduction, supersonic flight is no longer available for civilians, neither in commercial nor private jets. Jet manufacturers continue to be conspicuously silent about any plans to reintroduce supersonic flight. But perhaps most astonishing is the failure of anyone to come near challenging the world speed record for flight for four and a half decades. The world speed record for flight was constantly increasing from the Wright brothers’ maiden flight in 1903 until July 28, 1976, when a U.S. Air Force SR-71 Blackbird registered the fastest speed for an air-breathing aircraft: 3,529.6 kmh, or Mach 3.3. On that same day, another SR-71 registered the highest airplane altitude record of 25,929 meters. Forty-five years later, both
records still stand. The SR-71 was decommissioned in 1991, and none of the replacement aircraft has come close to achieving its speed or elevation.

World flight speed record, 1903-2017. Data from 1910-2017 obtained from the Fédération Aéronautique Internationale. Data from 1906 to 1909 obtained from Taylor, John and Kenneth Munston. 1961. Jane’s Pocket Book of Record Breaking Aircraft. Collier Books, New York, NY. Data from 1903-1905 obtained from the Wright Brothers Virtual Museum.

The closing of the gold-exchange window in 1971 caused a rise in costs of all goods, including food and fuel. The rise in the price of energy was massively disruptive to a highly industrialized world economy reliant on modern high-power tech. Environmentalist ideologies that villainize consumption and human prosperity became widespread. As illustrated with aviation, innovation in many industries shifted from improving performance to reducing consumption. If human progress in the past two centuries had come through the steady exponential increase of energy consumption, one can only wonder what progress we have missed out on from the increasing costs of energy and the stunting of our consumption of it.

Whether in food, science, or energy, the introduction of government fiat to a market disfigures it completely. We have no idea what the world would look like if we had continued to have a free market in energy and inflation hadn’t spiked prices and made them so volatile. There are advantages and drawbacks to each source of energy, and a free market would have allowed individuals to make the choices that maximize the benefits while reducing the costs. The enormous resources wasted on fiat fuel fictions would probably have been spent on gas plants, helping more of the world transition from dirty coal to clean gas. Nuclear energy might have advanced enough to displace most hydrocarbons used in energy generation. With steady accumulation of capital guided by rational calculation on an uncorrupted money, energy prices would likely be a fraction of where they are today. In short, corrupt fiat money has robbed countless generations of incalculable human flourishing and prosperity.

Chapter 9
Chapter 11