White House Chronicle

News Analysis With a Sense of Humor

Political Class Isn’t Leveling With Us About the Hard Times Ahead

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There is a rough road ahead for the world, and our political class isn’t leveling with us.

As Steve Odland, president and CEO of The Conference Board, one of the nation’s premier business research organizations, said in a television interview, inflation will continue at least until 2024, and longer if things continue to deteriorate with the supply chain and the war in Ukraine.

Particularly, Odland, who serves as a director of General Mills, fears a global food crisis with famine in Africa and many other vulnerable places if Ukrainian farmers don’t start seeding spring crops to start this year’s harvest. Already, Ukraine — known as the world’s breadbasket — has cut off exports to make sure there is enough food for their own people, as war rages.

Odland sees U.S. inflation continuing at 7 percent to 8 percent for several years at best. But his primary worry is global food supplies, as countries face a crisis of new and frightening proportions.

His second worry is stagflation. If the rate of productivity falls below 3 percent, “then we will have stagflation,” Odland told me during a recording of “White House Chronicle” on PBS, the weekly news and public affairs program I produce and host.

Odland faults the Federal Reserve for being timid in raising interest rates to counter inflation.

I fault the political class for not leveling with us — both parties. As we are in a state of perpetual election fervor, we are also in a state of perpetual happy talk. “Get the rascals out, and all will be well when my band of happy angels will fix things.” That is what the political class says, and it is a lie.

We are in for a long and difficult period, which began with the pandemic that disrupted supply chains and set off inflation, and now the war in Ukraine has compounded that. Supply chains won’t magically return to where they were before COVID-19 struck, and more likely they will have further constrictions because of the war. New supply chains need to be forged, and that will take time.

For example, nickel, which is used in the batteries that are reshaping the worlds of electricity and transportation and for stainless steel, will have to  come from places other than Russia. At present, Russia supplies 20 percent of the world’s voracious appetite for high-purity nickel. Opening new mines and expanding old ones will take time.

The world’s largest challenge is going to be food: starvation in many poor countries, and high prices at the supermarkets in the rich ones, including the United States. There are technological and alternative supply fixes for everything else, but they will take time. Food shortages will hit early and will continue while the world’s farms adjust. There will be suffering and death from famine.

The curtailing of Russian exports will affect the United States in multiple ways, some of which might eventually turn out to be beneficial as the creative muscle is flexed.

In the utility industry, someone who is thinking big and boldly is Duane Highley, president and CEO of Tri-State Generation and Transmission Association in Denver. Highley told Digital 360, the weekly webinar that emanates from Texas State University in San Marcos, the challenging problem of electricity storage could be solved not with lithium-ion batteries but with iron-air batteries.

In its simplest form, an iron-air battery harnesses the process of rusting to store electricity. The process of rusting is used to produce power when it is exposed to oxygen captured on site. To charge the battery, an electric current reverses the process and returns the rust to iron.

Clearly, as Highley said, this won’t work for electric vehicles because of the weight of iron. But in utility operations, these batteries could offer the possibility of very long drawdown times — not just four hours, as with current lithium-ion batteries. And there is plenty of iron stateside.

Another Highley concept is that instead of dealing with all the complexities of transporting hydrogen, it should be stored as ammonia, which is more easily handled.

This isn’t magical thinking, but the kind of thinking that will lead us back to normal — someday.

Politicians should stop the happy talk and tell us what we are facing.

Disruptive Technologies and the Agenda They Set

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The copper-wire telephone is in danger, traditional advertising is drying up and health care costs are through the roof and rising. What is the villain? Well, it’s technology; particularly, “disruptive technology.”

Disruptive technologies are devastating to established order. And they underlie Congress’s consideration the most wide-ranging legislative challenges it has faced since the New Deal: health care and energy.

Hugely effective but expensive new medical technologies, like magnetic resonance imaging, nuclear therapies and artificial joints, threaten to bankrupt the nation’s health care system. At the heart of the health care debate lie the escalating costs for these new technologies and how to shoulder and control them. The rudimentary solution is to get the well to pay for the sick, in the way that Social Security seeks to get the young to pay for the old.

After health care, Congress has to consider energy and its leitmotif, climate remediation. Here, too, it is faced with new technology forcing the issue. Even as the Senate contemplates taking up the House-passed bill, with its heavy emphasis on renewables, new drilling and discovery technologies are tipping the energy balance towards natural gas and away from other competitors like wind and nuclear power. Ironically, at one time, nuclear power was a disruptive technology that threatened to elbow out coal.

In electricity, Congress can force the market away from the disruptive technology toward something it favors for social and political reasons, like solar or wave power. The cost is simply passed on to the consumer.

As for transportation, the energy imperatives are dictated by the forces of infrastructure and sunk cost. In the long term, there are four options that will keep the wheels turning:

1.plug-in hybrids leading to full electric-powered vehicles;

2. hydrogen fuel-cell vehicles;

3. ethanol-powered vehicles and;

4. compressed natural gas-powered vehicles

These options are not created equal. Hybrids are here but the batteries are expensive, and the plug-in option dictates that the car sits in a garage or a parking lot that is equipped with plugs for charging. Also, the batteries decline with time and cannot be used after they lose about 30 percent of their design capacity. If you live in a high-rise, plugging in your vehicle is not yet an option. Ditto pure electric vehicles.

Hydrogen is a darling technology of the green community, which marvels that it is emission-free except for water. Trouble is, there is hydrogen aplenty in nature but not free-standing; it has to be extracted from hydrocarbons, like natural gas, or from water, with huge electrical input. Why not use the gas or the electricity directly?

General Motors markets a duel-use vehicle that can run on E85 (85-percent corn-derived ethanol). This fuel was a favorite of President George W. Bush; but the environmental impact of putting so much farmland down to corn for fuel and the effect on corn prices has taken the bloom off ethanol.

Natural gas–which can be used in a modified gasoline engine and has been made more abundant by revolutionary horizontal drilling technology–is advocated by T. Boone Pickens and others. It has come late to the transportation fuel wars because of fears of shortage, now proved groundless. Natural gas is not without emissions, but these are about half of those of gasoline. And it may be the big energy disrupter.

Congress, reluctant to pick winners for fear of also creating losers, intends to throw cash at every option in the hope that the market can make the choice later. But the market is not immaculate–and less so in energy than almost any other commodity. Electricity has to move down a finite number of power lines, and transportation fuels depend on the nation’s 160,000 gas stations for market entry. You can expect the gas station infrastructure to, say, provide replacement batteries, charging points, hydrogen terminals or natural gas compressors. But can you expect it to provide all of these?

Maybe the gas station, rather than being the vital element in the new energy regime, will be rendered obsolete by disruptive new technologies that allow gas compressing and electric charging in home garages and commercial parking lots. Maybe the hybrid of the future will have a compressed-gas engine and plug-in capacity, and all this will be achieved without the traditional gas station. Technology enhances, modifies and improves, but it is hell on established order.

Leon Trotsky said: “You may not be interested in war, but war is interested in you.” Congress ought to know that technology, disruptive technology, is interested in it. –For the Hearst/New York Times syndicate

 

The Pity of Earth Day–It Brings Out the Crazies

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The trouble with Earth Day, which we mark this week (April 22), is that it has a powerful hold on crazies. Crazies on the left and crazies on the right.

That certainly is not what Sen. Gaylord Nelson had in mind when he inaugurated the first Earth Day in 1970. The senator, and others, hoped that Earth Day would attract a serious examination of the stresses on the Earth. Instead, it seems to attract stressed people.

From the left come the neo-agrarians, the anti-capitalists, the no-growth proselytizers, and the blame-America-first crowd. From the right come the supporters of the Competitive Enterprise Institute, a pro-business phalanx that is in deep denial about man’s impact on the environment, and libertarians who refuse to believe that governments can ever get anything right, or that government standards can be beneficial.

The fact is that a great majority of Americans are deeply concerned about the environment and maintaining the quality of life that has been a hallmark of progress in the 20th and 21st centuries. This majority includes electric utility executives, oil company CEOs, and the trade associations to which these industrial captains belong.

It is notable the extent to which the energy industries have signed onto the concept of global warming and other environmental degradation. They know that their activities often collide directly with the environment and they are, often to the surprise of the environmental community, keen to help. British Petroleum is pouring millions of dollars into solar power and hydrogen. John Hofmeister, president of Shell Oil Company, the U.S. division of Royal Dutch Shell, is retiring early to devote himself to the task of alerting Americans to their energy vulnerability and to the environmental story.

Sure, it took industry a long time to get on the environmental bandwagon. It is the way of industry that it initially resists any innovation that might cost money or involve difficulty. Later it buys television advertising, pointing to its own virtue when it has capitulated.

The introduction of double-hulled oil tankers in domestic waters is a clear example of this: conversion in the face of necessity. After the Exxon Valdez disaster in 1989, the government mandated double-hulling, the tanker industry moaned, and oil spills in domestic waters declined by 70 percent. The cost of double-hulling is balanced out by the lack of payouts for spills. Double-hulling ships, like removing lead from gasoline, introducing the catalytic converter, and banning hydrofluorocarbons in propellants and refrigerants, are major American environmental successes. We led the world.

But if you listen to the critics, you would think that the United States was always on the wrong side of the environmental ledger.

The problem is we live well and we consumer a lot of energy and a lot of goods in our routine lives. There are about 21 gallons of gasoline in a 42-gallon barrel of oil. If you calculate your own daily gasoline usage, you will come up with a pretty frightening number over your lifetime. Likewise, coal burned for lighting, heating and cooling. Residents of New York City, who live on top of each other and do not drive very much, use about half of the energy of suburban households.

For a serious improvement in the environment, just from an energy consumption standpoint, we need to generate electricity by means other than burning fossil fuels (nuclear and wind), introduce more electric-powered public transportation, and substitute electric vehicles for hydrocarbon-powered vehicles. The technology is in sight for all of these. The problem is that the political will is distracted by the pressure groups on the left and the right.

Human impact on the environment can be disastrous or benign, and even beneficial. The towpath along the Chesapeake & Ohio Canal in Washington, D.C. started out as a purely commercial intrusion on a river bank, but now it is a recreational magnet. The dams along the Colorado River have boosted growth in the West, but the river has paid a price. Seattle City Light, the utility that serves the Seattle area, is now carbon-neutral because of the large amount of generation it gets from wind and hydro. There is a debate whether damming rivers is justified; but compared with other ways of producing large quantities of electricity, it is relatively benign.

Farming is an intrusion into nature—a constructive one. The challenge for the Earth Day advocates is to find other constructive intrusions.