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Abundance: How Capitalism beat Caliphatism

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.

Happy New Year! Consider Keynes’s last words: “I should have drunk more champagne.” To avert similar rue when our own lives end let us pop an extra cork to celebrate a world undeniably confronting a tsunami of … affordable energy.

Daniel Yergin, in his latest and arguably most promethean work, The Quest: Energy, Security, and the Remaking of the Modern World, infuses a rich ingathering of information and analysis with the narrative power of a McMurtry, the human interest of an O. Henry, all shaken, not stirred, with a frisson of Ian Fleming.

Prosperity is emerging. How did the sourpuss Malthusians in the “Limits to Growth” league allow the heretical: abundance? Clearly someone from the Club of Rome slipped up — badly — and is destined to be burned at the stake. Probably with a fossil fuel.

“What are the prospects for the future?” Yergin asks. “[U]sing a database that includes 70,000 oil fields and 4.7 million individual wells, combined with existing production and 350 new projects… [t]he conclusion is that the world is clearly not running out of oil. Far from it. The estimates for the world’s existing stock keep growing.”

Hydraulic fracturing and horizontal drilling turn North Dakota, an earlier adopter, into America’s fourth largest oil producing state, raising oil at a cost of around just $50 a barrel. Its economic growth is generating, to quote the doughtily dour New York Times, “too many unfilled jobs” — many going begging at $100,000 a pop.

As for gas Yergin observes:

“Over the next few years, the output of shale gas continued to increase. Some now started to call it the ‘shale gale.’ … As a result of the shale revolution, North America’s natural gas base, now estimated at 3,000 trillion cubic feet, could provide for current levels of consumption for over a hundred years—plus.”

Something so vast is occurring as to effect a dramatic transformation of, well, everything. Such ‘sociotectonic’ events can be hard to credit. They are too colossal. But Yergin assembles the pieces and provides us mere mortals with a clear view.

Not to fear. Environmentalists are rising to the challenge posed by the threat of unwonted prosperity! The New York Times, again, prominently, has issued many fatwas against hydraulic fracturing, many by Ian Urbina. Urbina’s rigor and objectivity have been challenged by former U.S. Department of Labor chief economist (now Hudson Institute scholar) Diana Furchtgott-Roth.

Yergin does not shy from reporting the environmental concerns but does not seem unduly anxious: “Critics warn that fraccing may damage drinking water aquifers. The industry argues that this is highly unlikely, as the fraccing takes place a mile or more below drinking water aquifers and is separated from them by thick layers of impermeable rock. Moreover, the industry has a great deal of experience with fraccing. More than a million wells have been fracced in the United States since the first frac job six decades ago.”

The impact of abundant energy on our investment decisions is significant. Yergin: “The lead times may be long owing to the scale and complexity of the vast system that supplies energy, but if this is to be an era of energy transition, then the $6 billion global energy market is ‘contestable.’ … A transition on this scale, if it does happen, has great significance for emissions, for the wider economy, for geopolitics, and for the position of nations.”

The first implications are about wealth and poverty. The second, at least as compelling, are political. Yergin quietly instructs his readers as to the real driver in the war, now winding down behind a victorious America, between al Qaeda and America.

The evildoers behind 9/11 were by no means operating at random. They had a grandiose geopolitical goal. Al Qaeda aspired to the establishment of a caliphate, centrally ruling a united Moslem world, using oil to fund its empire… and as a weapon against the West.

Bush administration poll-tested slogans notwithstanding, in the first decade of the third millennium America was not engaged in a “war on terror.” That’s like saying that we were at “war on bullets.” Terror was a tactic. America was at war with ambitious empire-builders eager to rival and supplant it … at least in the Middle East.

“In his 1996 statement, ‘Declaration of War Against the Americans Occupying the Land of the Two Holy Places,’ Osama bin Laden argued against attacking oil infrastructure in the Middle East, which, he said, embodied ‘great Islamic wealth’ that would be needed for the ‘soon-to-be established Islamic state.’ The attacks that did take place were aimed at foreign interests.

“Then a new jihadi work appeared in 2004 that called for a change in strategy. Titled ‘The Laws of Targeting Petroleum-Related Interests and a Review of the Laws Pertaining to the Economic Jihad,’ it proclaimed the oil industry a legitimate target so long as certain ‘rules’ were followed. Long-term oil production capability should not be damaged. That needed to be preserved for the Islamic caliphate. But it advocated conducting operations that would drive up the price of oil, thus hurting Western countries.”

“Several months later Bin Laden, embracing this new doctrine, urged attacks on oil targets as part of an economic jihad against the United States. … He called for terror attacks that would drive oil to $100 a barrel with the aim of bankrupting the United States.”

Bin Laden is dead. Long before he died he had become irrelevant. Oil aplenty becomes, in ways that cannot be ignored, a mere commodity, like iron, rather than a strategic weapon. Did we win the war on Al Qaeda with bullets, bombs and drones? Or … did we win it, strategically, in the laboratory of free market capitalism?

“George P. Mitchell, a Houston-based oil and gas producer, could see the problem [of limited gas supply] coming. His company was going to run short of natural gas, which would put it in a very difficult position. … But he did have a strong hunch, piqued by a geology report that he had read. That was in the early 1980s. Three decades later, Mitchell’s relentless commitment to do something about the problem would transform the North American natural gas market and shake expectations for the global gas market. Indeed, the stubborn conviction of this one man would change America’s energy prospects and force recalculations around the world. The son of a Greek goat-herder who had somehow ended up in Galveston, Texas, Mitchell had grown up dirt poor.”

Shades of an Ayn Rand novel! World transformation — the balance of world power, the quality of the life of the ordinary citizen — was determined not by a refined bureaucrat but by a smart roughneck with shrewd insight and tenacity. Mitchell Energy got itself acquired (for $3.5 billion!) by another independent, Devon Energy, whose CEO, Larry Nichols, recognized that Mitchell’s increasing output signaled that it had “cracked the code” on how to unleash the imprisoned lightning of energy formerly trapped in shale.

“’At that time,’ added Nichols, ‘absolutely no one believed that shale drilling worked, other than Mitchell and us.’” The narrative that Yergin weaves leaves at least this reader with the conviction that it was the forces of human ingenuity and passion, under a regime of dignity and liberty, that prevailed over a ruthless aspiring Caliphatism as it had over Communism and Fascism.

Happy New Year, dear world, and let us toast Daniel Yergin with champagne for The Quest — a celebration of human ingenuity, passion, dignity and liberty. Without imputing such a sentiment to Yergin himself … by unleashing such forces surely the fall even of the last vestige of the Club of Rome, Obamunism, is not far off.

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