Floating Wind Turbines - Brought to you by Big Oil

Now this is just plain cool. Inspiring, really. StatoilHydro, Norway's largest oil company (take a moment to ponder) and the largest offshore oil producer in the world is launching the world's first offshore floating wind turbine generator. Yup, click on the link and have a look. The idea is that wind power might just become a viable competitor further offshore, where wind patterns are stronger and more stable. And, one hastens to add, where they can't be seen by "environmentally conscious" rich people.

The remarkable thing to a lot of people('s stereotypes) will, of course, be that one of the world's largest oil concerns is building this thing. But why not? North sea oil production is drying up - down 31% since 2001. This is largely due to extraction difficulties - the increasing cost of which is outstripping the company's ability to do new exploration and open new fields, even with oil prices as high as they are. An investment in wind power is an investment in the company's future. And in fact, investment in wind power is up in the US too. The link goes to an article about how increased demand is driving up the cost of wind generators. Which is, of course, a Good Thing - because raising prices on wind generators will lead to greater investment in their production, resulting in a greater capacity to produce them, etc. etc. etc.

I'm sorry, it hurts me at the pump too, but rising oil prices, provided they don't start running away, are a Good Thing. We can already see the results in investment patterns. Nuclear plant investment is a reality for the first time in three decades. Investment in wind energy is up. We're subsidizing ethanol to the tune of tens of billions a year. Wait ... wha? Yeah, 'cause when hasn't the government managed to stick its claws into problems the market is fixing just fine on its own.

It's what Brian Caplan (along with other economists) calls anti-market bias: "the tendency to underestimate the economic benefits of the market mechanism." And in this case, as usual, it's spoiling a good thing. If oil is getting harder to supply (because of increased demand from China et al and diminished capacity in places like the North Sea), then higher oil prices are a very good thing - for two reasons. First, because it causes people to limit their use of this increasingly precious commodity. I myself, to take an example, will finally get around to buying a helmet so I can regularly ride the bicycle I purchased last summer. Second, higher profits for oil companies mean more money to invest in future production. That's good for everyone - because when oil companies are less productive, as is happening now when they fail to keep up with ever-increasing demand, energy becomes harder to come by. Notice that oil company investment need not be in future oil projects exclusively. Oil companies don't exist to extract oil - they exist to make a profit. If there is profit in wind power, there will be investment and production in it.

And yet Congress, fuelled by economically ignorant voters, wants to (a) sue OPEC, (b) continue to all but forbid offshore drilling here at home, (c) tax "windfall" oil company profits that would otherwise be invested in energy solutions but will now have the effect of driving prices even higher than they already are and (d) almost certainly funnel those "windfall" tax profits into ethanol, which contains less than 2/3 the energy per gallonof gasoline, is $0.38/gallon more expensive to produce than gasoline, and is unlikely to become more efficient ever (this last is straight from the USDA itself, not some some raving free-market fringe group). "Moron" isn't strong enough a word...

Look - just leave well alone. The market will figure it out. Government didn't create the modern oil industry. Investors figured out on their own that Henry Ford's ethanol-powered Model T's (yup, we've already tried the ethanol "alternative" - it was in fact the first at-the-pump car fuel in America) could be improved by switching to gas. The rest is history. We use oil because it is efficient, and therefore cheap. Rising prices are as much as anything a sign of its falling efficiency relative to other energy sources. Once another energy source is more efficient than oil, the market will give you an incentive to buy that instead by making it cheaper. Like, say, in the form of lower electric bills coming from offshore, floating wind turbines... So let's let the oil companies keep their profits. I guarantee you they know better than Congress how to invest them, and that's because, unlike Congress, they have a real incentive to do right by their investments. Their future livelihood depends on it, after all.