Thursday, August 14, 2008

Alternatives Are Not Viable Yet

Talifaitasi W. Satele

I like to make a number of points in response to Mr. Herdrich’s latest guest editorial.

First, I want to restate the fact that the technology is unavailable to make alternatives economical. When I say “economical”, I mean economical on a scale that fossil fuels (like oil) now provide for.

According to the Dept. of Energy (DOE), only .8% of the electricity consumed in the U.S. was provided by wind power during 2007. To get the other 99.2% would require an overwhelming dedication of resources. We’re talking about land, thousands of wind turbines, transmission lines and new grids here, and such investments would cost a lot of money.

The other thing to consider is that cost is not the only factor in determining what prices will be charged. Cost per kilowatt hour generated by current wind technology may be 4 to 6 cents, but that’s only in service to .8% of the nation’s electricity needs.

Let’s imagine for a second that all of the world’s oil wells dried up tomorrow, and everyone has to jump on electric grids powered by wind turbines. Currently, wind power technology is so far from being sufficient to meet demand that prices per kilowatt would be astronomical in such a scenario.

It’s the same story with every other alternative out there. All together, renewable energy can only provide for a mere 7% of the nation’s energy consumption in 2007 according to the Energy Information Administration.

Second, investment cost for alternatives are still prohibitive. Let’s start with hybrid vehicles. The cost of a Civic hybrid, for example, is $3,980 more than a conventional model. To make up the cost difference, one would have to drive 86,444 miles since you would only save .045 cents a mile at $4 a gallon of gas.

I’m glad Tom Drabble can afford to invest in solar panels for his hotels, but for a lot of folks, such an investment is out of reach and unjustifiable. And all his solar panels are doing is heating his water? People need a source of energy that does far more than that.

Last but not least, the only viable alternative to oil is a cheaper substitute. The switch from whale oil to petroleum was not made out of concern for that stupid animal. It was made because oil was and still is the cheapest form of energy.

Now whoever invents that substitute is going to make a lot of money. Big Oil would be stupid to be blind-sided by such advancement and not be part of that potential market. That is why they’re working on alternatives, not because they have anyone else’s best interest at heart.

In the meantime, having that 18 billion barrels of oil from off-shore drilling is better on the market than lying in the ground despite what the U.S. Energy Information Administration assumes its impact on prices will be in its latest study.

Monday, August 11, 2008

Dr. Patrick Soon-Shiong: Pro-Capitalist or Anti-Capitalist?

Stuart K. Hayashi

This is the story of Dr. Patrick Soon-Shiong, from ABC News's Nightline. Is this a parable about the evils of capitalism? The Nightline story says,

Back in 1985, when Soon-Shiong was working as a surgeon, he was poised to perform a pioneering transplant of cells from pigs to humans when he made a chilling discovery.

"We discovered a virus in pigs, and I refused to do that transplant," he said. "My investors said, You will do the transplants."

His investors later sued him for fraud, and he won in arbitration.

"I recall vividly, they said, 'You know, heroes and pioneers take risks, and all that you will suffer is a slap on the hand from the FDA.' And I said, 'No, that's not all I'll suffer. We'll put patients' lives at risk and I will not do it,'" he recalled.

Aha! Does this not prove the evil of capitalism? Dr. Soon-Shiong stood up to his greedy investors, who were willing to endanger the lives of transplant patients in order to make a quick buck? Were the investors not greater exemplars of capitalism than Dr. Soon-Shiong?

. . .

If I told this story in front of an audience, this is the part where anti-capitalists would not be nodding along, taking this as confirmation of their worldview.

But there is more to the story. Soon-Shiong got tired of this corrupt, unethical environment. And so he started his own pharmaceutical company, American Pharmaceutical Partners (APP). He built up a reputation for honest dealing. Consequently, a lot of consumers decided to stop doing business with the corrupt people, and to buy from Soon-Shiong instead. This has made Soon-Shiong a billionaire -- far richer than his get-rich-quick investors from 1985.

So capitalism does work.

This is how the Nightline article began.

The blood thinner heparin is one of the most used drugs in America, employed daily in hospital surgeries and for kidney dialysis patients.

But a safe supply of this critical drug fell into jeopardy last winter [2007] in a catastrophe that illuminated severe problems caused by the fact that most ingredients for American drugs now come from foreign sources. These sources are not being adequately monitored by either the pharmaceutical industry or the Food and Drug Administration.

The FDA told "Nightline" that as many as 55, or perhaps considerably more, people may have died from the contaminated heparin. So far it's only been able to definitively link three deaths to specific lots of the tainted drug.

Although so far it's only been able to definitively link three deaths to specific lots of the tainted drug. Heparin used to be primarily produced by the pharmaceutical giant Baxter, but Baxter recalled its entire stock, nearly half the nation's supply, after the deaths from contaminated heparin. A number of smaller companies also recalled supplies. To date, Baxter says they have received 955 reports about contaminated heparin in 2008.

That's when billionaire pharmaceutical executive Dr. Patrick Soon-Shiong and his company American Pharmaceutical Partners (APP) stepped in with a large, safe supply of the drug. Without it, countless more Americans would have died.

There are indeed criminals and corrupt people in the business world, and some of them may get rich. But, to the extent that the market is free, consumers are able to seek information about which businesses truly deliver on their promises, and which do not. For that reason, in the long run, businesses that endanger their customers lose potential revenue to competitors who consistently treat their customers better. In the end, free enterprise is the best means of rewarding good conduct. In this case, it was Dr. Soon-Shiong, rather than his 1985 investors, who behaved in accordance with the principles of capitalism.

Saturday, August 09, 2008

Off-Shore Drilling Is Part Of The Answer

Talifaitasi W. Satele

I’m always dumbfounded when people compare our reliance on fossil fuels to an addiction, as Mr. Herdrich did in his guest editorial. If there is anything we’re addicted to, it’s to higher standards of living that oil is now providing for at the lowest cost possible. It’s unfortunate that some would relegate our pursuits of living better, more affordable lives to something as irrehensible as crack; especially when it comes to those who could least afford the high-priced luxuries of an environmentally friendly lifestyle.

In the past, oil harvested from whales was used to light up lanterns and make candlesticks. Transportation back in day was largely horse-driven, and those damn animals came with their own pollution problem: manure. That did not make for a pretty picture in large urban centers like New York City.

Oil replaced whales and horses as sources of our energy needs. And you can say that the switch to oil was unintentionally beneficial to the environment. It saved the whales from extinction, got horses off the streets reducing methane exhaust, reduced our dependence on more carbon polluting fuels such as coal and wood, and as a result of the latter, saved tree forests. All the while, petroleum is used to make everything from plastics to fertilizers to the asphalt the ASG forgets to put in all the potholes back home.

I say “unintentionally beneficial to the environment” because the intention is always to get the most output out of the least input. Economists call that “efficiency”, businesses call it “profitability” and the average Joe calls it “common sense”. And right now, oil is still the cheapest form of energy that requires the least amount of input to extract all of the output that makes modern life convenient. Not hydroelectric power, not wind power, not solar power, not geothermal power, and definitely not ethanol.

Currently, the technology is unavailable to make any of those alternatives economical. But Big Oil is working on it, because they realize that they’re in the energy business, not just the oil business. In the meantime, Big Oil wants to expand oil production at home using their own money, which is the clearest indicator that such ventures are viable. These people are putting their own money where the mouth is by investing billions in the infrastructure and technology that can expand domestic production in an environmentally safe manner.

Whether oil from off-shore drilling comes 10 years or 30 years from now, it is better to start today than it is tomorrow. Gas prices is a function of supply and demand, and increasing supply is the only way to bring them down. Some are even making the point that the now likely prospect of more domestic supplies coming online is causing investors to bet down the price of oil futures contracts.

Cheap gas is not a right, but as a matter of public policy, government should not be standing in its constituents’ way when it comes to using the environment to serve their needs. One day, oil may very well dry up, and we should expect to pay the true costs of energy as determined by supply and demand at that time. But that day is not today, and hopefully when that day does come, inventors have figured out how to make alternatives a viable source of energy.

Until that day arrives, off-shore drilling, oil shale and nuclear energy should all be part of a national energy policy.

Tuesday, August 05, 2008

What's Up With Congress and Gas Prices?

Talifaitasi W. Satele

I hate to jump on bandwagons here, but I have to join the Republicans still holed up in Congress protesting the decision by Democrats to allow the legislature to go on vacation without taking any action on gas prices. Not that Republicans are admiring free-marketeers (which most of them are not), but at least they’re highlighting an energy solution I agree with, and that’s to increase energy supplies.

Get this: Big Oil companies want to use their profits to increase supplies but Congress chooses to stand in their way. Why?

I believe Faleomavaega owes the people of American Samoa an explanation as to why his party is blocking off-shore drilling and nuclear energy and what he has done (if anything) to persuade them otherwise.