Updated: May 16, 2021
Climate Change would not be the existential threat to the US economy and American society today, if America and the US energy industry would have committed to diversifying the US energy industry and its associated down stream fuel and feedstock end uses, in the early 1950s, when the US energy industry discovered that US oil production was forecasted to peak by 1970. Of course this was not what business and financial interest in the US energy industry wanted to hear. US oil and natural gas production peaking by 1970 would have catastrophic consequences for the US economy if it were to occur.
To mitigate the risk of peak oil production in America by 1970, leading scientist in the energy industry proposed diversifying America's energy supplies away from oil and natural gas to renewable fuels, electric cars and nuclear power in electric generation. Business and financial interests in the US energy industry were dramatically opposed to spending money to diversify the US energy industry. If it aint broke don't fix it was in effect their motto. Energy industry executives were betting that oil production would not peak in 1970, and even if it did, they were betting that America could import oil at prices equal to or only slightly higher than what it costs to produce oil in America.
Well, 20 years later as forecasted by energy industry experts, US oil production peaked in 1970, and America, the richest and most powerful country on the planet was caught short of oil, naked, unable to increase domestic production of the most important input to the US economy. The business and financial interest in the US energy industry were wrong about US oil production not peaking in 1970, but they were correct that there were ample supplies of oil to import from the world market. But the energy and business interest to the energy industry were catastrophically wrong about what price America would have to pay oil exporting countries to import their oil in the the US.
From 1970 to 1982, the market price for oil in America increased by 1,000%, causing the Great Inflation in the US economy, breaking the competitive economic backbone of the US economy over this period. As we have discussed in the past, America never recovered from this event, because America failed to make the investments required to correct the market failures created in the US economy from the great inflation, but decided rather to use financial engineering to finance uneconomic growth in the US economy on a going forward basis, because that was the easiest thing to do and it also allowed the rich and well connected to exploit this uneconomic situation to make money hand over fist for themselves, but at the direct expense and financial destruction of the bottom 80% of American in America.
America could have killed two birds with one stone, if it had moved forward with diversifying the US energy industry, beginning in the early 1950s, both mitigating the catastrophic risk to the US economy of peak oil production by 1970, and getting a 70 year start on mitigating the risk associated with Climate Change by diversifying the energy industry away from fossil fuels and operating the US economy much more efficiently and economically, making conscious choices to live, work and play in ways that would have eliminated global temperature rise associated with carbon emissions induced by human activity on the planet earth.
Now let's just look at the massive economic cost saving and value added that would have been achieved in the US economy, if America would have done the right thing, making the time, effort and investments to diversify the US energy industry beginning in 1950 to mitigate the risk of peak oil production in the US economy by 1970.
The Great inflation of the US economy would have been avoided.
The financialization of the US economy would have been avoided, because the Great Inflation would have never taken place and the economic backbone of the US economy would have never been destroyed.
The Global Credit Crisis and the Great Recession would have been avoided, because the financialization of the US economy would have never taken place
The challenges of meeting climate change today might be negligible or non existent, given most of the work for diversifying the US energy industry and associated down stream industries would have started aggressively, back in 1950, some 70 years ago
All Together I estimate the avoided economic cost of diversifying the US energy industry beginning in 1950 to mitigate the catastrophic impact to the economy of peak oil production by 1970 is on the order of $40 - $60 Trillion, when you consider the cumulative cost mitigations to the US economy that includes avoiding the Great Inflation of the 1970s, avoiding the cost of financializing the US economy from 1980 - 2008, avoiding the cost of the Global Credit Crisis and Great Recession of 2007 - 2009 and finally avoiding the rush to meet the climate change challenges of today by 2050, since most of those cost would have been developed when the industry began diversification back in 1950.
Now I agree the cost of diversifying the US energy industry starting back in the early 1950 in todays dollars would have been on the order of $3 - $6 Trillion, but it would have mitigated a catastrophically much higher cost of $60 Trillion, which is the actual cost and debt build up that America has experienced over the last 70 years, because America did not diversify its energy industry back in 1950, when the opportunity first presented itself. When will America learn and how many chances will America get before it is too late. That is exactly why I created Making It Right, the Economics of the 100%. I believe that America and the world now have one more chance to do the right thing before it is too late.
Let's move onto the next section, the Great Opportunity where we derive the economics of the 100% and use that economic framework to create a National Economic Strategy for actually Killing US economic Cancer and winning America's future for current and future generations of Americans, in the next 3 - 5 years.
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