The Power Surge

The Power Surge: Energy, Opportunity, and the Battle for America's Future

by Michael Levi

Main Points:

• Michael Levi pursued his undergraduate degree in physics, masters in mathematical physics/cosmology, and PhD in war physics, but has an interest in energy. This book is the 'first major study' of how the boom is affecting American policy. 
• Historical foundation of the current energy age: the book looks how the debate on energy unfolded the last time we experienced major change (late-1960's, early 1970's). First oil crisis, first Earth Day, continuing rise of nuclear power, as well as finding a footing on the economy, environment, and national security. Intense debate that pitted advocates on growing supply of fossil fuels vs. people who advocated a soft energy path (efficiency and alternative energy sources). This culminated in the 1980 election- resulting in a hands-off approach of government to industry. Ted Kennedy (left wing) criticized opponent for unstable prices vs. David Stockman (chief architect of Ronald Reagan's energy plan) criticized Jimmy Carter's plan as a front for state control. Ten years after this deregulation you see stagnation, moratorium on off-shore drilling, stop tightening improvements on CAFE standards, and not too much improvement on clean energy.
• Today's Energy Boom: Last dozen years the energy scene has come to the forefront: September 11th, emergence of China, Hurricane Katrina, skyrocketing energy prices. Natural gas propelled by gas passes coal as top domestic fuel in 2011, oil production increases and peaks, renewable energy from wind and solar doubles, and U.S. oil consumption peaks. The Boom in Gas and the Boom in Oil. The Bakken Shale, the Barnett shale. Oil and gas production is increasing energy supply, reducing greenhouse gases, etc. Constrains to what can happen: (1) carbon constraint- doesn't hit oil production, we would have relatively high oil prices, and increase investments (2) no energy independence- prices are set on world markets, during a crisis or an oil shock producers do not spend money as freely as consumers do. Oil shock created stagflation and domestic production doesn't completely insulate us. If we were to double production in the US and other's oil production increases too, prices will fall, which will reduce US production, and thus the price change is temporary. 
• Picking apart arguments from papers:  Levi takes various estimates and picks them apart, are the assumptions and techniques accurate. People say there are 9 million jobs related to the energy industry and assume via extrapolation that doubling oil supply will double the number of jobs. This isn't true because a fair number of jobs are for service stations and you won't double the number of jobs at gas stations by doubling supply. Wildcards- What if we are wrong about the economy returning to full strength in the next few years? is one of the many arguments he tries to make in the book. This has a potential to add more jobs
• "Taking a consumer dollar and paying it to a US company is like throwing 75 cents in the trash." What happens if there is a spike in the price of oil? How does the U.S. economy respond? In the short run, the typical consumer doesn't have much money. The typical shareholder, executive, and company have more money, so it takes longer for them to spend quickly. As a result 75 cents of the dollar will not get spent quickly, which hurts the economy. This doesn't mean that corporate profits are good, eventually this money goes to shareholders and in the meantime there is a lot of pain that the economy goes through. 
• Renewable Portfolio Standards vs. Production Tax Credit: RPS isn't great. A tool for broad decarbonization would be a price on carbon emissions. The case for RPS is more as a technology-driver- government helping push technologies in the marketplace, so that cost can be brought down, and it can be improved. RPS brings together a bunch of technologies and essentially becomes a wind requirement. Incentives that are tailored to various sources might be better than RPS. 
• Climate change: More natural gas production will displace coal fired power- natural gas prices will not return to the current prices until 2026. Oil will make economic gains without climate change improvements. We need to use gas as an opportunity to push forward with policy that reduces emissions, vs. hoping that this solves our problems. 
• Current Political Gridlock: As Michael Levi says, "We had bipartisan energy legislation in 2005...You don't hear much about these sorts of things today. Instead you hear about why the Keystone XL pipeline will be gameover for the planet, or how blocking it would be a body blow to national security. You hear about how fracking will  poison our water and corrupt our politics, or how it will create millions of jobs, slash emissions, and provide replacement for oil. You hear about government support for clean energy innovation will propel the US to global leadership in the 21st century or how profligate government spending on losers like Solyndra and Fisker show how badly Washington is adrift."

Listen to Michael Levi's speech on the book via his CSPAN lecture with the World Affairs Council of Houston!

Watch the New America Foundation's interview of Michael Levi on his book The Power Surge, where the interview was conducted by another great author, Steve Levine!

Read Michael Levi's CFR article titled "What My Book The Power Surge Got Wrong."