always be random, so get used to it. The only reasonable way to run your business or your policy is to become indifferent to oil prices. It is still sensible not to use it, no matter what the price.
PM: But it’s very difficult to write a business plan around producing a commodity whose price fluctuates by a factor of two or three.
AL: No, it’s dead easy. When the price goes up, it just means I earn more for the time being. I am really indifferent to oil prices. What the price drop has done—and we called it quite a while ago—is to take a lot of the froth out of the market and kill the most stupid products.
PM: You’ve said we can get energy independence for $180 billion.
AL: I saw we could eliminate the use of oil by the 2040s for $180 billion. Nowadays that’s chump change. You would spend roughly half of that on retooling the car, truck, and plane industries, to triple efficiency, and the other half on an advanced biofuel industry, unrelated to the food system, that preserves and enhances soil fertility. If oil were $26 per barrel in 2025, which is what we have forecasted, then against that a $180 billion investment would yield $155 billion in gross returns and $70 billion a year in net returns, achieve 26 percent less carbon emissions, and create a million new jobs, three-quarters of them in rural and small-town America, saving the jobs at risk in automaking.
PM: I’d do that deal. But I would need a slightly larger fund.
AL: But it’s probably going to be even cheaper than we thought. That’s what we’ve been learning the last four years.
PM: You got started on all this in the 1976 Foreign Affairs article, the “Road Not Taken,” which laid out an alternative path for U.S. energy policy toward efficiency and conservation.
AL: Well, efficiency. I don’t use the word “conservation” because to many people it means curtailment or privation. So let’s use the unambiguous word. It just means doing more with less.
PM: Why do you think that road wasn’t taken between, say, 1976 and 2006?
AL: More happened than you might think. Since 1975, we have more than doubled energy productivity in this country, oil productivity in particular. Gas productivity went up. Electric productivity was stagnant for a long time, for various reasons, one of which was that in 48 states we reward utilities for selling you more electricity and penalize them for cutting your bill. Now we only do that in 40 states, but it’s just as dumb as a possum, and we’ve got to stop doing it. But we have seen sustained reductions in electricity intensity in the last two years. That’s accelerating rapidly and will feed on itself, because as soon as utilities lose demand and revenue, they will plea for a decoupling of profits from sales volume, just as gas utilities did when they experienced demand destruction. And then they’ll start to realize that they can make a lot more money off efficiency than they ever did off supply. Then we’re off and running.
PM: California went through a period when energy efficiency doubled.
AL: They saved $100 billion of capital that they were able to find more productive uses for, because—and these are equally important—they set early and good standards for both building efficiency and appliance efficiency. New houses use one quarter of the energy they used to. And California utilities have been rewarded for the last 20 years for cutting your bill—which has a salutary effect on their behavior.
PM: Home building is a rather odd industry.
AL: Yes, it’s an industry where the basic unit of production is the pickup truck. Most of the industry is very fragmented, and actively resists innovation.
PM: And it’s still building homes that don’t make sense for an energy-constrained world.
AL: Or in any other respect. The lean manufacturing experts have said that 80 percent of the time building a home is spent waiting for something to happen or remediating past mistakes. It’s an extremely inefficient process. One of the good-news headlines is that we can now make hoses that need no cooling or heating and provide excellent comfort from minus 46 degrees to plus 115 degrees.
On the minus 46 degree side, in my climate in Colorado, at least before global weirding, you could get continuous winter clouds. But come into the atrium of my house, and you are in a banana jungle. We have harvested 28 banana crops with
