In free markets, commodities bought and sold possess perceived value. When a buyer and seller reach an agreed upon price for any product, there is a "meeting of the minds." The value of any natural raw material is proportional to its scarcity. The more of it there is, and the more easily it can be obtained, the less value it holds. A vendor who sells ordinary rocks cannot make a living when his product is found freely all over the ground. If he transacts in gold or silver, diamonds or rubies, however, his hard-to-find "rocks" are worth a small fortune. If only there were a way to turn ordinary rocks into valuable commodities!
There are, in fact, two well-known ways to do so. An unscrupulous vendor could simply paint ordinary rocks gold and pretend that common minerals are rare, and an unsuspecting customer might never be the wiser. Through fraud, the seller can hijack the perceived value of his goods and undermine the agreed "meeting of the minds" between himself and any deceived customer. His "precious" rocks actually hold no value but provide him with ill-gotten gains. Over time, however, this type of fraud does not last. More discerning customers eventually catch on to the ruse, and that information is shared among prospective buyers. And unless he is quick to move on to a new town with new buyers yet to be deceived, old swindled customers are likely to end his livelihood or much worse. Engaging in fraud comes with serious personal risks.
There is another, safer way, however, to turn ordinary rocks into valuable commodities. The vendor could petition the king of the realm for the exclusive right to gather and sell ordinary rocks. If granted such an extraordinary license — whereby ordinary rocks may only be possessed if first stamped with the vendor's mark — then an abundantly available natural resource becomes scarce overnight. What was once free now costs whatever the vendor and the king's tax-collecting chancery decide to charge for the use of regulated rocks. Perhaps citizens with special status or recognized allegiance to the king will still get their rocks for next to nothing. Yet the classical mechanics of supply and demand still come into play for everyone else. Even if the price charged for an officially sanctioned rock is kept low, its value on secondary markets is determined entirely by the scarcity of available vendor-stamped rocks.
How much are licensed rocks worth if they are the only ones that may be legally owned? When a king and vendor conspire to make only a small fraction of available rocks "legal," then their manufactured "unavailability" makes them extremely valuable. Legally imposed scarcity comes with much fewer personal risks. Licensed monopoly on high-demand commodities is a license to print money.
From this lens, it is easy to see why so many investors love government intervention in energy markets.
Governments possess the power to conjure artificial value from nothing by creating laws that make it impossible to participate in the market without first paying for the privilege. One such scheme is to take an essential raw material needed for all industrial production and commerce — energy — and regulate it to the hilt. When abundant sources of hydrocarbon fuels are heavily regulated, ownership of government-approved, hydrocarbon-based assets becomes much more valuable. When governments limit drilling and mining for hydrocarbons in the ground, they manufacture scarcity. When governments set strict limits for how much oil, coal, and natural gas may be used commercially, such energies' broad industrial usefulness ensures increasingly high demand. When companies are forced to limit their "carbon footprint" or purchase "carbon credits" (ordinary rocks) from licensed "green" vendors, then the government's preferred business partners reap windfalls (and the government's treasury mushrooms, too).
When only certain wealthy individuals and companies can afford artificially expensive hydrocarbon energies as regular business costs, then budding entrepreneurs and small firms can no longer compete. Those at the peak of society's wealth pyramid have a much easier time staying on top when the same natural sources of hydrocarbon energy once used to amass fortunes are now denied to those who would do the same.
A war on "fossil fuels" is a superb tactic for protecting private market share. It is a profitable ideological cause for fattening government revenues. And it is a constant source of income for environmental "nonprofits" and other special interests that are more than willing to feed from the government's spending troughs in exchange for promoting the government's profitable "green" game.
Are electric vehicles as powerful as their internal combustion engine counterparts? Can wind and solar energies really provide nations with reliable power grids robust enough to avoid rolling blackouts? Can plastics, heating oil, and most synthetic materials found around a home be magically manufactured without petroleum?
Can the global population stave off famine and starvation if farmers are forced to overhaul agricultural and livestock production methods in order to abide by "green" laws limiting the use or release of carbon dioxide, methane, nitrogen, and phosphate — molecules and compounds essential to basic farming and high crop yield fertilizers?
Or will these "green" initiatives wind up looking remarkably similar to the example of the unscrupulous vendor above who learned how to swindle his customers by treating common minerals as rare and painting ordinary rocks gold — or perhaps now, a resplendent green?
Is that not what the imposition of Environmental, Social, Governance (ESG) standards upon markets accomplishes? Is ESG not a concerted effort to warp trading markets with acutely political aims that seek to reward companies and capital investments for their pledged commitment to ideological beliefs rather than their likelihood for generating future profits?
When boardrooms and investors distort free markets by treating stocks and other assets as more valuable than they really are, simply because they are painted a shiny "green," then ESG overvaluation turns misguided yet "politically correct" fantasies into gold. Ideology hijacks the market's natural direction toward an objective and transparent "meeting of the minds." There is an unspoken but unmistakable fraud.
Until governments, including hostile adversaries such as Russia and the United States, conspired to limit the use of hydrocarbon energy and "go green," the idea that anybody could turn a profit from the wind or sun would have seemed as absurd as a vendor selling rocks freely available all around us. On the other hand, making a fortune from bottled water once seemed absurd, too.
Government-enforced environmentalism has created its own class of "green" billionaires. Whenever and wherever governments have mandated that citizens purchase certain goods or suffer legal consequences, the producers of those goods have made financial killings.
Anyone once blissfully unaware of that kind of crummy crony capitalism surely learned a thing or two watching global vaccine mandates drive up pharmaceutical industry profits, while government-granted indemnification clauses rendered vaccine makers free from financial liability for any resulting injuries.
When governments subsidize entire industries, force citizens to purchase those industries' products, and protect those industries from the legal consequences of their products' harm, then money flows into the pockets of those with ownership stakes.
When kings mandate that all internal combustion engines be scrapped and all consumer vehicles run on lithium batteries, then electric vehicle manufacturers are licensed, like our royally sanctioned rock-vendor above, to print money, too. For those who jumped on the "green" bandwagon early and invested in technologies that would be touted as necessary replacements for traditional hydrocarbon-dependent machines, vast fortunes have been made. The principal driving force behind much of the "green" revolution appears not to have been environmental concern but rather good old-fashioned greed.
Sure, going "green" has been lucrative for some, but can that lucre last? That is the magical thing about hydrocarbon regulations and carbon credit requirements. Should the government's preferred "green" vendors need more wealth, then politicians can simply ratchet up the energy pain for everyone else. The fewer hydrocarbons that companies and citizens are "allowed" to consume, the more money they will be willing to pay for "credits." Through self-dealing mandates, governments create artificially appreciating "green" assets. The sky is the limit!
Or rather, is it not the total confiscation of one's wealth and the fruits of one's labor that is the inevitable end point here? Should ordinary people not be able to abandon their consumption of hydrocarbons as easily as government agents demand, they will simply have to go without automobiles, modern technologies, ordinary comforts, air conditioning, or even heat.
No personal cost, it seems, is too high to meet the Green New World Order's demands (or to ensure that preferred "green" vendors and their government friends remain flush). "Green" profits can only rise if citizens' freedoms continue to fall.
Does that sound remarkably similar to another political philosophy that is predicated on the abolition of all private property? What is that old saying somewhat apocryphally credited to Vladimir Lenin? "The capitalists will sell us the rope with which we will hang them." Or perhaps today it is the "green" capitalists who make money by rendering food and fuel scarce, virtue-signaling "green" advocates who cheer the one-sided transaction, and the increasingly impoverished Western citizens who end up worse off than ever.
This much is certain: irrespective of prevailing politically correct Western "wisdom" and the current environmental "madness of crowds," should the hydrocarbon bedrock of the global economy be traded for worthless "green" rocks, neither wealthy capitalists nor poor citizens will long survive.
JB Shurk writes about politics and society.
JBM