A week ago, Shannon and I were crawling through the remains of the U. S. whaling industry. At one point, the industry accounted for one fifth of the nation’s economy, and it really was no wonder. This ship we were on sailed with a crew of 36, but it was the work of thousands to fit her out for each voyage. The empty barrels and casks alone would take a cooper a year to build. The miles of rigging, the sails, the provisions, whenever the Charles W. Morgan set sail, she did so with the labor of a good portion of New England behind her. She always returned, and she made a profit on each voyage she made.
The reason for her profit changed throughout her career. First it was oil for heating and lighting the cities of Europe. Then, whale-oil was displaced by oil from the ground, and it was fashion and art, be it in the form of baleen for corsets or bones for carving or perfumes. The oil was then sold for its still unmatched abilities to lubricate without ever losing viscosity.
The important lesson for today, however, is that whale oil stopped being used for heat and light long before steam and diesel powered ships made a question as to the avalibility of whales for harvest. Oil stopped being used for heat and light for economic reasons long before the whales became scarce. Oil from the ground was a far easier and more reliable source for industry. A well that struck oil was not a multi-year gamble as was sending a ship to sea.
The same is true in Alaska. We find more and more proven resources on the North Slope. We have, by some accounts, more oil remaining on the slop than we had in proven resources when we built the pipe-line. There are, however, more viable alternatives to oil, and economics are again talking. General Motors has announced plans to offer 18 new all-electric vehicles by 2023, and is taking about an all-electric future.
Let me say that again. The second largest auto manufacture in the world is planning for an all-electric future.
All of the oil in the North Slope will mean nothing if there is no market. The time of having oil pay for Alaska’s government will end, and opening ANWAR or NPRA won’t change that. Offshore oil in the Chukchi Sea won’t change that. We can’t make up the difference in mining revenue, and we don’t have the tax base to maintain our roads and ships without oil. What we do have is a $61 Billion Permanent Fund, wisely set aside so it could be a perpetual source of wealth once the oil is gone. Today, we received our private dividends. To be sure, it was smaller than some had hoped, but the “full amount” would not be largesse for a State that is so rapidly burning through its reserves.
This is our future. Yes, there are places we can still cut, but not by enough to meet our revenue without oil. And yes, we could be gaining more for our oil now, but that is at best a short term solution. And yes, we could raise our taxes quite a bit and still be one of the lower-taxed states in the union, but we can’t raise taxes enough to pay for the expenses set before us by our Constitution. There are angry signs by the side of the road, angry comments in our newspapers and angry posts on Facebook about the “theft” of the PFD, but they all miss the long-term point. The PFD as we have known it is not sustainable without oil, and the demand for oil is not likely to come back. Like the whale-oil before it, petroleum is facing the economic reality that it is no longer the fuel of the future.