Fossil Fuels Are the Future

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Fossil Fuels Are the Future

Even the loudest pessimists haven't been making much noise lately about the looming threat of "peak oil," the nightmarish scenario they once promoted, in which the world's oil wells would stop producing, and all of our cars and factories would grind to a halt for lack of fuel.

That's because there is no longer any question that the U.S. is producing an abundance of oil and natural gas, thanks to innovative American technologies like horizontal fracking. And before long, the same technologies that have revolutionized North America will be adapted to Europe and East Asia.

The revitalization of the oil industry is particularly important because, despite massive government subsidies, the renewable energy sources that were supposed to replace it—wind, water, and solar—are still too expensive and unreliable.

Germany provides a perfect example of what can happen when these technologies are prematurely forced on a healthy economy. According to a report on, Germany's decision to shift to green energy is at least partly to blame for its economy's slide into deflation for the first time since 2009.1

In 2011, an earthquake created a tsunami that hit Japan's Fukushima nuclear power plant, leading to the meltdown of three of its six reactors and the release of radioactive material into the environment. This event was the catalyst that enabled Germany's Green Party, which had already staged protests against nuclear energy in the previous year, to convince the German population that Germany's reactors were dangerous.

German Chancellor Angela Merkel bowed to the pressure by closing eight of Germany's seventeen nuclear power stations in 2011. Further, she announced that Germany would close the remaining plants by 2022 and would subsidize the development of renewables until the industry could survive on its own.

The problem was that Germany had already been sheltering the industry from market forces, starting with the Renewable Energy Act of 2000, which provided a feed-in tariff that guaranteed returns for firms providing renewable energy. Even as prices for solar equipment fell over time, the tariffs were not adjusted downward, which meant huge profits were assured...

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