Good Intentions, Unintended Consequences, and Your Money

As a consumer, investor, and a saver for “rainy day” and future-focused goals and objectives, you must ask key questions. What are you to make of pessimistic climate change and global warming scenarios? How do you balance global concerns against personal needs to feed your family, gas up your car, while perhaps saving for long-term goals such as owning a home, funding for educations, and enjoying a comfortable retirement?

The approach taken by the Biden administration relative to climate change issues has a direct impact on the buying power of your money, driven to some extent by the “law of unintended consequences.” Margaret J. Wheatley, author and organizational change expert, asserts, “Probably the most visible example of unintended consequences is what happens every time humans try to change the natural ecology of a place.” Every time we mess with the planet, even with the best of intentions, often there are unintended consequences.

Governments, especially in Europe and America largely have embraced “green new deal” initiatives. But the sun doesn’t shine 24/7. Wind doesn’t always blow. Draught in some areas has impaired hydroelectric power production. Electric power in some locales cannot meet growing needs. As we see current limitations on clean energy and a continued demand for fossil fuels, political and economic conflicts must be reckoned with, regardless of where one stands politically relative to climate change debates.

OPEC’s decision to decrease oil production increases global inflationary pressures. The prospect of rising prices and potential shortages here at home, a very cold winter in Europe due to dependence on Russian natural gas for heating, and more supply chain issues related to energy shortages and costs, have precipitated a growing round of government interventions in the marketplace. Ludwig von Mises (1881-1973), the esteemed Austrian School economist, historian, and sociologist, warned, “Every government intervention [in the marketplace] creates unintended consequences, which lead to calls for further government interventions.” This reality will continue to vex market prognosticators and consumers worried about “bread and butter” issues. 

As an offshoot to climate change concerns, environmental, social, and governance (ESG) issues complicate the energy conundrum. ESG emerged as an idea focused on corporate interests related to sustainable and ethical impacts, often attached to global warming issues. In tandem with the Biden administration’s actions regarding pipelines and production of oil and natural gas on federal lands, incentives for banks and large investment firms, as well as oil and natural gas producers, to invest in fossil fuel production as well as a needed expansion of refinery capacity, were reduced. Even if you’re a “hands off” index fund investor, you have a dog in the fight over fossil fuels. ExxonMobil Corp., Chevron, and ConocoPhillips rank among the top 50 stocks in the S&P 500 Index based on market capitalization, and their dividends are important to many retirees. Mutual funds and retirement plans invest in indexes as well as blue chip stocks.

Even if you own an electric vehicle, there’s no escaping the Law of Unintended Consequences. Electric bills are rising, as are costs to build and maintain home and highway charging stations.  The Jobs Act of 2021 allocated billions to repair roads and bridges. But as Jacob Borden, associate professor of chemical and bio-process engineering at Trine University (formally Tri-State University) in Angola, Indiana, pointed out, you can’t build roads without oil. (Wall Street Journal, 10/6/22). Asphalt is a byproduct of fuel production. Thirty-percent of fuel production goes into byproducts like asphalt, sheath on electrical wires and cell-phones, IV bags, pill casings, synthetics for clothing, etc. Eliminate fuel production, and what happens to essential byproducts and the costs to produce those? Unintended consequences.

With America no longer energy independent, relative to the production of gasoline, diesel, bunker fuel for ships (warships included), and aviation fuel, we become increasingly reliant on current and future hostile governments. Many of the everyday products we consume depend on China, an authoritarian regime that  controls much of the exotic minerals, solar panels, windmill parts, etc., that power green dreams─an unintended consequence driven by globalism.

The fact that energy costs are linked to virtually everything else is a harsh reality. Persistent inflationary pressures are likely to push the Federal Reserve Bank to hike interest rates more aggressively. Global warming may be a concern, but so will freezing Europeans due to a shortage of liquefied natural gas (LNG). It takes natural gas to make fertilizers essential to crop yields, raising specters of starvation among poorer citizens in less developed countries. Schemes surrounding carbon taxes will hurt the poor everywhere.

On the bright side, difficulties and challenges often yield creative solutions. Political power may shift, as disgruntled consumers call for change as we saw in Italy. Out of common-sense necessity related to security, America may yet return to being a dominant producer of oil and natural gas, the latter a relatively clean “bridge fuel” as we solve problems related to renewable energy.

 Entrepreneurs, inventors, designers, and risk-takers will come to the fore with new ideas, processes, products, and inventions. Progress often is a child born of necessity in times of difficulty. Hang in there, pilgrim, and bet on yourself!