Obama and the Alternative Energy Fiasco
The president is wrong to block oil and gas production.
It's only a matter of time before President Barack Obama's vast popularity runs aground on his energy policies. In the name of saving the planet from global warming, he has delayed new oil drilling, an action that will have major political repercussions once the world economy recovers. Instead of using some the stimulus billions to produce more gas and oil, Obama's wild-eyed supporters dream of "renewable" energy derived from corn, wind, sunshine, and even grass.
With the appointment of extremists like climate czar Carol Browner and science adviser John Holdren, Obama has placed his administration's environmental policy in the hands of radicals. Interior Secretary Ken Salazar proposes replacing oil and coal with windmills. Yet Barron's recently reported that America would need to build 500,000 giant offshore windmills and transmission lines to produce Salazar's specified 1,900 gigawatts of electricity. In contrast, oil and gas drilling could provide hundreds of thousands of solid, well-paying blue-collar jobs. Washington Post economics columnist Robert Samuelson explains this in "The Bias Against Oil & Gas," describing how alternative energy job creation is miniscule compared to what an expansion of oil production would create. Meanwhile, Rep. Henry Waxman (D-Calif.) and Rep. Edward Markey (D-Mass.) have proposed legislation giving legal standing to allow Americans to sue any company that produces "greenhouse" gasses.
All of these things are happening at a time when natural gas is abundant and cheap. The new technology of horizontal fraccing has made it economically feasible to drill into vast shale deposits in many states, even famously difficult ones like Michigan and New York. Many cars could run on natural gas, much like many buses do already. On a recent trip to Peru, I learned that most taxicabs have been converted to natural gas for a cost of about $1,000 each. New technologies continually revive old oil and gas fields and make new ones economically viable. So it's little more than socialist Malthusianism to argue that the world is running out of cheap energy. Science will always find and harness new sources. Even the liberal New Republic recently admitted that, "Utopian environmentalism has, to some extent, always promised to heal the alienation wrought by modernity… it is a form of escapism and disengagement from reality." The extremists scoff at science and would apparently prefer scarcity so that bureaucratic rationing will enforce a change in American lifestyles.
Instead of producing more of the cheap, abundant energy that fueled America's dynamic growth, the extremists who support and surround Obama dream of drastically cutting American consumption. Many of them would like to see the government force General Motors to make flimsy little cars that run on electricity (or alternative energy) at the cost of billions. Meanwhile, the Sierra Club magazine recently boasted of helping to block construction of 96 coal-fired power plants and helping to impose a de facto moratorium on all new plants.
Currently, half of the drilling rigs in America are shutdown because of low oil and gas prices. Most smaller oil companies have suffered severe damage or even gone bankrupt by their inability to renew loans or gain credit. Likewise, the majors have few safe options in foreign countries but would invest heavily in offshore American exploration, if it were permitted.
So what about the so-called green alternatives? Forbes recently detailed the problems with windmills. First, they depend upon a two-cent-per-kilowatt taxpayer subsidy to remain competitive. They also require backup gas generators (in case the wind isn't blowing when needed) and new transmission lines running from windy places to population centers. And while new technologies to store wind-generated electricity are in the works, they have so far proven uneconomical. Nor does this even begin to consider the years of legal delays that would likely result from litigious neighbors opposed to new transmission towers. Solar power is even more expensive and would also require additional billions for backup generators and new transmission lines. Compare those unseen costs to the clear benefits of coal and gas plants where transmission lines are already built.
New oil and gas technologies could also help the U.S. from importing so much oil. But the Obama administration is stalling and trying to stop the offshore drilling approved by the previous Congress. The White House has also shut down previously permitted onshore drilling and burdened drillers with costly new restrictions. Meanwhile, $80 billion in stimulus spending has been earmarked for "renewable" energy. The plan is to give a 30 percent tax credit for the associated costs.
Americans will soon again feel the sting of gasoline costing $3.00 or $4.00 per gallon and then come to recognize how we've wasted years of opportunity to produce more energy domestically. For instance, the U.S. Geological Survey estimates that there are 85 billion barrels of offshore oil. (And that is an old number. It is almost certain to increase once new exploration and testing are permitted.) New supplies in continental America, not to mention the billions of barrels now accessible in Alaska, could transform our trade deficit by cutting hundreds of billions of dollars in imports. This would help rescue the value of the dollar, alleviate the cost of maintaining armies and navies in the Middle East, and help save free trade from the latest round of restrictions.
It's also essential to remember that so-called renewable energy cannot replace oil and natural gas in any significant way. For example, corn-based ethanol production "costs" nearly as much to produce as it saves in oil and can only exist with the help of costly and unending subsidies. Government, in other words, gets what it pays for. If it offers subsidies to alleviate global warming or make gasoline from grass, it will find promoters who will gladly accept that money and deliver scant results.
With the Republicans no longer handicapped by leaders like George W. Bush and John McCain, both of who caved before environmental extremists, Obama's energy policies might be a strong issue for conservatives and libertarians to rally around, and perhaps change their political fortunes. Remember that McCain famously opposed drilling in ANWR, while Bush promised the country that a gasoline substitute could be produced from switch grass.
One day the alternative energy fiasco will be studied as a vast example of waste and fraud that contributed to the collapse of the dollar and to lower living standards for most Americans. Let's hope that day comes sooner rather than later.
Jon Basil Utley is associate publisher of The American Conservative. He is a former insurance executive with AIG and a former South American correspondent for Knight Ridder.