"Energy Independence" has been a rallying cry of presidential candidates for at least the last 40 years. In all that time, the USA has not moved any closer to the goal of ending major oil imports. In my opinion, this issue could be a much bigger one in 2012 than it has been for the past few decades.
Let's look at where we will be in 2012. Domestic oil production will be declining rapidly in the USA. Most of the off shore wells that account for a substantial portion of current oil production will have reached the point where their output declines rapidly. There will not be any replacements for those wells, however, due to the actual and de facto moratorium on off shore drilling put in place by president Obama. There will also be declining production from on shore wells; the administration has taken land away from being available for exploration and has delayed permits for other drilling. Within the last week Shell oil pushed a major exploration program in Alaska back for an entire year due to bureaucratic wrangling in Washington.
Declining oil production will mean higher prices at the gas pump and for home heating oil. No one will be immune to these costs. Historically, every time that oil prices rise substantially, the US economy goes into recession. Will 2012 be different? Only time will tell.
Declining oil production will also mean fewer jobs in the oil services industry. This will hit states in the West that Obama might otherwise win. Colorado and New Mexico come to mind; a small swing in those states could send them back into the GOP fold.
Absent a major change from the present, Obama will not have any program or progress at which to point in order to show his efforts towards energy independence. Sure, there will be the subsidies paid out for wind and solar energy, but these sources will remain a tiny percentage of the national energy requirement. Worse still, solar and wind will remain more expensive than fossil fuels even after the federal subsidies. If people look for answers to question about energy policies, Obama will be forced to try to change the subject. A strong and sustained push by the Republicans on this front should make life really tough for Obama.
The sad thing is that there are relatively easy answers to the energy problems. My favorite (as readers of this blog well know) is the promotion of domestic natural gas as an energy source. Natural gas is abundant in the USA; we have about a century's worth of gas located on shore in fields that would not be very difficult to tap. Gas at the moment is much less expensive than oil; the impending oil shortages will only improve gas as an alternative. Gas is also substantially cleaner than oil; emissions are down by a substantial percentage when gas is the fuel rather than oil. When the alternative is coal, gas is even cleaner by comparison.
A federal program to promote the use of natural gas would not be hard to design. Washington gives subsidies for wind and solar. Take that money and use it instead to subsidize conversions of old oil heating systems to new, efficient gas heating systems. Grant tax credits for utilities that switch from oil fired power plants to gas. Use the purchasing power of the government to promote creation of cars and trucks that run on natural gas. Imagine if all postal trucks ran on natural gas. Or suppose all transit buses switched over to natural gas. What if all government vehicles (aside from the military) were switched to natural gas by 2016. Just those moves could provide enough of a market to encourage the auto industry to create natural gas powered cars. It would also provide a base so that some service stations would add natural gas filling stations. In other words, a virtuous cycle would be created. The change over would not take place overnight, but after a decade, a substantial portion of the US auto fleet coul run on natural gas.
Just think what that would do. First, it would mean hundreds of thousands of new jobs in natural gas exploration and production. Second, it would give America the jump on the rest of the world in developing a natural gas car industry. Third, it would cut the level of oil imports dramatically, thereby lowering the world price and allowing us to stop sending hundreds of billions of dollars each year to countries that are not our friends. Fourth, it would reduce the levels of air pollution and carbon emissions. Fifth, it would put money in the hands of the land owners who would get royalty payments from the gas production; this would promote economic growth as well. Sixth, it would mean substantial increases in government revenue both from royalties and taxes on gas production as well as from income earned on all of those new jobs and those receiving royalties.
In short, it all seems like a no brainer. Maybe that is why Washington does no understand it.
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