Saturday, April 2, 2011

Winning the Energy Future (If, By "Future," You Mean 1980)

This week, President Obama announced his big plan to Win America's Energy Future (seriously).  In his speech announcing the plan, the President explained why it was so necessary:
In an economy that relies so heavily on oil, rising prices at the pump affect everybody -– workers, farmers, truck drivers, restaurant owners, students who are lucky enough to have a car.  Businesses see rising prices at the pump hurt their bottom line. Families feel the pinch when they fill up their tank. And for Americans that are already struggling to get by, a hike in gas prices really makes their lives that much harder. It hurts.
So gas prices are the target, and the President's solution?  Attacking foreign oil:
The United States of America cannot afford to bet our long-term prosperity, our long-term security on a resource that will eventually run out, and even before it runs out will get more and more expensive to extract from the ground. We can’t afford it when the costs to our economy, our country, and our planet are so high. Not when your generation needs us to get this right. It’s time to do what we can to secure our energy future.

And today, I want to announce a new goal, one that is reasonable, one that is achievable, and one that is necessary. When I was elected to this office, America imported 11 million barrels of oil a day. By a little more than a decade from now, we will have cut that by one-third. That is something that we can achieve. (Applause.) We can cut our oil dependence -- we can cut our oil dependence by a third.
Ahh, yes, Energy Independence, the politician's holy grail, white whale and black unicorn all rolled into one smelly package.  As Obama admitted in his speech, pretty much every President since Nixon has futilely chased this mythical beast, but this time, my friends, it's different.  The President's got a Blueprint.  According to the White House blog, this planblueprint focuses on three things: (i) developing and securing America’s energy supplies; (ii) providing consumers with choices to reduce costs and save energy (e.g., mass transit and weatherization); and (iii) innovating our way to a clean energy future (i.e., green energy subsidies).

Now that, folks, is how you win the freakin' future!  (Suck it, China!)

Or not.

You see, upon closer review, the President's big plan is hardly a "winner."  First, there's the fundamental silliness of any domestic energy plan designed to provide American consumers with cheaper, more abundant fuel through "energy independence."  As William Teach over at the Pirate's Cove humorously put it, "With Oil Prices Rising, Obama Looks To….Reduce Imports!"  Exactly.  And Cato's Dan Griswold elaborates:
In a speech today at Georgetown University, President Obama called for a goal of cutting America’s oil imports by one-third within a decade. Like all efforts to wean Americans from big, bad imports, such a policy will mean we will all pay more than we need to for the energy that helps to power our economy....

We Americans benefit tremendously from our relatively free trade in petroleum products. Like all forms of trade, the importation of oil produced abroad allows us to acquire it at a price far lower than we would pay if we had to rely more heavily on domestic oil supplies.

The money we save buying oil more cheaply on global markets allows our whole economy to operate more efficiently. Oil is the ultimate upstream input that virtually all U.S. producers use to make their final products, either in the product itself or for shipping. If U.S. manufacturers and other sectors are forced to pay sharply higher prices for petroleum products because of import restrictions, their final goods will cost more and will be less competitive in global markets. If households are forced to pay more for gasoline and heating oil, consumer will have less to spend on domestic goods and services.

The president talked in the speech about the goal of not being “dependent” on foreign suppliers, but most of our oil imports come from countries that are either friendly or at least not in any way an adversary. According to the U.S. Department of Commerce, one third of our oil imports in 2010 came from our two closest neighbors and NAFTA partners, Canada and Mexico. Another third came from the problematic providers in the Arab Middle East and Venezuela (none from Iran, less than one-third of 1 percent from Libya.) The rest came from places such as Nigeria, Angola, Colombia, Brazil, Russia, Ecuador and Great Britain.

Even if, by the force of government, we could reduce our imports by a third, there is no reason to expect that the reduction would be concentrated in the problematic providers. In fact, oil is generally cheaper to extract in the Middle East, so a blanket reduction would probably tilt our imports away from our friends and toward our real and potential adversaries.
Second, even assuming that energy independence is a worthy goal, the President's three-part plan is one part lip-service and two-parts boondoggle:
  • Increased domestic production.  Few, if any, free marketers (and certainly not me) would oppose a US energy plan that sought to rapidly increase domestic oil and gas production.  And considering that a new CRS report shows that the United States is sitting on top of the largest fossil fuel reserves in the world, the easiest thing the US government could to to lower energy prices is to make it easier for private companies to exploit our natural comparative advantages.  Unfortunately, the administration doesn't appear very interested in approving existing requests for domestic oil and gas drilling permits, and it certainly isn't interested in streamlining the process to request and receive such permits.  And they're not even going to talk about drilling in ANWR, dude.  So just drop it.
  • Energy efficiency.  Everybody likes conservation and efficiency, but unfortunately, when the federal government tries to mandate it, things rarely (if ever) go well.  Just consider the two cost-saving initiatives mentioned by the White House - mass transit and weatherization.  Each has repeatedly proven to be an absolute, money-burning debacle.  On the former, Cato's Randall O'Toole has ruthlessly documented the utter folly of federal mass transit programs, especially those for this administration's beloved high-speed rail.  Here's a sample of O'Toole's findings: "Since Congress began giving states and cities incentives to take over private transit systems in 1964, worker productivity — the number of transit riders carried per worker — has declined by more than 50 percent; the amount of energy required to carry one bus rider one mile has increased by more than 75 percent; the inflation- adjusted cost per transit trip has nearly tripled, even as fares per trip slightly declined; and, despite hundreds of billions of dollars of subsidies, the number of transit trips per urban resident declined from more than 60 trips per year in 1964 to 45 in 2008."  I don't know about you, but to me those stats just scream "yes, let's pour more borrowed money into federal mass transit programs!"  On weatherization, the Obama administration's previous efforts have proven equally awful.  Just consider Tennessee's very recent audit of its federally-funded weatherization program which found a "laundry list" of problems - involving half of all homes surveyed! - including "everything from work not being done or done incorrectly to work being done by people who were not authorized or properly trained. Auditors also found homes and homeowners who were not eligible for weatherization had work done."  Nice.  Of course, other federal energy efficiency initiatives - like those super-awesome CFL lightbulbs - have gone much, much better.  Oh, wait, nevermind.
  • Green energy subsidies.  I've spent a lot of time here documenting the utter folly (and danger) of the federal government's attempts to pick winners and losers in the alternative energy market.  Of course, there's ethanol, the granddaddy of of alternative fuel messes, but it's certainly not alone.  Lots and lots of taxpayer-subsidized alternative energy projects - be they biofuels or wind or solar or geothermal or hyrdo or whatever - have failed over the last few decades (in the US and around the world).  And, of course, when the government's involved, fraud and corruption - or at least the appearance of such nastiness - almost always follow.  According to recent reports by ABC and the Center for Public Integrity, the White House has funneled hundreds of millions of dollars in green energy "loans" to failing US companies that just so happen to be run by big Obama campaign fundraisers.  Blech.
Finally, the President's big plan for winning the future isn't really futuristic at all.  In fact, it's rather boring and archaic.  Every US President since Nixon has pursued "energy independence," and, as I've documented above, the "big plans" in the White House's energy blueprint are as recycled as the paper on which it was undoubtedly printed.  But hey, don't take my word for it.  Just look at these two eerily similar videos - one from President Obama and one from President Carter - announcing their big energy independence plans (h/t Mises Institute):

President Carter's energy plans - which also relied on increased domestic production, conservation and alternative fuels - failed over thirty years ago.  Why should we expect anything different when President Obama tries them now?

Oh, right, we shouldn't.

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