PrintMay 27, 2011
The Administration's No New Energy Policy
The Memorial Day weekend traditionally marks the beginning of the summer driving season but this year Americans are looking at the prices at the pump and reconsidering the cost of a vacation via the great American highway. Four dollar a gallon gasoline has folks tightening their belts rather than loosening their collars and relaxing for a week or two this summer. There are numerous forces affecting the price of gas, including monetary policy and the war on terror premium, but the principal economic force driving these prices is future supply concerns and growing demand around the globe.
Even before the BP blowout in the Gulf of Mexico, in April of last year, the Obama administration embarked on a policy to reduce domestic oil production. In point of fact, President Obama signed an executive order banning drilling in Bristol Bay, Alaska, fully one month before the BP disaster. Additionally, in the wake of the poorly handled BP disaster, the President signed a drilling ban in the Gulf to "assess" the safety of deep water drilling. Subsequently, that ban was lifted but the number of permits issued since the ban ended is less than a dozen due to the bureaucratic backlog, which is moving at less than half fast speed.
The loss of hundreds of thousands of jobs along the Gulf Coast is not the only result of this "permitorium." The shut down of the offshore drilling industry means that future domestic oil production will fall at a time when global demand (from China and India) is rising. The exciting advancements of technology, like the application of horizontal drilling and multi-stage hydraulic fracturing technology, to unleash our onshore American natural gas and crude oil simply can't overcome a plan that cripples the fundamentals required by companies to put deals together to explore, drill, find, and produce oil and natural gas, too. When that happens, you get less of the supply to go around. It is a tried and true economic theorem that if you reduce the supply of a commodity, higher prices are the result. Once again, the American family pays the price.
The loss of hundreds of thousands of jobs along the Gulf Coast is not the only result of this "permitorium." The shut down of the offshore drilling industry means that future domestic oil production will fall at a time when global demand (from China and India) is rising. The exciting advancements of technology, like the application of horizontal drilling and multi-stage hydraulic fracturing technology, to unleash our onshore American natural gas and crude oil simply can't overcome a plan that cripples the fundamentals required by companies to put deals together to explore, drill, find, and produce oil and natural gas, too. When that happens, you get less of the supply to go around. It is a tried and true economic theorem that if you reduce the supply of a commodity, higher prices are the result. Once again, the American family pays the price.
Currently, 56% of the U.S. trade deficit is the result of oil imports. Two hundred billion dollars of American wealth is transferred overseas every year to countries that don't like us very much. If current Obama Administration policies don't change soon these numbers will only get bigger. Regardless of these numbers the Obama Administration only wants to hear about green energy.
Some activists have always dreamed of the day when the world is powered by green energy. The problem with this fantasy is that the technical challenges involved make this an impossible dream. If you include hydroelectric power, the total output of green energy is less than 3% of the total energy produced in the U.S. Wind power needs natural gas as a back up to be practical; and solar, while it sounds good, is only 20% efficient for the very best panels. The higher cost of these solar panels results in a cost per kilowatt-hour of more than twice the current value of a natural gas fired power plant. Energy security is only an empty pipe dream if you are banking on sources other than oil and natural gas to do the heavy lifting to fuel America for decades to come. Simply put, there is nothing coming down the pipe that can turn green energy into reality, unless one wants the American people to make sacrifices.
Speaking of pipelines, for more than three years the U.S. State Department has tied up the building of an oil pipeline from Canada with bureaucratic lethargy. This pipeline would bring oil to the U.S. from a dependable ally that has not had any political turmoil for more than two hundred years. Instead the administration would rather send $2 billion to Brazil to assist them with their off shore drilling projects.
Recently, the President has been speaking out of both sides of his mouth when it comes to production of our energy resources. The message given is "let's drill" while regulatory hurdles are placed in front of the drilling. From where or whom is this mentality derived? Is it ignorance or arrogance? The Administration doesn't have the slightest understanding of oil and gas law, contracts, and the role of geology in the process. They don't understand how deals are done, and it is hurting America.
The reality is that there is plenty of domestic hydrocarbon energy to be produced if only the government would get out of the way and let us go and get it. According to the government's own estimates of the technically recoverable undiscovered petroleum resources of the Gulf of Mexico and offshore Alaska totals 68 billion barrels of oil and 342 trillion cubic feet of gas, or a combined total of 128 billion barrels of oil equivalent. This does not even include the large potential reserves of the Alaska National Wildlife Reserve (ANWR). Simply put, 128 billion barrels of potential oil is what the Obama administration is restraining the United States from developing. Failing to aggressively open up these resources for leasing, by moratorium or "permitorium," the failure and delay in granting permits to drill is a total fiasco of government. Only a radical environmental ideologue could appreciate the logic of this policy that throws the energy security of our nation under the bus.
The demand for oil is not going away just because some bureaucrats have the ill-conceived or ill-informed idea that all our energy needs can be met by green energy. The Energy Information Agency (EIA) places our daily petroleum consumption at almost 21 million barrels a day. By 2030, the EIA projects that the consumption will grow to 23 million barrels a day. If we were the only country using oil this would not be a problem but we aren't.
Global demand for oil is growing as a result of the modernization efforts underway in India and China. China is now Saudi Arabia's biggest customer. In fact China is laying down 600 miles of four-lane concrete highway every year and to populate that highway they are producing 14,000 new cars every day. The Department of Defense (DoD) began studying the growth of these emerging economies and late last year published it's bi-annual report called the Joint Operating Environment (JOE). In that report it states the following:
A severe energy crunch is inevitable without a massive expansion of production and refining capacity. Energy production and distribution infrastructure must see significant new investment if energy demand is to be satisfied at a cost compatible with economic growth and prosperity.
Apparently no one in the Obama White House read that report. The fact of the matter is that we need to be encouraging the oil and natural gas industry to find new sources of domestic energy; it should be a national imperative. Other countries are getting into the energy producing game, thanks to shale oil and shale natural gas. We will eat their dust if we fail to provide the energy our economy needs. We can say adios to energy and economic security and global competitiveness for generations to come.
Chairman Elizabeth Ames Jones, 54, was overwhelmingly elected statewide in 2006 to serve a six-year term on Texas's energy oversight agency, the Railroad Commission of Texas after serving two terms in the Texas Legislature.
