Whatever the outcome of November’s elections, our economic well being requires that the dysfunctional relationship between the White House and Congress change. Governing needs to replace posturing.
A good place to start is energy policy. The failed energy policies of the past have been well documented. Industrial policy initiatives aimed at energy independence and alternative energy sources have failed, have wasted hundreds of billions of dollars, and have distorted the energy market.
Energy is to the economy what oxygen is to human life. To do its job, it needs to be abundant and affordable. As EU citizens and their leaders are learning, the rush to alternative energy has raised the cost of electricity significantly and caused private investment to migrate elsewhere.
Low energy prices alone are necessary but not sufficient to get the economy moving on a stronger growth track. But as we have seen, high energy prices are a dead weight that slows economic growth.
The Energy Information Administration (EIA) in its annual Outlook forecasts that our energy budget in 2035 will continue to be dominated by oil, natural gas and coal, although coal’s share declines and natural gas’ increases. Fossil energy will provide 73% of our energy, only slightly lower than today. Renewables, mainly solar, wind and biofuels, experience rapid growth but at best will provide about 14% of our energy needs. The EIA forecast is consistent with those by private firms.
U.S. Oil Production At 14-Year High
The policy message of the EIA’s Outlook is that our nation should take advantage of our abundance of oil and natural gas resources. Our oil production recently reached a 14-year high and could extend even further. Every barrel that we produce here means a barrel that is not imported or a dollar sent overseas.
Oil use has essentially plateaued. Increased domestic production can translate into much lower imports from unstable regions. Advances in engine and emission technology mean increase fuel efficiency and continued improvements in air quality.
Politicians need to recognize that efforts to push all electric and plug-in-hybrid vehicles to market will continue to flounder because of cost, range and the limits in battery technology. USA Today recently reported that sales of the all-electric Leaf had plummeted 69%.
Hybrid technology continues to mature, so hybrids not electric vehicles are the likely substitutes for all gas and diesel vehicles. As technology advances other systems will come to market but technology can rarely be forced with mandates and subsidies.
Not more than five years ago, it was believed that the U.S. would have to begin importing natural gas in liquid form — LNG. Advances in shale gas technology have reversed that outlook.
100 Years Of Natural Gas
Today, the U.S. has an abundance of natural gas, enough to meet our needs for a century. Clean and affordable, it is replacing coal as the source of electric power generation because of its abundance and cost. It also holds promise as a transportation fuel for centrally fueled vehicles because of its cost advantage.
Alternative energy – wind, solar, biofuels – have fallen short of their promise. They simply are not ready to displace conventional energy sources any time soon. Cellulosic technology is far from commercially viable. Wind and solar are unsuitable for baseload power because they are intermittent, dispersed sources that lack storage for transmission.
Rather than attempt to force them to market with mandates and subsidies, the national interest would be better served through incentives, like the R&D tax credit, to spur investments in technology, and through government research focused on creating new knowledge.
No energy policy discussion would be complete without mentioning nuclear, whose renaissance always seems to be just around the corner. Two major impediments are high costs and the failure of government to deal with waste disposal. Yucca Mountain, a well-studied and ideal waste repository, is a monument to government at its worst.
For too long, political leaders have guided energy development by substituting political forces for market forces. Repeatedly, they’ve failed, and as a result, taxpayers have put up with waste, market distortions and crony capitalism on steroids. The country’s economic welfare can’t afford more of the same.
Now is the time for the White House and Congress to take a balanced, practical and realistic look at America’s energy policy. As we have seen with recent oil and gas production, embracing energy realities can lead to job creation and increased domestic investment.