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Alan Krueger Has Some Peculiar Views on Energy Policy

By Daniel Kish

Daniel Kish is the senior vice president for policy at the Institute for Energy Research.

The latest in President Obama’s revolving door of White House Economic Council Chairmen—Dr. Alan Krueger—has some peculiar views on our national energy policy, to say the least.

In his previous capacity as United States Assistant Secretary of the Treasury for Economic Policy and Chief Economist, Krueger testified before the Senate Finance Committee Subcommittee on Energy, Natural Resources and Infrastructure back in 2009 to defend the administration’s budget proposals regarding oil and gas. Krueger began by defining two central tenets to the administration’s environmental and energy policy: (1) that the United States must build a new clean energy economy and reduce greenhouse gas emissions; and (2) that finding more fossil fuels will no longer address our nation’s energy needs.

The logic of this position is elusive, especially if you take a look at the amount of fossil fuels we can recover in the United States with existing technology. According to data from the U.S. Energy Information Administration and the U.S. Geological Survey, relative to current rates of consumption, America has enough oil to power itself for 29 years, enough oil shale for 140 years, enough natural gas for 88 years, and enough coal for a whopping 465 years of use. And that’s just what we could extract today, with existing technology. History shows energy supplies grow geometrically with technological advances, the shale gas revolution being the latest proof. [See a collection of political cartoons on gas prices.]

Nonetheless, according to Krueger’s testimony, what we should really be worried about is the overproduction of oil. In attempting to make the case for why a discriminatory repeal of tax deductions for U.S. oil and gas businesses is a good thing—while leaving this particular deduction for all other U.S. manufacturing and production industries—Krueger exposed his ignorance with the following statement: “To the extent that current tax subsidies encourage the overproduction of oil and natural gas, they divert resources away from other, potentially more efficient investments and they are inconsistent with the Obama administration’s goals to reduce GHG emissions and build a new, clean energy economy.”

Reading that first part, one might think Krueger sounds like a supporter of the free market, bemoaning as he does the diversion of resources to inefficient investments. Alas, Krueger conveniently neglects to mention that in building a “new, clean energy economy,” the federal government provides massive subsidies to green energy technologies that apparently can’t get off—or more importantly, stay off—the ground without taxpayer dollars. If that’s not inefficiency, I don’t know what is, and if you don’t believe me, ask someone from Spain where green energy subsidy programs have contributed to 21 percent unemployment.  Its commitment to renewable energies subsidies has cost the government four times what it had originally budgeted and totals 11 percent of its gross domestic product, while the sovereign debt crises has led to significant doubt that government energy subsidy programs will even be honored.

Ultimately, then, cost-effectiveness isn’t the true end goal for Krueger. In his testimony to the Senate, he stressed the importance of leveling the energy playing field by taking into account nebulous “externalities,” like global climate change, foreign oil dependency, and—wait for it—the costs of traffic congestion. He makes the case for a social conscience when it comes to budget policy, but job losses and increased foreign energy dependence associated with restricting our access to domestic oil and gas resources don’t appear to count. Indeed, he never even addressed how making energy cost more for consumers and making U.S. production of energy uncompetitive with that in foreign countries will help America’s economy or produce jobs. [Read the U.S. News debate: Should offshore drilling be expanded?]

What this all adds up to is a troubling scenario for a president looking to address our nation’s economic and energy troubles. As Chairman of the White House Economic Council, Krueger—renowned for his expertise in labor issues—will ostensibly be expected to advise President Obama on how to get our unemployment situation back on track and bring down gas prices. Proposals like building the Keystone XL pipeline, lifting the Gulf of Mexico “permitorium,” beginning to tap Alaska’s vast energy resources, and opening up a bit more than 4 percent of government lands for energy exploration stand out as ways to create jobs, attract investment and bring prices down almost immediately.

It’s doubtful that Krueger will be suggesting these ideas to the president, though. Not only did he lead the charge to repeal the aforementioned tax deductions—a proposal that the administration has recently revived in budget talks—but Krueger also advocated for a new excise tax on offshore oil and gas and the national cap-and-trade program, which was nothing more than a new tax on energy use. Affordable energy is like fertilizer for an economy, but taxing it to make it more expensive is like sowing salt in a field. [Read: How Much Oil is There?]

Had these proposals become law in 2009, the impacts would have been disastrous for U.S. energy security and the economy. Let’s hope the President conditioned Krueger’s appointment on him reversing his previous policies.

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