Posted by mb50
Peter Foster Jan 27, 2012 – 8:00 AM ET
Nothing more clearly indicates U.S. President Barack Obama’s economic muddledom and ideological stubbornness than the dog’s breakfast of energy policies revealed in Tuesday’s State of the Union address. The good news is that hydrocarbons are back (as long as you forget Keystone XL). The bad news is that “clean” energy isn’t going away. Instead it’s “all of the above.”
Without his nose growing visibly, the President claimed the government was behind the technological advances that led to the current shale gas boom, and even suggested that he might take credit for the rise in domestic oil production. In fact, Mr. Obama’s administration has hampered and castigated oil companies at every turn. In the light of the hysterical grandstanding over the BP Gulf spill (whose impact proved to be greatly exaggerated), it was ironic indeed to hear the President now declare a great opening up of offshore exploration.
The industry has responded to attacks by becoming more innovative and productive. According to the U.S. Energy Information Administration, between 2007 and 2010, U.S. oil production grew from 5.1 million barrels a day (mbd) to 5.5 mbd. The agency predicts domestic production will hit 6.7 mbd by 2020, helping take imports down to 36% of domestic usage in 2035 from 60% in 2005. So much for peak oil. Meanwhile, the EIA also predicts that by 2016, thanks to the shale boom, the U.S. will be a natural gas exporter.
This reluctant acknowledgment of the success of private innovation was accompanied on Tuesday by the usual cheap shots. The oil industry has been subsidized (a dubious claim) for too long. Its profits are too fat. The administration will demand that oil companies release details of fracking chemicals – as if they might wilfully poison Americans without public oversight.
These political sideswipes are unlikely to appease the environmental lobby. If the President thinks he won any Greenie Points by kicking the Keystone XL pipeline down the road, he certainly lost them all – and probably then some – with his support for fracking and offshore drilling. Radical environmentalists don’t want to hear about energy security, objective risks, or practical safety measures: they want to close down hydrocarbons as the work of the climate devil.
Over in the dodgy logic section, Mr. Obama suggested that shale gas success demonstrated that it took time for energy research to pay off, thus he was right to stick with promoting alternatives. However, the cases are entirely different. U.S. government research laboratories may indeed have been involved in technologies such as fracking and directional drilling, but these technologies were first developed in the private sector. Government presence should be attributed more to jumping on winners than skill in picking them. Plus, there is the private sector’s incurable penchant for grabbing government funds. When it comes to alternatives, however, while rent seekers are as thick on the ground as subsidized solar panels, the government has no winners on which to jump.
The President suggested government-stoked success in battery technology, but this is predicated on the success of electric cars, of which the President wants – Soviet target-style – to see a million on the road by 2015. Government support for “clean” energy isn’t an investment in the future: It is money down the drain. Naturally, the half-billion-dollar Solyndra debacle received as little reference as Keystone XL.
Critics have suggested TransCanada’s projection of 20,000 jobs in construction and manufacturing from the Keystone XL line, with many more spin-offs, is exaggerated. Strange how interventionists love the Keynesian multiplier when it refers to government expenditure but deplore the idea when it comes to creating real jobs. More important, job creation in subsidized wind and solar is entirely fictitious. One widely quoted Spanish study suggests that every alternative job costs two jobs elsewhere.
Mr. Obama, now presumably to his embarrassment, has referred to oil as a dwindling “19th-century” resource. If we are talking of being out of date, William Watson noted here yesterday that President Obama’s grasp of economics hasn’t yet absorbed the 18th-century wisdom of Adam Smith. Mr. Owe’s predilection for misconceived trade-is-war “mercantilist” policies was clear from his promise in the State of the Union not to “cede the wind or solar or battery industry to China or Germany because we refuse to make the same commitment here.”
If they put in big destructive subsidies that threaten real trade war, then so will we. Anything they can do, we can do stupider.
One wonders if the President has the slightest clue about the flagging state of the wind and solar industries in Germany, or that what is boosting China’s alternatives industry is government subsidies … from other countries.
The President announced a plan to devote huge swathes of public land to the development of clean energy to power “three million homes.” He also apparently committed the Navy to buying a chunk of this power, as if it weren’t expensive enough to guard the Strait of Hormuz.
Mercantilist alternative energy strategies represent – as Jimmy Carter famously suggested – the “moral equivalent of war.” The problem is that it is war on one’s own economy. At least, with his partial ceasefire against the oil industry, President Obama is now only shooting himself in one policy foot rather than both.
- Obama backs fracking to create 600,000 jobs, vows safe drilling. (businessweek.com)
- Keystone XL is Dead! Long Live Keystone Light (reason.com)
- Warren Buffett cleans up after Keystone XL – Cronyism Perchance?!? (lettingfreedomring.com)
- Obama pushes energy plan on campaign-style tour (reuters.com)
- Allen West to Obama and Reid: “Fight’s On!” (usamericanfreedom.com)
Tags: Barack Obama, domestic oil production, Energy Information Administration, gas boom, Jimmy Carter, Keystone Pipeline, Keystone XL, Obama, President Barack Obama, private innovation, public oversight, State of the Union address, TransCanada Corporation, u s energy, United States