U.S. crude oil output,
Mediocrity reigns supreme:
Paul Driessen ,
Congressional hot air substitutes for energy policy
Tuesday, June 6, 2006
In 1774, Irish statesman Edmund Burke told voters, "Your representative owes you not his industry only but his good judgment. And he betrays instead of serves you if he sacrifices his judgment to your opinion."
Two hundred years later, US Senator Roman Hruska argued, "There are a lot of mediocre people. They're entitled to a little representation, aren't they?"
Fortunately, Congress rejected Hruska's appeal for mediocrity on the Supreme Court. Unfortunately, ongoing "debates" on energy policy suggest that mediocre people are over-represented in today's Senate and House of Representatives, and good judgment has been supplanted by opinion and demagoguery.
US crude oil output has declined 43% since 1985, as demand increased by 31% and imports have skyrocketed to 60% of the oil we use (compared to 28% just prior to the 1973 OPEC oil embargo). Meanwhile, China and India's booming economies have intensified global demand for oil.
As if that weren't enough to send prices into the stratosphere, political unrest and muscle-flexing in Iran, Iraq, Chad, Nigeria, Bolivia, Venezuela and Russia have generated jitters and further price hikes. Additional upward pressure on gasoline prices results from air pollution laws that mandate 18 expensive specialized gasoline blends for individual markets, highly subsidized and hard-to-transport ethanol for broader markets, and a 54-cent tariff on imported ethanol.
Not surprisingly, crude oil is now over $70 a barrel, and gasoline hit a national average of $2.90 per gallon in April.
Congressional actions have likewise helped make clean-burning natural gas the fuel of choice for numerous applications. US utilities use 41% more of it than just a decade ago, and 87% of all generating plants coming online in next 5 years will burn gas including plants that provide essential backup electricity for unreliable wind turbines that Congress and state legislatures promote, subsidize or even mandate. Natural gas is also used to make fertilizer to grow corn and other crops, and burned to convert various crops into ethanol and bio-diesel.
So demand is up, while production has stagnated, and natural gas prices have soared from $2 in the 1990s to nearly $9 per thousand cubic feet today.
Winter heating bills soared 25% during the relatively warm winter of 2005-06, and fertilizer prices rose nearly 50% in a year's time. Facing sharply higher costs for heating, lighting and transportation, businesses and schools are desperately trying to control other costs, without laying off more workers. The National Association of Manufacturers estimates that more than 3.1 million high-wage manufacturing jobs have been lost since 2000; many have moved overseas, where natural gas is plentiful and costs less.
But why are US supplies so tight and prices so high? It's not because we are running out of oil and natural gas. In fact, using US Minerals Management Service projections, the Consumer Alliance for Energy Security calculates that our offshore Outer Continental Shelf contains enough natural gas to heat 100 million homes for 60 years, and enough oil to power 50 million cars for 60 years.
MMS also says Alaska's Arctic National Wildlife Refuge could hold another 16 billion barrels of recoverable oil. That's 30 years' of imports from Saudi Arabia. Turned into gasoline, it would power California's vehicle fleet for 50 years. At $70 a barrel, ANWR oil could replace $1.1 trillion worth of foreign crude, create 500,000 American jobs, and generate hundreds of billions in royalties and taxes.
But President Clinton vetoed 1995 legislation that opened ANWR to drilling, arguing that the oil and gas would not be available for a decade which is right now, just in time to meet the current supply and price crunch. What do we hear from Congress? No drilling, because the energy won't be available for a decade.
Even after Hurricanes Katrina and Rita which impacted a fourth of our production and refining capacity and in the midst of the current price shocks, Congress cited flimsy environmental arguments and voted to keep US oil and gas locked up: off our Pacific, Atlantic and Eastern Gulf of Mexico coasts, and in Alaska (including ANWR), the Rockies and Great Lakes.
Even California senators and congressmen, representing by far the biggest energy consuming state in the US, steadfastly oppose petroleum development in any of these areas. And even Florida, our third biggest energy consumer, refuses to allow one rig off its coast, to help slake its ravenous demand for oil and gas to power the cars, boats, trucks, planes, houses, hotels, casinos, businesses and air conditioners that make the Sunshine State's good life possible.
Canada is drilling in the Great Lakes. China and Cuba are planning to drill 45 miles off the Florida coast. In 60 years of drilling off our shores, there has only been one accident where significant oil reached shore (1969 off Santa Barbara). We clearly need the oil and gas.
And yet Congress won't budge on drilling, or on easing permits for refineries, pipelines, liquefied natural gas ports or nuclear power plants. About the only things it does promote are tax-subsidized ethanol, biodiesel, wind and solar projects, which together supply less than 0.5% of our energy needs.
However, in a raucous showing of bipartisan, bicameral blather, neo-Hruskas did find time to denounce purported corporate greed, price fixing and obscene profits and vote to outlaw "price gouging." (On a gallon of gasoline, oil companies earn about 10 cents profit, most of which they spend on new exploration and development work, while the federal government gets 18 cents in taxes, and states add another 28 to 60 cents in taxes.) Congress didn't know how to define "price gouging," but legislators are certain they'll know it when they see it (unless it's taxes doing the gouging).
In a few weeks, the same legislators will consider global warming legislation that could push energy prices up another 20% for no perceptible environmental benefits.
As Will Rogers famously observed, "Every time Congress makes a joke, it's a law. And every time it makes a law, it's a joke." If we could simply harness congressional hot air, America's energy problems would be history.
Until then, however, Burke's wisdom will be but a dim memory. Hruska's paean to mediocrity will reign supreme. America will be held hostage to foreign "oiligarchs" and domestic environmental extremists. And consumers will have to dig deeper into their pocketbooks or try to live more like the average family in China or India.