Bush’s Energy Policy
President Bush has been talking up the idea of a national energy strategy again. Personally I always find these claims that “we need a national strategy” rather disappointing. Disappointing in that I don’t think the government is all that good at doing things (generally speaking).
I made my decision. I know what is important for this country to become less dependent on foreign sources of energy, and that requires a national strategy. Now, when I first got elected, I came to Washington and I said, we need a national strategy. And I submitted a national strategy to the United States Congress. And it has been stuck. And now it’s time for the Congress to pass the legislation necessary for this country to become less dependent on foreign sources of energy. (Applause.)
And the most important component of our strategy is to recognize the transformational power of technology. Over the last quarter century, technology has radically changed the way we live and work. Think about this: Just 25 years ago — for a guy 58 years old, that doesn’t seem all that long ago — (laughter) — if you’re 24 years old, it’s a heck of a long time ago. (Laughter.) In the 1980s, most Americans used typewriters, instead of computers. We used pay phones, instead of cell phones. We used carbon paper, instead of laser printers. We had bank tellers, instead of ATMs. (Laughter.) We had Rolodexes, instead of PDAs. And for long family trips, we played the “license plate” game — (laughter and applause) — instead of in-car DVDs. (Laughter.) We’ve seen a lot of change in a quick period of time, haven’t we?
While the second paragraph is true, the reason we have had all these developments is that there was a profit to be had. In other words, the prospect for profit lured in investors for research and development. There was no national strategy to develop DVD players or computers, and if we could go back and implement one we’d probably end up with sucky computers and DVD players. Funding basic research strikes me as a reasonable role for government. A national energy strategy on the other hand strikes me as nothing more than an opportunity for rent seeking and corporate welfare.
I do agree that more nuclear power is probably a good idea and that there probably should be a very serious look at and overhaul of the regulations for nuclear energy. Other countries have been using nuclear power safely for decades. One problem with increasing nuclear power in the U.S. are the hysterical environmentalists who ironically want to cut CO2 emissions, but at the same time don’t want to switch to nuclear power which emits no CO2. Another problem, which is derived in part from the previous problem, is the exorbitant costs due to the regulations on nuclear power. So while this would be a good direction to go in, I doubt that we will go in that direction.
Here is a startling fact,
A secure energy future for America also means building and expanding American oil refineries. Technology has allowed us to better control emissions and improve the efficiency and environmental performance of our existing refineries. Yet there have been no new oil refineries built in the United States since 1976.
In the last 29 years there have been no new oil refineries. This one of the main reason that we see sudden and dramatic price spikes for gasoline. Add on top of this the regional restrictions on the types of gasoline that laws permit and you have an industry with a tremendous amount of market power and the slightest reduction in output can drive prices up very high. The reason? Envir0nmentalism and NIMBYism (and its more extreme cousing BANANAism).
And existing refineries are running at nearly full capacity. Our demand for gasoline grows, which means we’re relying more on foreign imports of refined product.
We could also get rid of the regional differences in gasoline. For example, California requires specialized refining for the gasoline used in the state. If the price jumps, gasoline refined to fit the requirements of another state cannot be used to mitigate the price spike in California. In short, these regional differences result in market power and price volatility in these regions. Having a uniform standard for gasoline would reduce this effect and could help make the world market for refined products more competitive and it would be cheaper than building new refineries. Of course, a new refinery in a given State/congressional district sure is a nice way to throw some pork to a Senator/Representative and his constituents.
Advances in technology will also allow us to open up new areas to environmentally responsible exploration for oil and natural gas, including the Arctic National Wildlife Refuge.
This will do very little to the domestic price of oil. I know this is a favorite theme of conservatives, but geesh they either are totally clueless about economics or are throwing a nice porky bone to contributors or something. To see the problem ask yourself this question: at what price does domestically produced oil sell for? Same as price in the world market? Well, then why would we expect to the oil form ANWR to be so cheap? Are the oil companies going to suddenly develop a massive case of “patriotism” or something and sell the oil from ANWR for half price? I don’t think so. They will sell it at the prevailing market price. Granted, theoretically a new source of oil would reduce the price of oil, but the Saudis and other oil producing nations have increased production in the past and it has had little impact on the price of oil.
Will it reduce our dependence on foreign oil? Kind of. Kind of in the sense that we wont be buying as much from them for awhile, but the world price would still be prone to price spikes if something disrupted the supply of oil from the Middle East. So in terms of the impact on prices, the economy (inflation, growth, etc.) it will have little to no impact and we will still be dependent on Middle East oil in terms of prices.
We’ve proposed $2.5 billion over 10 years in tax credits that will encourage consumers to buy energy-efficient hybrid cars and trucks, and we need to expand these incentives to include clean diesel vehicles, as well.
Big deal. $250 million a year is literally chump change when it comes to car sales. It would be like looking under the cushions in your sofa and collecting the loose change and putting towards your rent/mortgage and then crowing about how wise you are. This is a tiny idea that will have very little impact. Consider this, according to this article in 2002 $250 million would cover slightly more than 2 dealers in Ward’s top 500 dealers in terms of revenue from new car sales. This is a tiny idea and braying about it is ridiculous.
Overall Bush’s plan looks like a pork fest and wont do much to help the high price of oil in an appreciable way. Personally I’d rather he did nothing and let the high prices induce people to drive more fuel efficient autos. Further, the high prices would make alternative energy sources look more attractive in terms of current technology and research into developing even better technology.