The Rational Argumentator

A Journal for Western Man

Obama's Energy Vision

The President has made it clear in his State of the Union address, and in his 2011 Budget, that rather than focus on an economy that has shed more than 10 million jobs during this recession, he will remain fixed on his attempt to “change America” into what is his vision for us. In particular, the President, while noting the dire state of the economy and the need to create an environment where producers will hire additional workers, is sticking with his plan to increase energy costs in the U.S. This will result in the loss of even more jobs. The Heritage Foundation has estimated that the House-passed Waxman-Markey bill, which proposes to reduce CO₂ emissions by 83 percent, will cost the U.S. two million jobs and raise energy costs for the average household by more than $3000 per year. Science Applications International Corporation (SAIC) used the U.S. Energy Information Administration’s model to analyze a smaller 70 percent cut in CO₂ emissions by the year 2050.   SAIC found that this would cost between 3 million and 4 million jobs. Average household incomes would fall by between $4,000 and $7,000 per year. 
 
Yet the President praised the House for passing the Waxman-Markey bill, calling it “a comprehensive energy and climate bill with incentives that will finally make it clean energy the profitable kind of energy in America.” This is simply not a reasonable belief. The fact that so-called clean energy sources must be heavily subsidized to remain in existence means that markets are indicating oil, natural gas, and coal, and nuclear power are more economically efficient ways of creating energy than the alternative.
 
The U.S. Energy Information Administration predicts world-wide demand for liquid fuels, primarily oil, will increase by 25 percent, natural gas demand will increase by 47 percent, and coal demand will increase by 49 percent by 2030. Alternative energy sources are not going to meet this increase in demand. Bio-fuels make up 22 percent of world-wide liquid fuel production, and renewables make up less than 20 percent of electricity production in 2010.
 
The administration’s 2011 budget calls for $36.5 billion in new oil and gas taxes.   A budget proposal to tax a profitable jobs-producing industry to support an alternative that is not otherwise economically viable cannot be a reasonable way of moving the economy out of a jobs recession. It is a proposal that is driven by a desire to make the world into what it cannot reasonably be until market forces create innovation that efficiently produces energy using alternative fuels.
 
The President believes that the scientific evidence on manmade climate change is “overwhelming.” He also believes that “the nation that leads the clean energy economy will be the nation that leads the global economy.” Neither of these are true. As for evidence of climate change being overwhelming, there is plenty of scientific evidence to the contrary. More than 120 of the world’s top scientists say that global warming is not a crisis. In fact, there is some evidence that the world’s temperature has actually been declining over the last decade. It is also interesting to recall that the June 24, 1974, issue of Time Magazine contained the following: “the weather aberrations (scientists) are studying may be the harbinger of another ice age.” The article goes on to explain how global cooling could be “catastrophic.”
 
Even if global warming is occurring and is a problem, carbon dioxide is no more than 4 percent of the total greenhouse gas envelope. Of that 4 percent, manmade CO₂ is about 3 percent. Even if the U.S. eliminated all of its CO₂ emissions, growth in Chinese emissions alone would replace the U.S. emissions in less than a decade. It is quite a stretch to think that forcing a “clean energy” economy will make us a national leader. It is much more likely to slow the growth of our economy and make it difficult to get back to full employment.
 
It is also clear that the President is engaged in what Ludwig von Mises called “the politics of envy.” In his State of the Union address he said: “We will not continue tax cuts for oil companies, investment fund managers, and those making over $250,000 per year. We just can’t afford it.” This statement makes it clear that the President believes the American people somehow don’t like oil companies, investment fund managers, and those who make more than the average. The implication of his statement, “we can’t afford it,” is that none of these folks have a right to their own earnings--profitable companies and individuals who produce successfully in a free market have no right to keep their earnings.  
 
The U.S. oil and gas industry pays more taxes and royalties than any other US business. It is vital to U.S. manufacturing as a source of energy and transportation. Independent producers develop 90 percent of domestic oil and natural gas wells, produce 82 percent of U.S. natural gas and produce 68 percent of U.S. oil, and several of the President’s proposals, such as increasing fees for applications for permits to drill, will fall more heavily on the independent producers than on what the media likes to call Big Oil. 
 
Rather than demonizing the industry, the Obama administration should address the evidence on both sides of the CO₂ emission debate, increase market-based incentives to innovate in the production of energy, including oil, gas, coal, and nuclear, and not go down a path which will push production out of the U.S. into countries that are less efficient in the use of energy and that emit more per unit of output.

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