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Politics Sucks the Energy Out

12:00 AM, Mar 31, 2012 • By IRWIN M. STELZER
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What makes the president’s data so misleading is that he is understating America’s oil reserves by including only those known to exist and be economically recoverable. He fails to concede that there are billions of barrels yet to be discovered, which makes a nonsense of his 2 percent figure. Consider this: at the end of 2000 it was estimated that America was sitting on 20 billion barrels of proved reserves of oil. After a decade in which some 20 billion barrels were produced, the latest estimate is that the U.S. sits on, get this, 20 billion barrels of oil. So reserve additions from sources not known in 2000 made up for the decade’s production.

Advancing technology has made new areas and new depths accessible to the drill bit; higher prices have made it economic to drill in places previously shunned by oil companies. Because of these developments, and either in spite or because of the administration’s policies, during the Obama years domestic production has risen from 4.95 million barrels per day to 7.5 million barrels, and experts are guessing that production will eventually hit the 1970 level of about 10 million barrels per day—about what the world’s largest producers, Saudi Arabia and Russia, each take out of the ground. Talk of America-as-Saudi-Arabia, and energy independence once again fills the halls of Congress and the media.

Throw in America’s massive coal and natural gas reserves, and the future for fossil fuels looks bright. Well, almost. This past week the Environmental Protection Agency issued regulations that, along with low natural gas prices, make it unlikely that any new coal-fired generating stations will be built unless economic carbon capture and storage (CCS) technology is developed, not likely very soon. Mounting opposition to water-intensive hydraulic fracturing, or fracking, to recover natural gas from shale, might stifle the development of that resource. And environmentalists’ are urging the U.S. Fish and Wildlife Service to curtail drilling in the important Permian Basin area to protect the five-inch dunes sagebrush lizard—“It’s a pathetic little lizard… but life needs to be protected,” one green told the press.

Where the balance will be struck depends on the November elections. My view is that if we cut through the internal contradictions of “all of the above,” and the campaign posturing, it is reasonable to guess that a reelected Barack Obama would, if he can control Congress, raise taxes on oil companies, double down on his (more precisely, the taxpayers’) bets on green technologies, try to save the electric car that has proved less than a sensational addition to consumers’ choice of vehicles, perhaps pushing through a $10,000-per-vehicle payment to anyone buying one of these vehicles. Continued dependence on oil is “not the future I want for America.”  

In the days of Bill Clinton, it was “the economy, stupid.” Now, when it comes to the energy sector, it’s the politics, stupid. America’s ability to compete successfully, despite high wages, once depended in part on ample and economic supplies of energy. Those happy days just might be here again. The president is betting taxpayers’ money and the nation’s future on the guess that those supplies will come from the wind, sun and what he calls “American ingenuity.” If he is wrong, America will add high-cost energy to its shaky fiscal condition as it faces the future.

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