Daily Archives: 28 February 2012

Energy Then and Now

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I’ve been going back through a book I first read 30 years ago, the National Academy of Sciences’ Energy in Transition 1985-2010: Final Report of the Committee on Nuclear and Alternative Energy Systems.

At this point I’m less interested in specific predictions (over a future 25 year period?) than I am in the thinking and policies espoused by the NAS (and later by a variety of government administrations, as it will have turned out) to achieve the report’s goal of reduced energy consumption by the US.  Thus, the book leads off with this (remember, this is a 1980 copyright):

Slowing the growth of energy demand will be essential, regardless of the supply options developed in the coming decades.  In fact, the demand element of the nation’s energy strategy should be accorded the highest priority.  …this reduction could be accelerated by such explicit government policies as taxes and tariffs on energy and standards for performance….  [G]rowth of demand for energy in this country could be reduced substantially…by price-induced shifts toward less energy-intensive goods and services.

So much for recovering our manufacturing capacity.  The NAS continued [emphasis added]:

A major conclusion…is that technical efficiency measures alone could reduce the [energy/GNP [the earlier measure of US economic output]] ratio to as little as half its present value….  (This conclusion is sensitive to the prices assumed in the analysis,…result of this magnitude is attained only if prices…increase more rapidly than probable in a market at equilibrium.)

In some cases the price increases necessary…would have to be secured by taxes that would open up a wedge between consumer prices and the cost of producing and delivering energy.

The NAS had this to say about the impact of such measures [again, my emphasis]:

To avoid economic penalties, the rate of replacement must generally depend on the normal turnover of capital stock…though rising energy prices will accelerate this turnover in most cases.

“Normal turnover,” carefully manipulated by government interference with free market pricing through those taxes and tariffs and standards.

The real problem is finding a new balance between energy supply and energy demand, consistent with generally satisfactory overall economic performance. …

Tax, tariff, and price control policies…are important influences on the demand for energy.  But energy consumption can also be molded directly—for example, by imposition of mandatory standards for the efficiency of energy-using equipment….

Here is the NAS’ endorsement of economic management from the center—from government—preferring that to the clutter of a market of free actors freely interacting; i.e., we individual Americans acting in our own self-interest, unfettered by government, and achieving our own balance and defining for ourselves our “generally satisfactory performance.”  A free market at equilibrium is not to be tolerated.

Does any of this sound familiar in today’s political (I hesitate to say economic) environment?

A Wise and Practical Man

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What he said.

The Honorable Barack Obama
President
The White House
Washington, DC 20500

Dear Mr. President:

I am writing today to urge your Administration to take overdue but necessary action to confront soaring gasoline prices. In the last three years, gas prices have doubled, draining the disposable income of millions of hardworking Americans. In 2011, the typical U.S. household already spent $4,155 on gasoline, almost 10 percent of their income. Yet some analysts now predict prices may rise this year to more than $5.00 per gallon.

In a speech this Thursday, you stated that “there are no quick fixes to this problem. You know we can’t just drill our way to lower gas prices.” While we should explore a variety of energy resources—most especially those which do not put taxpayer dollars at risk—I respectfully disagree that we cannot utilize our remarkably vast untapped energy reserves to provide Americans with much-needed relief. I reject the defeatist view that says the nation that won two world wars, pioneered space travel, and overcame the Soviet Empire is now helpless in the face of high prices at the pump. We are not at the mercy of dictators, cartels, and events beyond our control.

Simply by removing the bureaucratic barriers imposed by your own administration we can begin to make progress. But we can go much further than that. Powerful action to harness America’s untapped oil and gas resources would place downward pressure on prices and speculation in the short-run and, by surging global supply, would serve to keep prices low in the future. Crucially, it would also provide millions of Americans with good-paying private-sector jobs; produce substantial royalties for local, state, and federal governments; reduce our enormous trade imbalance; and put an end to our huge wealth transfer from America to competitors oversees.

I therefore recommend the following proposals for immediate implementation:

1. Restore the bipartisan 2010–2015 offshore lease plan to ensure that the 31 lease sales called for in that plan are completed expeditiously. Your Administration only directed one lease sale in 2011 and has announced just one lease sale for 2012, far short of the number of sales that would have occurred over this period under the original 2010–2015 plan that your Administration discarded.

2. Take all necessary steps to accelerate the leasing and permitting process for domestic shale oil production. The United States has recoverable shale oil reserves estimated at 800 billion to 1.2 trillion barrels, meaning our nation has potentially three to four times more recoverable oil than any other country in the world except Canada.

3. Maximize energy production from federal lands. As I and 21 other Senators noted in a January 25, 2012 letter to you, actual oil production on federal lands is now just 714 million barrels per year, a 16 percent decline from what was projected just five years ago. This decline must be reversed.

4. End the de facto moratorium on permitting for offshore oil and gas production.

5. Direct the EPA, the Department of Energy, and other federal agencies to grant all necessary waivers and approvals to oil and gas refineries to facilitate maximum production at minimum cost. Refinery expenses comprise 11 percent of the price for gasoline that Americans pay at the pump, but your Administration has imposed numerous regulations that have driven refining costs up, not down.

6. Abandon your proposal to increase taxes and fees levied on U.S. energy production by more than $40 billion. These additional costs would be passed along to consumers, taking money out of their pockets and discouraging needed domestic production.

7. Approve the Keystone XL pipeline and grant necessary waivers, licenses, and permits, where possible, to ensure expedited completion of this important North American energy project. The pipeline would carry 700,000 barrels a day to U.S. refineries, which is nearly half what the U.S. currently imports from the entire Middle East.

America has the potential to fundamentally shift the balance of power in global energy production—to produce more energy, more efficiently and more cheaply, than your Administration has recognized. Such bold steps will broadcast an unmistakable signal to the world that not only places downward pressure on prices in the near-term but helps deliver a future of abundant, affordable energy. Moreover, unlike costly short-term stimulus, achieving energy independence would provide long-term relief to both struggling families and our indebted treasury.

I look forward to working with you on this important matter.

Very truly yours,

Jeff Sessions
U.S. Senator

Hmm….