Republican Party presidential candidate Mitt Romney on Thursday unveiled a plan to achieve North American energy independence in 2020. Speaking to voters in New Mexico, the former Massachusetts governor said that more oil and gas production in the United States will create three million jobs.
“This is not some pie in the sky kind of thing,” said Romney. “This is a real achievable objective.” That’s true but is it a goal that the country should hope to achieve?
Energy independence of itself is an autarkic vision that makes no economic sense. If, after all, it is cheaper to buy petroleum from Canada, Mexico and Saudi Arabia, America’s top three oil importers, why should Americans purchase oil that is produced domestically instead?
When “energy independence” is a codeword for allowing more domestic oil production however, it makes perfect sense. The United States’ oil reserves are estimated to be among the largest, if not the largest, in the world. Letting oil companies drill in areas that are now closed to exploration would naturally drive down fuel prices which would be a boon to the American recovery.
The United States Energy Information Administration estimates that by the end of this decade, nearly half of the crude oil that Americans consume will be produced domestically. By the 2020s, the United States could well export more oil than they import. It’s not so much that government needs to help to expand domestic oil production. It’s that it should get out of the way.
When Barack Obama took office, the average price of a gallon of gasoline was $1.83. Today, the price is $3.72 per gallon. That increase is a huge obstacle to the recovery. The president’s policies are in large part to blame.
Although the administration lifted a moratorium on deepwater drilling in the Gulf of Mexico in the wake of the Deepwater Horizon disaster in 2010 — a ban that was struck down in court as “arbitrary and capricious” — the Bureau of Ocean Energy Management, Regulation and Enforcement did not approve a single permit for oil drilling plans for months after the spill. In 2011, it approved just 35 percent of permit requests for the region and took an average of nearly four months before giving permission to drill or not. That compares to an historical approval rate of 73 percent while under previous administrations, it took an average of two months for the government to approve plans.
Moreover, new regulations require deepwater drilling plans to undergo an environmental review that takes more than seven months.
The president has also reversed an earlier decision to open access to coastal waters for exploration, instead placing a seven year ban on drilling in the Atlantic and Pacific coasts and eastern Gulf of Mexico.
There are vast reserves of oil and natural gas near the Atlantic coastline, off the northern coast of Alaska, and on land, in Colorado and Wyoming. Combined, these regions hold over two hundred billion barrels of oil and 2,000 trillion cubic feet of natural gas that are recoverable with today’s technology. If fully developed, it would be enough to free America from the import of foreign oil for almost fifty years.
Yet natural gas production on federal lands has decreased by 16 percent since 2008. By contrast, oil and gas extraction through hydraulic fracturing on private lands has increased.
In the last four years, fracking has created up to 600,000 new jobs. North Dakota has the lowest unemployment rate in the country thanks to oil production in the Bakken formation.
But according to the president, “drilling alone cannot come close to meeting our long-term energy needs.” He said in March, “There is no such thing as a quick fix when it comes to high gas prices.” North Dakota proves otherwise.
The president calls for an “all of the above” energy strategy. “Yes, develop as much oil and gas as we can but also develop wind power and solar power and biofuels.” His policies show that he isn’t serious about the former but willing to invest billions in the latter even if wind turbines remain unprofitable and only this year did German engineers create the first profitable solar panels.
Biofuel refers to ethanol which, until the end of last year, the United States massively subsidized. Some 40 percent of corn crop was used for the production of ethanol which naturally drove up regular corn prices worldwide as America is its largest producer and premier exporter.
Instead of assessing his own policies, which has inhibited domestic fossil fuel production and subsidized supposedly renewable energies, the president has chastised oil and gas companies for turning a profit. “It’s like hitting the American people twice,” he complained.
You’re already paying a premium at the pump right now. And on top of that, Congress up until this point has thought it was a good idea to send billions more of your tax dollars to the oil industry.
The president subsequently rallied for months against what he called subsidies but are in fact tax breaks for oil companies which were originally introduced in the 1950s to offset royalties they had to pay for oil production and exports in the Persian Gulf region.
For all his condemnations however, the president didn’t submit a concrete proposal to Congress to end the “subsidies” even if Republican leaders agreed that they should be cut.
Treasury Secretary Timothy Geithner in May 2009 lamented in a letter to Congress that the tax break “encourages overproduction of oil” and is therefore “inconsistent with the administration’s policy of reducing carbon emissions and encouraging the use of renewable energy sources.”
The president has since preferred to talk of an “all of the above” strategy but there’s no indication that he actually believes in it. Mitt Romney, by all indications, does. His goal, “energy independence,” may be misguided; his proposed way of getting there is sound policy.