Barack Obama released his “New Energy for America” plan today during his speech at Michigan State University. His entire energy plan is laid out here. Relieving America from its foreign oil addiction was the gist of his speech:
Without a doubt, this addiction is one of the most dangerous and urgent threats this nation has ever faced – from the gas prices that are wiping out your paychecks and straining businesses to the jobs that are disappearing from this state; from the instability and terror bred in the Middle East to the rising oceans and record drought and spreading famine that could engulf our planet.
Though there was some good in Obama’s speech and in his plan, it was mostly bad. The bad policies include:
- Immediately Provide Emergency Energy Rebate: To compensate for the high costs of gas and energy prices and revamp the struggling economy, Obama conjured up a plan to give $500 to individuals and $1,000 to families as soon as this fall. The Foundry has written more extensively on this here, but to summarize this idea, it would reduce supply, increase the demand for gas, and rely on windfall profits taxes on big oil, which have been tried and failed miserably. Economist Don Boudreaux puts it this way: It’s like trying to put out a fire by dowsing it with jet fuel.
- Tapping the Strategic Petroleum Reserve: The SPR, created after the 1973-1974 Arab oil embargo, is a federally maintained petroleum stockpile intended to make up for any shortfall caused by a temporary supply disruption. Granted, an extra 3 million to 4 million barrels per day would lower prices at the margin, but the SPR could maintain that pace for no more than six months. After that, the price of oil would likely return to its previous level, and the SPR would be empty and thus no longer available for its intended purpose as an insurance policy against a supply disruption. What would Obama do if the U.S. were hit with a severe energy crisis and the SPR were tapped dry? Think of the national security and economic implications.
- Cracking Down on Speculators: Speculators have been receiving a lot of the blame for the rise in oil prices, but this is misleading. Heritage economist David Kreutzer gives a good primer on how speculators can help consumers at the pump, and J.D. Foster writes that the speculators’ role in increased oil prices is marginal, at best. Ultimately, speculators do little to affect supply and demand.
- Capping-and-Taxing: I mean, trading. Obama plans to implement an economy-wide cap-and-trade program to reduce greenhouse gas emissions 80% below 1990 levels by 2050. The Lieberman-Warner cap-and-trade legislation that quickly died on the Senate floor in June proposed 70% reduction of 2005 levels by 2050. The Heritage Foundation released a study on the economic costs of the Lieberman-Warner climate change legislation that detailed the burden cap-and-trade legislation would impose on the economy. If the Lieberman-Warner bill would have imposed a $4.8 trillion hit to GDP by 2030 and nearly 1 million jobs lost in certain years, just imagine what Obama’s plan would do. The Heritage analysis of the Lieberman-Warner bill also projects a huge jump in energy prices, including gasoline. So, is Obama for lowering gas prices or raising them? Hmm.
- Renewable Fuels Mandates and Fuel Economy Standards: Under Obama’s new energy plan, 10% of America’s electricity will come from renewable sources by 2012, and 25% by 2025. Now that food prices have risen dramatically, there is bipartisan consent, along with statements from environmental and global hunger groups, that the ethanol mandate has been an absolute failure.
Furthermore, Obama proposes to have 1 million plug-in hybrid cars — cars that can get up to 150 miles per gallon — on the road by 2015, and he suggests that they all be built here in America. (We’ll save the protectionist argument for another day.) The question now is: Where is the electricity generated that the hybrids receive? Howard Learner, executive director of the Environmental Law & Policy Center, a Chicago-based advocacy group notes that “plug-in hybrids are perhaps not good for all areas. … [S]tates that are heavily coal, that equation doesn’t work out very well for the environment.” And aren’t hybrids more expensive?
There is a bit of silver lining, however, but even the good news comes with some bad.
- Increase Domestic Supply: Obama recently shifted his position on off-shore drilling, but the only time in his eight-page energy plan that offshore is mentioned is during his use or lose it initiative, which requires that “oil companies to diligently develop these leases or turn them over so that another company can develop them.” His plan recognizes that U.S. oil and gas play a critical role in America’s energy policy and includes drilling in Bakken Shale in Montana and North Dakota, Barnett Shale formation in Texas and the Fayetteville Shale in Arkansas, and the National Petroleum Reserve-Alaska (NPR-A). It also includes recovering more oil from existing fields and Prioritizing the construction of the Alaska Natural Gas Pipeline. Search his plan and see if you can find the words “outer continental shelf.” What about “ANWR”? Nothing.
- Increase Nuclear Power: The presidential nominee does recognize that “It is unlikely that we can meet our aggressive climate goals if we eliminate nuclear power as an option.” But here’s the problem. His “New Energy for America” plan calls the geologic repository Yucca Mountain “not suitable.” Instead, he will lead federal efforts to look for safe, long-term storage. Yucca Mountain, as critical as it is to the management of used nuclear fuel, is not alone a long-term solution. The amount of used nuclear fuel already accumulated in this country is near the 70,000-ton statutory limit. Furthermore, if nuclear power production increased by 1.8% annually after 2010, a 120,000-ton (what most scientists believe its actual capacity is) Yucca would be full by 2030. Fortunately, Heritage’s Jack Spencer outlined a free-market approach to managing used nuclear fuel that would better serve consumers as well as the nuclear industry.
Granted, Obama’s plan does take some baby steps in the right direction by increasing supply and advocating nuclear, but even these parts of his plans have flaws. No mention of the Outer Continental Shelf. No mention of ANWR. No clear solution to nuclear waste. And those are the good parts.
The unfortunate part his plan is that it repeats the same mistakes of the failed policies introduced in the 1970s, along with a few other bad ideas for good measure. These policies will lead to more restrictions on energy supply and higher costs for Americans — all to change the earth’s temperature .1 of a degree.