Flat-Earth Thinking on Gas Prices?
Nicolas Loris /
President Obama blasted oil-drilling advocates last week, equating their solution for high gas prices to people who didn’t believe the Earth is round. President Obama said,
They dismiss wind power. They dismiss solar power. They make jokes about biofuels. They were against raising fuel standards. I guess they like gas-guzzlers. They think that’s good for our future. We’re trying to move towards the future; they want to be stuck in the past. We’ve heard this kind of thinking before. Let me tell you something. If some of these folks were around when Columbus set sail they must have been founding members of the Flat Earth Society. They would not have believed that the world was round.
It’s not that we want to “keep on doing things the same way” as the President suggests. It’s that we don’t have the hubris to think using taxpayer dollars will somehow transition us to a new energy economy. We’ve heard it before, and we’ll hear it again from both Democrats and Republicans—the argument that all we need is billions of dollars in taxpayer-funded seed money and we’ll end our dependence on foreign oil. It could be wind, solar, biofuels, nuclear, natural gas vehicles. Anything—apparently—BUT more domestic oil.
Many attempts to subsidize clean energy such as wind, solar, and nuclear wouldn’t even replace oil, because oil provides only about 1 percent of U.S. electricity generation. Oil is mostly used as a transportation fuel, but setting that aside, let’s set a few other things straight:
1.) We’re not anti- energy technology. We’re against wasting taxpayer money to “invest” in those technologies, including oil and gas. If it’s a market-viable idea, using federal money is offsetting private-sector investments. If it’s not a market-viable idea, we’re artificially propping up an industry until it goes bankrupt. Either way, it’s a raw deal for taxpayers.
2.) Consumers do not have an addiction to oil; they have an addiction to affordable, reliable transportation. Gasoline provides that. If there’s an alternative (biofuels, electric vehicles, natural gas vehicles) that can capture part of oil’s multitrillion-dollar market and provide value to consumers, it will happen without government subsidies. Consumers will gladly power their vehicles with algae instead of oil if it’s affordable and reliable.
3.) We don’t support any energy subsidies. President Obama says some are complaining about renewable subsidies but saying oil subsidies are justified. We’re not saying that. What we are saying, however, is that the $4 billion per year subsidy figure for oil and gas companies that the President constantly uses is bogus. Those tax breaks are general manufacturing tax breaks that are so broadly available that video game manufacturers get them. The others come in forms of accelerated depreciation schedules, which are also broadly available. We should get rid of all subsidies and allow all companies to deduct expenses in the year they are incurred to encourage new investment, but the President needs to be honest with the American people about the meaning of a subsidy.
4.) The President’s thinking on gas prices doesn’t reflect Flat Earth thinking; it reflects the Malthusian/imminent resource exhaustion mentality used to promote policy agendas. Three decades ago, proven world oil reserves were 645 billion barrels; five years ago, they were 1.28 trillion, and in 2009, they were 1.34 trillion. Innovative technologies will allow producers to discover and recover more oil, if we have access to it. If the price of oil goes up because we’re running out, alternative sources of transportation will become more competitive. But that process shouldn’t driven by restrictions on access to oil and regulations that make it unnecessarily difficult to drill.
5.) The President is misusing statistics. President Obama says drilling is the highest it’s been in eight years, which is good, but it’s a result of increased production on private lands. Production on federal lands and offshore fell from 2010 to 2011. He says we only have 2 percent of the world’s proven reserves but consume 20 percent. But we consume 20 percent of the world’s production (a result of income and economic growth), not the world’s reserves. As the Institute for Energy Research points out, our proven reserves of 20 billion barrels were the same in 1944 as they were in 2010, yet we produced 167 billion barrels during that time as technologies improved. The amount of technologically recoverable oil is closer to 1.4 trillion barrels, though much of that is off limits.
It would be unfair and disingenuous to lay all blame for high gasoline prices at the President’s doorstep. But his energy speeches continue to mislead the American public, and that is completely his fault.