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A Coherent Energy Policy: “Drill, Baby, Drill!!”

The solutions to our dependence on foreign oil can be solved, the experts say by either increasing supply (the “drill baby drill” people) or decreasing demand (the tree huggers). I don’t understand why it cannot be both simultaneously. The United States is a leader in technology for safely extracting oil nd natural gas. As Shell Oil vividly demonstrated in the case of extracting shale oil, it is private industry, not government that will lead the way. Assuming we can decrease our reliance on gasoline through hybrid technology (not stupid electric cars) and LNG/CNG vehicles and the like while increasing domestic production to meet domestic needs, it is quite possible the US can become a net exporter of oil and oil products. The left, in the meantime, needs to cease their populist rhetoric against our energy producers and cut the umbilical cord that ties them to the environmental movement. Reality dictates that fossil fuels are not going anywhere anytime soon. The answer is not the carrot of government subsidies where government mandates dictate personal choice of vehicle purchase. The answer is the stick- you want your gas guzzler, fine; but you will have to pay extra for it. And since decreasing oil imports will do very little in meeting the energy needs of this country, stating that decreasing imports will bring us “energy independence” is a lie. There are very few oil burning electrical generation plants in this country.

The main sources are coal, natural gas, nuclear, and the so-called “renewables” (solar, wind, hydroelectric). There are 1500 coal burning plants in the US that produce 45% of all the electricity. We rely on coal for a few reasons: (1) the high capacity factor, (2) we have abundant domestic supplies, (3) we are actually a net exporter of coal, (4) all things considered, it is cheap. There were, as of 2008, 154 pending permits for the construction of new coal burning plants spread across 42 states. However, it has its drawbacks. Mainly, coal is dirty. It creates not only the dreaded greenhouse gases, but also sulfur dioxide, nitrous oxide and mercury. Most of the current subsidies directed at coal are to create “clean coal” technology. Incidentally, coal plants emit 100 times more radiation in a year than a nuclear power plant, but the folks who are against coal are usually also against nuclear power.

Carbon sequestration, a process that filters out the emitted carbon dioxide and sequesters it underground, has been funded to the tune of $5.9 billion. The technology today is far from perfect. Most experts predict it will take an additional $25-30 billion to perfect it. Even then, it would not be cost effective on a widescale basis until perhaps 2030. Until then, the best method is to remove moisture from coal before it is burnt. By burning dry coal, emissions can be decreased 50%. Yet, the government has made the decision to invest in what may prove to be a solution that solves nothing. To date, there i exactly one plant (in Germany) that uses carbon sequestration. Additionally, both China and India have stated they intend to increase their reliance on coal in the future.

Domestically, we sit on over 21 billion barrels of known oil reserves. Prior to the Deepwater Horizon disaster in the Gulf, more monetary and environmental damage was done by oil tanker spills and accidents than by offshore drilling operations. Offshore drilling technology has advanced light years beyond that used in the Santa Barbara spill that sent a chill over domestic offshore oil exploration. Should there be safety regulations? Absolutely, but remember that BP took short cuts through their subcontractors and they should be held liable. Much is made about ANWR in Alaska and exploiting the reserves there. Personally, from everything I have read, the recoverable reserves are not that great and would represent only a short term solution. But isn’t even a short term solution better than no solution at all? Between oil and natural gas domestically, there is an estimated $2.4 trillion.

Another possibility is shale oil in the western United States. It is estimated there is over 2 trillion barrels. That is 265 times our current rate of consumption. During the Carter Administration, led by Shell Oil, extraction and production of shale oil began, but then the Arab oil embargo ended and the technological research ceased. The best part about this is that the majority of these reserves lies under ground owned by the Federal government which represents an economic boom to the country, while privately creating jobs which adds tax revenue. Yet, Obama and company insist that increasing domestic production will not help.

Another important problem is the number of oil refineries. To date, there are about 150 which operate, generally, at 95% of capacity. Over one third of them exist in the Gulf region, including Texas. As recent storms have proven, siting in this area causes disruptions. Secondly, despite increased EPA mandates, oil refineries have consistently operated at over 90% capacity for the past decade. Still, since 1999, only one permit for a new refinery has been improved (in Arizona). What environmentalists will not tell you is that it took over seven years of study and litigation to get that single refinery approved.

Whether new refineries are built or older ones modified to meet the new demands of government mandates, the oil companies have done a tremendous job of meeting demand. Many decry the fact that more than half the refineries are owned by five companies. So what? Not being an apologist for oil companies, I don’t envy them their profits because they are a matter of scale. The average profit margin for any company on the Standard & Poor’s 500 is 8.5%. Exxon has a profit margin of 10.8%, Chevron 8.6%. These “exorbitant” amounts are interesting considering that the profit margin of Apple is 15.1%, Google 24.9% and Microsoft 28.3%, yet we hear no mention of Big Internet. From 1980 to 2005, oil companies in the US collectively paid $2.2 trillion in inflation adjusted dollars. Over that time period, that is equivalent to someone making $200,000 and paying $150,000 in taxes. One populist suggestion is always a windfall profits tax being assessed. During the Carter Administration that was tried. The result: domestic production decreased 3-6% while imports increased 8-16%.

Recently, my favorite Democratic moon bat was on the Sunday morning talk shows and the subject of the price of gas came up, specifically the Keystone XL pipeline. Her response was that it would take 10 years for the “drill baby drill” strategy to have any effect. OK, lets give her that. But, that begs the question as to why we were not increasing our domestic output ten years ago.

The reason is the hypocrisy of the Liberals and their allies in the Democratic Party, the knee jerk environmentalists who live in a rose-tinted world of renewable energy production. If Pennsylvania alone were to fully exploit the natural gas in the Marcellus formation within their boundaries, they would surpass Texas as an energy-producing state. Thus far, it is George Soros, among others through MoveOn.org, who is preventing fracking in New York state by decrying the environmental problems possibly involved. Meanwhile, Soros has multiple financial interests in alternative energy projects receiving subsidies from Obama. He also has huge ownership stakes in energy producers in Brazil and Australia. His Brazilian investment is exploring offshore petroleum drilling. His Australian venture is in extracting natural gas by fracking. Apparently, those environmental concerns in New York take on less weight in Australia in the mind of George Soros. If Obama really wanted to create high paying, long term jobs with no government money, he would get out of the way of the energy sector and let the experts do what they do best.

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