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Obama’s Clueless Energy Policy

By: Steve Maley (Diary)  |  January 26th, 2011 at 04:00 PM  | 

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From the President’s State of the Union Address:

We need to get behind this [green] innovation. And to help pay for it, I’m asking Congress to eliminate the billions in taxpayer dollars we currently give to oil companies. I don’t know if you’ve noticed, but they’re doing just fine on their own. So instead of subsidizing yesterday’s energy, let’s invest in tomorrow’s.

Now, clean energy breakthroughs will only translate into clean energy jobs if businesses know there will be a market for what they’re selling. So tonight, I challenge you to join me in setting a new goal: by 2035, 80% of America’s electricity will come from clean energy sources. Some folks want wind and solar. Others want nuclear, clean coal, and natural gas. To meet this goal, we will need them all …

Already, we are seeing the promise of renewable energy. Robert and Gary Allen are brothers who run a small Michigan roofing company. After September 11th, they volunteered their best roofers to help repair the Pentagon. But half of their factory went unused, and the recession hit them hard.

Today, with the help of a government loan, that empty space is being used to manufacture solar shingles that are being sold all across the country. In Robert’s words, “We reinvented ourselves.”

Let’s take a closer look, shall we?

…I’m asking Congress to eliminate the billions in taxpayer dollars we currently give to oil companies.

Those billions of dollars we “give the oil companies”? Prior Congresses, going back nearly 100 years, purposely tweaked the tax code to encourage drilling. Their “investment” resulted in the stable, secure and affordable energy supply that enabled our nation’s industrial might. By taking those benefits away, drilling becomes less attractive to the investor.  Fewer wells will be drilled, and more jobs will be lost. Energy prices will rise, making the U.S. less competitive in international markets and more dependent on foreign energy producers.

Several of the proposed tax breaks available to energy are available to other industry: energy is being singled out.

A point often missed by Democratic policy wonks: You can’t punish oil without punishing natural gas. The two are inextricably linked; what we refer to casually as “oil companies” are also America’s biggest natural gas suppliers. The tax code for drilling is the same for oil and natural gas. Since 80% of America’s domestic drilling targets natural gas, you can’t take away those tax breaks from oil without crippling gas. More on that later…

I don’t know if you’ve noticed, but they’re doing just fine on their own.

I don’t know if Mr. Obama noticed (he certainly didn’t bring it up in the SOTU), but there was an oil spill in the Gulf of Mexico last summer. He imposed a moratorium, with a subsequent “permitorium” that has much of the industry in limbo. We’re already hemorrhaging jobs, thanks to Obama’s misguided overreaction.

…by 2035, 80% of America’s electricity will come from clean energy sources. Some folks want wind and solar. Others want nuclear, clean coal, and natural gas.

According to the Department of Energy’s base case projection, renewables will account for 12.7% of electrical generating capacity by 2035, vs 10.4% in 2009. (“Renewables” includes Hydro, geothermal and biomass, in addition to solar and wind.) That’s not much growth. “Some folks” may want solar and wind to be major contributors, but their share of generating capacity will always be tiny.

Mr. Obama has belatedly acknowledged that “other” clean fuel, natural gas. As I pointed out above, oil and natural gas are inextricably mixed. Most of “the billions in taxpayer dollars we currently give to oil companies” has had the effect of making natural gas cheaper and more available. Mr. Obama is unclear on how we’re going to stimulate gas production while punishing gas producers.

No, the big winner here is clean coal, another technology dependent on massive infusions of government dough. This time the beneficiaries will be the big coal-dependent electrical generating utilities: the government will heavily subsidize their new-generation plants, while increased costs will be passed along to ratepayers. The electric utilities, unlike oil and gas companies, enjoy the risk-free world of regulated returns.

Now, clean energy breakthroughs will only translate into clean energy jobs if businesses know there will be a market for what they’re selling.

He’s talking about a government-mandated mix of energy sources. Require consumers to buy a product, and sure enough someone will fill the demand.

This government-centric model is inefficient and backward. The government should not be picking winners and losers, the marketplace should.

GPS and the Internet, Obama’s models of government-led game-changing technologies, do not owe their commercial success to a government mandate for their use. They succeeded because some entrepreneur saw a way to make a buck by using the technology in a different way.

Government “investment” in energy research is not a new idea. President Carter created the Department of Energy over 30 years ago in response to the oil embargoes of the 1970s, with “energy independence” as its goal. About the same time I graduated college with a degree in Petroleum Engineering. After 33 years in the business, I can’t think of a single significant technology that the DOE can call its own. All of the significant breakthroughs happened in the private sector.

As long as the government throws money at renewable energy and green jobs, we are guaranteed one resource in limitless supply: “green” company owners like the Mssrs. Allen who can be trotted out like props at State of the Union addresses.

Cross-posted at VladEnBlog.

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COMMENTS

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  • gwalt

    You were a Petroleum Engineer? What school did you go to?

    Anyway—-saw the (Atlanta) Dekalb NAACP organized a protest over the weekend at a gas station for price gouging. This 3.50 a gallon gas hits minorities hard.

    Remember in 2008 how the LSM cried how Bush was breaking the backs of minorities?

    How about ringing up the NAACP and telling them their president is doing it on purpose. This time for real.

    • http://vladenblog.tumblr.com Vladimir

      And I am a petroleum engineer.

      • Next93

        Is there ANYONE in the president’s circle of advisors who has actually been involved in bringing a single gallon of gas to the pump? As near as I can tell, he’s surrounded himself with academics, environmental “activists” (read: “cranks”), and anti-business socialists. I don’t think there’s a one of them qualified to use a screwdriver.

        The left used to complain about the Bush echo chamber, but this administration has W beat six ways to Sunday.

        You’d think that someone with ears that big would be able to listen to *someone* besides himself.

        By the way, exactly what qualifications do you need to become an “activist”?

        • http://vladenblog.tumblr.com Vladimir
          • mspector

            And according to a report in the last day or so has not even spoken to roughly half his cabinet since appointing them.

    • dennism

      The federal government gives money to GE and Chase and AIG and ACORN and GM and Chrysler. And NPR and Planned Parenthood and farmers. We give money to foreign governments and probably even the Chinese government. But not a nickel to oil and gas producers.

      “Win the Future” = WTF

  • http://thesandsinstitute.org Vassar Bushmills

    The fact is, for Obama to achieve the uptopian dream he suggests, by us shifting from proven “inexpensive energy” to problematic energy of his social engineers, will require a complete reordering of America. In order to pay for the high(est) costs of energy, fewer cars will be on the road, by half, and all will be licensed by the state. I’ve seen this before. And home heating will be such that we’ll (except the state class) be forced into little 1200 sq ft “condos”, and pick up a bus or fast-rail line to get us where we want to go. I’ve seen that too.

    And where I saw it, they threw it down.

    • http://vladenblog.tumblr.com Vladimir
      • http://thesandsinstitute.org Vassar Bushmills

        I’m just saying there is a grander plan behind their energy policy, and this to put people into small fuel-using units, cars and homes, which would be the result of fuel costs skyrocketing. The need for mass transportation will rise, even for the once-affluent middle class in the burbs.

        • rbdwiggins

          Energy costs rise to the level that mobility, economic and actual, becomes unattainable for most Americans. Result: Semi-public and public housing that conforms to energy mandates, and economically induced public transportation. Except the ruling class.

    • http://vladenblog.tumblr.com Vladimir
    • voicefromthevoid

      Please, stop pretending that you believe BHO has an utopian dream. No, really. Looks like we all know what his dream really is and how this complete reordering is achieved, right? NKVD, Petrovka, Kolyma anyone? Who wants to remember what “vrag naroda” stands for?

      • myron_j_poltroonian

        It means “Devil Nations” in Croat.

    • astrolite

      You must have read the “Wildlands” project. or it’s morph : The Biodiversity Treaty. Both Still very much out there waiting to ambush us!

  • bobmontgomery

    three twenty five on his watch either. The price of coffee has almost doubled, many more examples can be cited. We can’t do this. We have to start calling lies….lies. The ideal candidate for me for President would be one who gave a speech saying “Everything you have been told for the last forty years is a lie.”

  • nessa

    Checking the FP every few minutes waiting to read your take, the wait was well worth it!

  • ehosterman

    You stated that, “The electric utilities, unlike oil and gas companies, enjoy the risk-free world of regulated returns.” Most states deregulated their utilities, so they are no longer guaranteed a regulated return. I will agree that they can pass along increased costs easier than other industries because there is little true competition since building generationg stations and transmission and distribution systems are very expensive barriers to entry.
    .
    Also, I have to take issue with your statement that the clear winner will be clean coal. Nothjing could be farther fom the truth. Under Obama, the EPA is doing everything in it’s power to drive coal companies out of business.
    .
    Currently, the low cost of natural gas is keeping a cap on the cost of electricity, since the few non-utility generating stations burn largely natural gas. If Obama cuts drilling related tax deductions for the oil and gas companies, all that will happens is large increases in the costs of all energy.

    • voicefromthevoid

      “large increases in the costs of all energy.” that is. Well, his ultimate goal is a total destruction of USA as a First World nation, but skyrocketing energy prices seem like a logical step.

  • renny

    and achieve third world status that he thinks we deserve for all of our sins in saving the world in WW I and WW II and freeing 1.5 billion when we ended the Cold War with the USSR and liberated the Eastern European bloc and for payback for sending trillions to the Middle East since oil was found in Saudi Arabia because we are so arrogant and lacking in humility, which o is so familiar with.

    • voicefromthevoid

      It’s just a necessary precondition for the communist revolution according to his Great Teacher Ullyanov – Lenin.

  • wonkish1

    I’ll agree to give up the deductibility of oil exploration and drilling in exchange for a fast track process(with limited ability to court challenge) leasing, exploration, drilling, and construction of refineries and other energy producing power plants(nuclear, clean*er* coal, etc.). And you can put all of the additional tax revenue towards incentivizing new technology.

    I’ll bet any money he wont go for that though.

  • bobojake
    • Read Chesterton

      Remember… “The price of energy will necessarily have to skyrocket.?

      He, or better, his handlers, know what they’re doing.

      • GregInFla

        Yes, the Daley’s are now out in the open. I’ll bet Mayor Richard will find a way to get on the fed payroll by the end of 2011.

  • voltron

    …was $4/gallon gas by June. What do we do about this Vlad? It seems everyone has moved on from the cost of fuel. What happened to Drill Here Drill Now! Drill baby Drill! and all that?

    • GregInFla

      Now, when the press reports the rise in prices from last month, they say “factoring out the higher costs of energy and food, prices stayed relatively the same this month.” Say what???

      • astrolite

        I think they used the value of our homes as a factor!

  • joekinde

    Isn’t there an inherent flaw in supporting oil subsidies and opposing “government-mandated mix of energy sources?” I’d prefer that government get out the business entirely, and allow the free market to flow as needed. Energy is crucial to the economy and a free market will develop naturally. If oil is deemed to be so crucial to our economy, the subsidies should flow through the Defense Department and not through the Energy Department (which should be abolished).

    • voicefromthevoid

      Tax breaks are NOT subsidies! It’s like if gang that met you in the dark street instead of taking all that was in your wallet agreed to spare you $10 so you can get home. Now they are calling that subsidy.

      Excessive taxation is an act of armed robbery. The fact that it is performed by the government does not make it any less a crime.

      • GregInFla

        By the government.

      • joekinde

        actually, it’s not like that at all. put your gun away, and stay far far away. sheesh. wackjob.

  • JoeG

    Investor owned utilities love “green” energy because it increases profit. Generally regulators set the profit of an utility as a fraction of revenue. The utilities are only allowed to charge the customers a set price based on the price of purchasing the bulk power. Any attempt to manipulate the price higher is blocked by the regulators. That is exclusive of “green” energy; since many of the regulators are political appointees that were chosen because they are all for forcing “green” power on the customers.

    This doesn’t apply to customer owned or government utilities. This is because these utilities aren’t regulated by the state PUC in most states. The assumption is that people don’t need protection from their own government. The people who run them are chosen solely for their ability to keep power cheap.

    The perfect example is Los Angeles Water and Power. LAWP is exempt from all of the green crap in the middle most environmentalist hijacked state. No net metering, no mandatory green power percentage, no ban on power from coal.

  • 6eorge Jetson

    As long as the government throws money at renewable energy and greence jobs, we are guaranteed one resource in limitless supply: ?green? company owners like the Mssrs. Allen who can be trotted out like props at State of the Union addresses.

    There, fixed it for you :)

    • 6eorge Jetson

      Kowalski

      • myron_j_poltroonian

        What is it called when you trade in your Chevy Volt for a new one? “Revolting”.

  • republicanconscience

    The Commie-in-Chief has a clue, he is not screwing up anything he is on target destroying this country. You look at it like he’s a President so you mischaracterize his actions. If you see him as I have come to see him, a Muslim terrorist, then you know he is spot on. He is destroying our country. He is the Enemy Within.

  • horizon3

    redistribute our wealth to third world and developing countries where they are currently exploring and producing oil & gas, it’s that simple.

    He will accomplish this by killing off our domestic production and mining, so that we have to import our oil, gas and coal from these other countries.
    He and other globalists have done the same to our manufacturing base. Why do you think GM are building a brand new engine plant … in Mexico.

    It’s not a mystery or some hidden agenda, if you have paid attention to what he has said for the last 10yrs, that is his exact intent, as it has also been for several other administrations since T. Roosevelt, Wilson, etc. FDR really got the ball rolling on it.

  • rsturm

    Confess I didn’t make it thru the whole speech… but (excluding earmarks and education) the consensus seems to be that green-fuel vs. oil was BHO’s big topic…. which (aside from job loss) is NOT usually a major Tea Party issue.

    So maybe we need to start a FUEL Party!!!

    We could have a protest march THIS April 15th, to demand a return to drilling in the Gulf, ..or Alaska or Colorado ..or anywhere that we can establish our own supply.

    Beck just showed stats of less than 1% usage of green-fuels (wind & solar) in the US, …so a few hundred signs saying we ditch that idea and return to coal and oil until the private sector creates a better plan …might just be in order!

  • http://www.plumbbobblog.com Plumb_Bob

    This is one of the worst problems with Democrats’ tactical lying: they eventually come to believe their own lies, and then they do things that are even more stupid than before.

    The claim that oil companies receive “subsidies” was concocted to offset the massive, incredibly wasteful subsidies that are the only reason anybody ever builds a solar plant or wind farm. Those subsidies amount to ten or twenty dollars per thousand kW. They needed to find something with which to offset these in the public eye, whether it was valid or not.

    So, they pointed toward the oil depletion allowance.

    The oil depletion allowance is not a subsidy in any meaningful sense of the word. Only in Democrat World are these subsidies.

    Accounting exists to tell businessmen accurately what they own, and what they owe. It is useless unless it creates an accurate picture. When your asset is a finite mineral in the ground, and you start removing that mineral to sell it, it is a cost to your business, just the same as when a home-builder buys lumber and starts using the lumber to build houses; accounting must show that the amount of the asset, lumber, has decreased. The businessman needs to know how much of the asset he owns, and when he uses some of it, then he owns less. So oil companies are permitted to account for depletion of oil resources as they pull them from the ground.

    Government does not allow this “allowance” as a favor to oil companies. They did not create it to incent oil companies to drill for oil. It’s simple, accurate accounting; the company had X barrels of oil in the ground, now it has X minus N barrels.

    The outcome would be that oil companies would not just pay taxes on profits, they would pay taxes on revenues that went toward purchasing the goods that they sell. It would be like making automobile manufacturers pay taxes on whatever they receive from selling a car, without first subtracting how much they spent on the metal and plastic they had to buy to build the car.

    Removing the oil depletion allowance would be a brainless, vicious step toward putting oil companies out of business. I would say it was deliberate, but it is most likely that nobody in Barack Obama’s circle of advisers knows the first bloody thing about accurate accounting. Nonetheless, now the idiotic mook is actually talking about forcing oil companies to break their accounting and pay taxes on revenue they did not receive — revenue that gets spent

    • http://www.plumbbobblog.com Plumb_Bob

      The last sentence should be “…now the idiotic mook is actually talking about forcing oil companies to break their accounting and pay taxes on revenue they did not receive — revenue that gets spent producing the goods that are being sold.”

    • http://vladenblog.tumblr.com Vladimir

      You may also enjoy this one: http://www.redstate.com/vladimir/2010/02/02/obamas-energy-tax-will-even-tax-strippers/

      The depletion allowance is not some unique handout to oil and gas companies. All extractive industries have something similar: coal, silver, gold, gypsum, even sand & gravel and clamshells.

      Singling out energy is insane.

      • YnotNOW

        How much are favorable write-offs and drilling incentives actually worth, vs. how much royalties and taxes the oil (and natural gas) companies PAY.

        That would provide good hard-numbers argument against the PURE subsidies that “renewables” receive – while paying almost no taxes at all.

        • http://vladenblog.tumblr.com Vladimir

          …#2 source of Federal revenue, behind the IRS.

          The only numbers I’ve seen for the value of the various so-called tax “loopholes” was in a proposed Federal budget right after Obama became President. I don’t have it bookmarked, but you can probably Google it.

          • http://vladenblog.tumblr.com Vladimir

            Eliminate Funding for Inefficient Fossil Fuel Subsidies. As we work to create a clean energy economy, it is counterproductive to spend taxpayer dollars on incentives that run counter to this national priority. To further this goal and
            reduce the deficit, the Budget eliminates tax preferences and funding for programs that provide inefficient fossil fuel subsidies that impede investment in clean energy sources and undermine
            efforts to deal with the threat of climate change. We are eliminating 12 tax breaks for oil, gas, and coal companies, closing loopholes to raise nearly $39 billion over the next decade.

            http://www.whitehouse.gov/sites/default/files/omb/budget/fy2011/assets/responsibility.pdf

          • GregInFla

            I hope they enjoy their climate change this week in DC, all 6-9 inches of it! At least this climate change keeps govt away from work and doing damage.

          • gekster

            from:
            http://www.dailymarkets.com/economy/2008/11/02/us-oil-companies-profits-vs-taxes-in-2006/

            excerpt:
            “According to the EIA, the major energy producing companies (listed here) like BP, Exxon, Shell, Chevron, etc. earned $131.5 billion in profits in 2006 (most recent year available, data here), see chart above.
            Those same companies paid or collected: a) $90.445 billion in income taxes in 2006 to various governments in Europe and the Middle East, the U.S., Canada, Russia, etc., b) $8.25 billion in non-income taxes to the U.S. government (production taxes, sales taxes, property taxes, payroll taxes, etc. (data here), and c) $48 billion in U.S. excise taxes (data here), for a total of $146.8 billion.

            Bottom Line: American oil companies paid and collected more taxes ($146.8 billion) in 2006 than they made in profits ($131.5 billion).”

          • YnotNOW

            Good info and links to make the arguement.

  • mspector

    To getting a case of the shingles? Now, that’s what I call progress.

  • ascrowe

    This is absolutely right on target, as per usual for Vladmir?s work. This analysis is what should be front and center in the national debate, yet, and unfortunately, its omission from that discussion can only mean that the real energy/economic crisis looms somewhere in our future?I?m afraid we ?ain?t seen nothing yet??the question seems to be how long can we go on before we have to face up to reality?and how deep can we dig our hole in meantime?

    Very good work Vladmir, I wish you the best.

    Samuel

  • nateiniowa

    He is back by the very succesful Oil invester, George Soros. George knows that if he is to make great money off all the oil off the coast of Brazil, he needs a strong market to sell to with out interference from the Saudies. Shut down US production and you have a ready made market. Also, Brazil is closer to the US than the middle east for transporting oil and you do not have to move it through crazy dictator’s waters.
    George knows it will take time to get a foot hold in Petrobrase, but he has his POTUS working on the captive market piece. (Ohh, by the way, George also had POTUS lend US Govt. money to Brasillian Oil interest. Talk about leverage!)
    Once George is a major player in Petrobrase, The US oil market will be his to dominate, thanks to BHO.

  • js1019

    If there was any truth by either side of the aisle about ending our dependence on oil, someone would get serious about getting all government vehicles converted to natural gas.

    We continually hear about green house gases, rising cost of gasoline, blah, blah, blah, but when have you heard a serious conviction about this one act which would remove appx. 2 million government vehicles from gasoline and diesel. (yes, there is a dual fuel convertor for diesel engines)

    I checked into conversion of my SUV and was surprised how little it would cost to purchase and install a dual fuel use converter. Not much more than $1000. The equivalent of natural gas to a gallon of gas price in our area is $1.44.
    The fed and states have laws making it prohibitive for service stations to do this, but it can be done yourself if you are mechanically inclined.

    Yes, the downside is you have to go to the natural gas supplier to get the fuel and the tanks are limited on their size, however, when you combine the price of gas and natural gas you can decrease your overall per gallon price by a dollar or more depending on how much natural gas vs. gasoline you use.
    Another downside is tanks are limited in size to 5 or 7.4 gallon equivalent and you suffer a 5% to 10% power decrease. And, the final downside is the home converters are ridiculously priced at $3500 and higher should you want to fuel at home.
    Personally, these do not seem like sufficient reasons to not begin the transference to at the very least a dual fuel conversion.
    In my mind, the savings of that many vehicles reducing their consumption of oil, would have a combined effect of reducing gas prices and be more “environmentally” friendly.
    Again, why has neither side ever broached this subject? Why don’t you hear the “environmentalists” tout this. I believe the answer is quite apparent.
    Someone mentioned a fuel party. Just as the Tea Party has changed the political landscape, it doesn’t seem that far fetched a Fuel Party could have the same effect on the economic landscaped.
    The greatness of America has always been our ability to innovate and solve problems. For the most part, this issue has been solved yet no one seems to have the political will to push this issue hard.
    The positive economic effects would be quickly apparent with a reduction of fuel costs, a manufacturing benefit to some one willing to get into that business, allowing service stations to offer this without onerous licensing, and I’m sure some Oil Company would begin opening supply stations. (I have heard Exxon is beginning this process).
    Obama’s agenda is quite apparent. He is committed to the destruction of America at every level.
    Where is the courage of the rest of our officials? Let’s pray the current congress does.
    I’m sure I am missing some other detractions of doing this, but this seems to simple to not do.

  • satchman3

    Coal and oil (and gas) have various environmental problems related to production and utilization. Burning produces NOx SOx and particulates.

    I was really surprised that Obama through clean coal into his speech. No way you can argue that coal is greener than oil or especially gas in any way.

    Clean coal has been the recipient of a lot of DOE money. I had the impression that the money was drying up but maybe the coal lobby is pushing for more.

    It also seemed inconsistent with his campaign talk of putting coal companies out of business. It really struck me as an inconsistent thing for him to say.

    • myron_j_poltroonian

      It certainly isn’t “I threugh momma under the (‘green’) train”, is it? I would most heartily indorse sitting down with a English primer (ask your grandparents) for awhile. Apparently, you are wishing for a “Pristine” environment, devoid of all un-green contaminants. One to match the interior of your cranium, mayhap, since it undoubtedly appears to be filled with a copious amount of “Green Effluent”, that is.
      “Clean Coal” is a lot cleaner than good, old-fashioned “unclean” coal (think of a Muslim’s reaction to pork – or, look in the mirror for your reaction to coal), and a lot more available. In fact, I believe the United States has a greater supply of usable coal than any other nation in the world.
      So, sit in your Ivoroid Tower (a substance used in guitar making, since real Ivory is forbidden for importation), cross your arms and legs and intone with all earnestness, “Ohmm” to your hearts content. Just leave us realist’s alone.

  • capeconservative

    “…As long as the government throws money at renewable energy and green jobs, we are guaranteed one resource in limitless supply: ?green? company owners like the Mssrs. Allen who can be trotted out like props at State of the Union addresses.”…

    http://news.cnet.com/8301-11128_3-20028245-54.html

    Evergreen TOOK $58 million from MA (that’s We the Taxpayers!!) for ‘green’ energy incentive and just recently announced they are CLOSING the plant and moving to (you guessed it) CHINA!!!! Once again proving the good??? use of our tax dollars!!!! Used OUR money to get their plant up and running and now 800 people are joining the unemployment lines!!!!!!