Gas Pains and Finger-pointing






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Publication: The New American
Author: Hoar, William P
Date published: April 9, 2012

ITEM: President Obama, reported the Associated Press on February 23, "assailed Republicans for what he described as a flawed and dishonest strategy for reducing gas prices, predicting his rivals would offer nothing but more drilling and political promises of $2-a-gallon gas. Said the president: "The American people aren't stupid.'

" 'That's not a plan, especially since we're already drilling. That's a bumper sticker,' Obama said in a stop at the University of Miami. 'It 's not a strategy to solve our energy challenge. That's a strategy to get politicians through an election. You know there are no quick fixes to this problem.' "

ITEM: The White House's latest budget proposal states: "As we continue to pursue clean energy technologies that will support future economic growth, we should not devote scarce resources to subsidizing the use of fossil fuels produced by some of the largest, most profitable companies in the world. That is why the Budget eliminates inefficient fossil ßiel subsidies that impede investment in clean energy sources and undermine efforts to address the threat of climate change."

CORRECTION: President Obama must have picked up a flawed and dishonest handbook about how to be a chief executive. The part that he seems to have taken to heart apparently calls for delegating all the authority while shifting all the blame and taking all the credit.

When Barack Obama assumed office, the average cost of a gallon of regular gasoline was about $1.80. Today, that seems like the good old days. Yet, when he was running for President, Obama and his supporters were eager to castigate the White House for the price of gas and vowed to bring it down, declaring, "You shouldn't have to accept any more excuses why it can't be done."

Now, however, the number of excuses and half-truths being tossed around by the Obama administration and its supporters would give a hernia to Superman - with the finger being pointed in all directions, from South Sudan to greedy speculators.

House Speaker Nancy Pelosi (D-Calif.) echoed the President on the latter. A Pelosi press release on February 22 claims: "Independent reports confirm that speculators are driving up the cost of oil, hurting consumers and potentially damaging the economic recovery. Wall Street profiteering, not oil shortages, is the cause of the price spike." In fact, speculators have a minimal impact on the long-term price of gasoline; they take risks by betting on how supply and demand will affect the futures market.

The commodity blame game is not unique to Democrats. During the 1950s, speculators were held responsible because onion prices had fallen. Then-Representative Gerald Ford (R-Mich.) sponsored the Onion Futures Act, banning futures trading on onions. The law was passed and signed by President Dwight Eisenhower in 1958. Nevertheless, a study published within the last couple of years showed that, despite the fact that onions have no futures market, their prices were even more volatile than gasoline prices. It's enough to make you cry.

Not everyone has been taken in by President Obama's doubletalk. The Wall Street Journal, for instance, has pointed out that the President is trying to sell the following: "a) gasoline prices are beyond his control, but b) to the extent oil and gas production is rising in America, his energy policies deserve all the credit, and c) higher prices are one more reason to raise taxes on oil and gas drillers while handing even more subsidies to his friends in green energy."

Of course there are many reasons why the prices of a commodity may change, but that is especially true with one so entwined with politics. The saber-rattling linked to a potential war with Iran is among those, as are the sanctions imposed against Iranian crude exports. (The results of the sanctions somehow are said to have surprised those imposing them because the move backfired and has affected the oil-consuming countries.)

There has been no shortage of activities affecting supplies in the turbulent Middle East and Africa, owing to political turmoils and uncertainties, including the possibilities of the closing of the Strait of Hormuz and war with Iran. In addition, demand for fossil fuels continues to grow in the developing world; this also has an impact on prices.

Yet another major factor, often overlooked, is the fiscal policy being pushed by the Federal Reserve. As noted by Nicolas Loris, a senior research fellow at the Heritage Institute, "Oil trades in dollars, and the Fed's easy-money policy has weakened the value of the dollar. It now takes more dollars to buy the same amount of oil in the U.S."

As a distraction, the President would rather change the subject. He wants to kill the relatively small advantages for those producing reliable energy, such as those tax write-offs that also apply to other manufacturers, so he can hand out additional subsidies to political cronies in the fields of wind and solar energy and largely unprofitable green businesses.

The President was taken to task by Karen Harbert, president of the U.S. Chamber of Commerce's Institute for 2 1 st Century Energy, who noted that the results "of the President's 'just say no' energy policy will be felt in the years to come":

* The Obama administration "has issued 50.7 percent fewer annual leases on public lands than President Clinton's" did;

* Gulf of Mexico energy production "is down 16 percent since 2009 and is projected to decrease even further in 2012";

* The President "denied the Keystone XL pipeline permit, which would have created thousands of jobs and provided all Americans with a steady supply of oil from a friendly ally"; and

* The President also "has banned new offshore areas from oil and gas exploration, and recently his Administration took one million acres of onshore land rich with oil shale off the table."

Meanwhile, comments the head of the American Petroleum Institute: "In an effort to ease the pain at the pump the President is misleading Americans about his energy strategy. President Obama says he's committed to domestic oil and natural gas production, but the fact is his record shows otherwise." Since Obama has taken office, says API's Jack Gerard, "he has declared 85 percent of our offshore areas off limits, decreased oil and gas leases in the Rockies by 70 percent, rejected the Keystone XL pipeline and has 10 federal agencies planning more regulation of hydraulic fracturing, which is key to oil and natural gas development."

If the President is right that the American people are not stupid, that doesn't bode well for his vaunted plans to plug the American economy into sources of largely notional alternative energy, Obama foresees, or so he says, that a major portion of American oil imports can be replaced by "this fuel that we can grow right here in the United States" - an-algae-based panacea.

Such fuels may eventually turn out to be the wave of the future. However, as the head of the Institute for Energy Research has observed, there is a world of difference between a laboratory concept and a practical solution. Thomas PyIe cites a recent study that has determined that "to replace 1 7 percent of the oil we import, algae would need to be planted on an area of land roughly equal to South Carolina and it would require 350 gallons of water for every gallon of algae-fuel created."

It is one thing for this alternative to be a matter of private research that may pay dividends down the road if the process meets the tests of the marketplace. But the President's green answers are very different varieties. Many seem strikingly akin to the extraction of sunbeams from cucumbers by the academicians in Laputa in Swift's Gulliver's Travels - more often than not being fueled with tax dollars extracted from the wallets of each of us.

The money that is being spent is not theoretical. The Washington Times summarizes some of these boondoggles:

With access to boatloads of taxpayer cash, the Obama administration addresses every energy problem with a "green" solution. The Pentagon ordered the Navy to purchase 450,000 gallons of algae fuel for jet-fighter training exercises this summer. Rather than pay $4 a gallon for conventional jet fuel, though, the service must shell out $16 a gallon for green gas.

In the meantime, one Navy supplier, Solazyme, has begun to steer away from biofuels and toward beauty products and nutritional supplements in order to survive. Uncle Sam sunk $22 million in stimulus cash into the San Francisco-based company to construct a biofuel factory in Louisiana. With gas prices hovering in the $3 range until the recent spike, the firm wasn't able to turn a profit, posting a $15.6 million loss in the last quarter of 2011.

Mr. Obama has poured taxpayer funds into other trendy technologies, but failures have outweighed successes so far. Colorado-based Range Fuels, which received $162 million in federal and state loans for production of cellulosic ethanol, proved a spectacular disappointment. The company built a new factory in Georgia to produce up to 100 million gallons of ethanol from wood chips. The firm didn't produce a drop of marketable fuel before going . bankrupt in January 2011.

The anti-fossil-fuel lobbyists, who call themselves environmentalists, have repeatedly derailed development plans for the Arctic National Wildlife Refuge. Experts say that had it been approved in 1995, a million barrels of oil would have been flowing daily from ANWR by 2005. And keep in mind that the drilling involved would have affected an area just the size of Dulles airport near Washington, D.C., out of about 1,000,000 acres.

When President George W. Bush proposed opening ANWR for limited drilling, the green opponents said it shouldn't be done because the oil wouldn't reach refineries for up to 10 years. (A major part of that time lag would have been caused by legal impediments added to the process by eco-ex tremists.) Guess what? That was more than a decade ago, and that oil could have been in the marketplace today, driving down gas prices.

Yet, the same anti-development arguments are still being used, in some cases by the same politicians. When a real solution appears, President Obama finds a way to make sure it doesn't get implemented, such as he did with the XL Pipeline. After all, his green friends see bogeymen in such projects, waving red flags about the potential side effects of too much carbon dioxide - which others recognize as an odorless, colorless, non-combustible gas critical to the survival of life on this planet.

The President, when he is in his shifting-the-blame mode, impugns Republicans for forcing him to make a decision on the pipeline before it was vetted properly. In point of fact, the State Department had already spent years assessing it and found no significant environmental problems. That was apparently the wrong answer.

With an election coming, the President is now trying to paint himself as an energy producer (while hoping his green friends will excuse the temporary disguise). It won't wash. As the Institute for Energy Research notes, since 2000, oil and natural-gas production on federal lands is down by more than 40 percent. Meanwhile, since 2000, oil production on private and state lands in the United States has gone up by 1 1 percent and natural gas production has risen by 40 percent.

The Wall Street Journal acknowledged on February 24 that the President is correct when he says that there is a growing share of the oil consumed in this country that has been produced domestically. However,

this trend began in the late Bush Administration, which opened up large new areas on and offshore for oil and gas drilling that are now coming on stream. Mr. Obama sneered at expanded drilling as a candidate in 2008 and for most of his term has done little to expand it.

In early 2010, he proposed to open some new areas to drilling but shut that down after the Gulf oil spill. According to the Greater New Orleans Gulf Permits Index for January 3 1 , over the previous three months the feds issued an average of three deep-water drilling permits a month compared to the historical average of seven. Over the same three months, the feds approved an average of 4.7 shallow-water permits a month, compared to the historical average of 14.7.

Approval of an offshore drilling plan now takes 92 days, 3 1 more than the historical average. And so far in 2012, an average of 23% of all drilling plans have been approved, compared to the average of 73.4%.

There is no lack of available and usable energy - that is, if the government will get out of the way. The Institute for Energy Research adds some perspective, observing that while "the U.S. is said to have only 20 billion barrels of oil in reserves, the amount of oil that is technically recoverable in the U.S. is more than 1.4 trillion barrels, with the largest deposits located offshore, in portions of Alaska, and in shale in the Rocky Mountain West. When combined with resources from Canada and Mexico, total recoverable oil in North America exceeds 1.7 trillion barrels, or more than the world has used since the first oil well was drilled over 150 years ago in Titusville, Pennsylvania. To put this in context, Saudi Arabia has about 260 billion barrels of oil in proved reserves."

Still, there really could be a way for the federal government to help out with the energy situation: Ditch the green algae handouts and burn Washington's red tape for fuel. ·

- WILLIAM P. HOAR

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