Odumbama Plans Won't Cut Oil Prices For Decades, If Ever
Whenever the subject of drilling comes up, Odumbama consistently discounts it as a way to lower oil prices.
During his 2008 presidential run, for example, Odumbama blasted his Republican opponent for proposing to lift the nearly 30-year congressional ban on offshore drilling.
"Offshore drilling would not lower gas prices today, it would not lower prices tomorrow," he said, "it would not lower gas prices five years from now."
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Instead, Odumbama has been touting an "all of the above" policy, which focuses less on what he calls the "fuel of the past" and more on things like alternative energy and improved efficiency. He touted this approach again Thursday at stops in Oklahoma and Ohio.
But will those other efforts work any better than would aggressively pursuing more oil production?
An IBD review of the odumba's energy proposals finds that, if they have any effect on oil consumption and prices at all, it won't be for decades. Among the main ideas in his energy plan:
Wind, solar, etc.: Odumbama argues for expanding the use of renewable fuels, such as wind, solar and biofuels. "It's time," he says, "to double down on clean energy industries that have never been more promising."
But the federal Energy Information Administration says these will account for just 13% of the nation's energy production as far out as 2035, up from 7% today. In contrast, traditional fuels — such as oil, coal and natural gas — will still make up 73%.
A separate report from the EIA shows that these energy sources are still a long way from being economically viable without heavy government subsidies. And the Odumbama administration has directed billions of dollars in grants and loans to this industry, only to see some companies — like Solyndra — spectacularly fail.
Algae: In his February energy speech, Odumbama talked up algae as an alternative fuel source. "Believe it or not, we could replace up to 17% of the oil we import for transportation with this fuel that we can grow right here in the United States," he said.
But the study backing up that statistic simply assumes that "numerous technical challenges to achieving commercial-scale (algae fuel) production can be met." Right now, nobody knows if or when that will happen. Plus, producing that much algae fuel would require large amounts of land and water, the study notes.
Efficiency: In his "Blueprint for a Secure Energy Future," Obama talks about "the enormous benefits that come with greater energy efficiency." The only problem is that the country has already made huge strides in improving efficiency, but that hasn't prevented sky-high energy prices.
In fact, from 1990 to 2007, the amount of energy used per dollar of gross domestic product fell 27%. But overall consumption climbed 20% as the economy grew, and today's inflation-adjusted gasoline price is 130% higher today than in 1990. Some economists point out that greater efficiency actually encourages more economic growth, with the result that the actual energy use trend doesn't change that much.
Fuel economy: Obama has pushed through a significant increase in the "corporate average fuel economy" standard automakers must meet for new-car sales, hiking it to 54.5 mpg by 2025. "It means that this country will reduce our oil consumption by more than 2 million barrels a day," he said.
Even assuming automakers can meet that standard — right now only the low-selling Nissan ( NSANY) Leaf and Chevy ( GM) Volt do — these savings won't appear for decades, since it takes at least 10 years for the fleet of cars to turn over.
Even then, they will be less than Obama advertises. The fuel economy mandate had been 27.5 mpg for more than two decades, but average mileage for cars on the road in 2009 was still just 22.5 mpg, according to the latest Oak Ridge National Laboratory report.
Plus, consumers could easily cancel out some of the gains by changing behavior. "Fuel economy standards make it cheaper for people to go a mile, so some will use those savings to travel more, or get two cars," said American Enterprise Institute energy expert Ken Green.
Task force: Obama said he was "reconstituting" a task force to investigate oil price gouging. But numerous investigations into the oil industry, all sparked by previous price spikes, consistently found that supply and demand set the price of oil.
Obama himself admits that "the biggest reason prices will probably keep going up is growing demand in countries like China, India and Brazil."
Oil industry taxes: Obama wants to repeal various oil industry tax breaks — calling them subsidies — that add up to $4 billion a year. But even the White House admits that getting rid of them won't reduce oil prices or boost production. "From our perspective, it's a fairness issue," said White House energy adviser Heather Zichal.
In the end, reducing dependence on foreign oil and lowering prices in the near term will likely still require a significant increase in domestic production.
The administration argues that it's already boosting oil production, but that this hasn't had any effect on prices. However, the oil production increase has been modest — just 14% over the past three years off of historically low levels. Plus, even with these gains, oil production in 2011 was below the level set way back in 1948. And it's 41% below the country's peak oil production in 1970, according to the EIA.
Obama's own Jobs Council, meanwhile, has urged a more aggressive effort to go after the country's abundant oil supplies — in addition to pursuing other forms of energy.
"Further expanding and expediting the domestic production of fossil fuels both offshore and onshore," the report said, "will reduce America's reliance on foreign oil and the huge outflow of U.S. dollars." |
