February 2012

Want wind to get subsidies just like oil does?  Then, cut the PTC by 99.9%.  Wind’s subsidy is 40% of the wholesale cost.  This would work out to $50 per barrel in the oil industry.  Instead oil gets 5 cents.

Of course the best deal would be to cut them both to zero.

For the details, see my blog today at The Foundry.

On another point: AWEA and its apologists have fallen back on the “we need certainty” argument.  Well here is some certainty: The subsidy will be zero for all time.

David W. Kreutzer, Ph.D. is a Research Fellow in Energy Economics and Climate Change at the Heritage Foundation.

In Friday’s Washington Post, Reps. Henry Waxman (D-Beverly Hills) and Ed Markey (D-Massachusetts) pitched cap-and-trade as a means to balance the budget. According to the Congressmen,

“The debate over how to reduce our nation’s debt has been presented as a dilemma between cutting spending on programs Americans cherish or raising taxes on American job creators. But there is a better way: We could slash our debt by making power plants and oil refineries pay for the carbon emissions that endanger our health and environment.”

This statement is absurd. By design, a cap-and-trade policy makes conventional energy more expensive. It is, therefore, functionally equivalent to a tax on a commodity—energy—that is fundamental to every act of economic production. It’s an economy wide tax. In effect, Reps. Waxman and Markey are claiming that a broad consumption tax (cap-and-trade) avoids “the difficult dilemma” of raising taxes, which doesn’t make any sense. Fortunately, these two Congressmen are in the minority party in the House, so their policy idea is a non-starter.

“I’m trying to write a paper on why fossil fuels are good. I was wondering if you could help me out with some information? I couldn’t find much information on the Internet because most people seem to think that fossil fuels are evil.”

The aforementioned is from an e-mail a young man named Cooper sent me the day before his paper was due. His father had heard me on the radio and suggested that Cooper contact me. I spent 45 minutes talking with him. Everything I said was a fresh new idea to Cooper. Obviously he was not being taught the complete picture. If Cooper had questions, others probably do, too. Here are the three things I told him that, like Cooper, you may not know, may have forgotten, or just haven’t thought about in a while.

With rising gas prices bringing energy into the debate, and President Obama setting his energy priorities out in his budget, it is important to be aware of some energy realities. Otherwise you may think fossil fuels are “evil,” when, in fact, they provide us with the freedom to come and go, to be and do.

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Last Thursday in Florida, President Barack Obama grossly misrepresented his record on energy policy in a speech delivered at the University of Miami.

The President first bemoaned the effect of rising fuel costs on average Americans, saying that, “high gas prices are like a tax straight out of your paycheck.” His apparent empathy is belied by his support for a cap-and-trade energy rationing scheme, which makes gas more expensive by design.

Then the President disingenuously took credit for rising oil and gas production in America. While it’s true that there has been a recent increase in production, it occurred despite this Administration’s anti-energy policies. As explained by the Institute for Energy Research, “The reality is that oil production on federal lands is falling, while production on private and state lands is rising.” To put it another way, production is increasing where the President doesn’t have the authority to stop it.

After misattributing to himself credit for increasing oil production, President Obama touted his record on pipelines, telling the audience that, “Over the last three years my administration has approved dozens of new pipelines, including from Canada.” He failed to mention his unpopular refusal to approve the Keystone XL, a 1,700 mile, shovel-ready pipeline from Alberta to Texas that would create thousands of construction jobs, stimulate tens of billions of dollars in business spending, and generate billions of dollars in tax revenues.

Finally, the President pitched an “all of the above” energy strategy. The primary problem with this approach, as my colleague Chris Horner has noted, is that it draws no lines to exclude the uneconomic. By embracing “all” energy sources, taxpayers are on the hook for green energy boondoggles that can’t exist without subsidies.

I’m still thinking about this algae thing, having been on the road when the hilarity ensued. As I understand it, we’re talking about algae because those stupid Republicans keep saying we should produce more oil domestically if we want to lower the price, since we have so darned much of it. And the President responded, that’s stupid because it won’t be here tomorrow.

We instead should “invest in” algae (see, “invest in” Solyndra, “invest in” Beacon Power, “invest in Ener1″…need I continue?). Because algae will be here…um…well, don’t be a cynic.

Because the true engine of… fuels for your engine… will always be energy sources like algae (man, I just wish I was in the room when the consultants worried, “how do we avoid him telling people the real answer is properly inflating their tires,” and the response to this brainchild was “YESSSSSS!,” high fives all around!).

Of course, any insider fool knows that this is a big waste of money because the prez has “invested” a lot of our money in Fisker and the Volt. They don’t need no stinkin’ pond scum to get you where you’re going.

Anyway, flash forward using time travel, which, really, like anti-gravity boots and the rest, has never been more promising (technically, you have to admit he’s right), and enter the world when we pull up to the station and say fill ‘er up with algae! (Free packet of Sea Monkeys with each tank!). It’s just around the corner, as competitive wind and solar electricity have been just around the corner since the ’80s…the 1880s.

The price is 425 dollars and 9 10^ths of a cent per gallon. Question for our economist in chief: if we produce more algae, does that bring the price down? Just a window into your thinking.

I sense somehow we’ll be told that we’re really captive to a world algae cartel and that the U.S. is powerless therefore to impact the price. And so stop asking that we produce more. We all know, by now, you can’t produce your way to lower prices.

So that’s stupid. We should instead be investing in…