2014

Yesterday the Senate Energy and Natural Resources Committee held the first hearing in 25 years to “explore opportunities and challenges associated with lifting the ban on U.S. crude oil exports.”

Sen. Lisa Murkowski (R-Alaska) reiterated her call for President Obama to end the prohibition against exporting crude oil produced in the United States. “The prohibition on crude oil and condensate exports threatens record-breaking U.S. oil production and American jobs by creating inefficiencies, gluts, and other dislocations,” Murkowski said in her opening statement.

Lifting the ban would “send a powerful signal to the world that the United States is ready to reassert its role as a leader on energy,” Murkowski stated. In addition, she argued, opening up global markets to U.S. producers would spur production, contributing to an overall expansion in global petroleum supply, which in turn would lower the price of petroleum products.

All things equal, the American consumer will benefit from this interaction, as will those Americans employed directly and indirectly as a result.

Chairman Ron Wyden (D-Oregon), who once opposed U.S. exports of petroleum products made from imported Canadian crude oil, took no position for or against lifting the crude oil export ban, stating he wanted to hear the arguments pro and con and would “not be making any judgments today.”

Sen. Murkowski agreed that no decisions would be reached in the Senate or the administration in the next few weeks. But, noting that congressional debate on the ban would have been unthinkable only two years ago, she said the hearing should advance the conversation on how to renovate America’s “antiquated energy trade architecture.”

In a comedic moment indicating just how far the conversation has come, Sen. Al Franken (D-Minn.) made a plea to Sen. John Hoeven, Republican of North Dakota, home of the Bakken shale boom, to “please discover some oil in Minnesota.”

As discussed previously, Sen. Murkowski recently released a white paper, A Signal to the World: Renovating the Architecture of U.S. Energy Exports. On visiting her Committee Web page today, I found that she has commissioned 11 studies from the Congressional Research Service (CRS) on various energy export issues. In short, she is providing intellectual leadership and serious legislative deliberation on these important issues. Brava!

I may review other testimonies in a later post. Here I’ll provide highlights from the testimony of Harold Hamm, Chairman and CEO of Continental Resources, Inc., “the company that co-developed the first field ever drilled exclusively with horizontal drilling and the company that is the largest leaseholder and most active driller in the Bakken Play.” [click to continue…]

Rupert Darwall, author of The Age of Global Warming: A History, writes today in the Wall Street Journal about Europe’s infatuation with renewable energy mandates.

In 2007, the European Union adopted a package of legally binding targets known as “20-20-20.” The EU committed to achieve the following objectives by 2020:

• Reduce EU greenhouse gas emissions 20% below 1990 levels.
• Increase the share of EU energy consumption produced from renewable resources to 20%.
• Improve the EU’s energy efficiency by 20%.

Darwall comments on a recent European Commission analysis, which finds that the U.S. is reducing greenhouse gas emissions almost as fast as Europe but much less expensively, placing EU manufacturers at a competitive disadvantage:

In a clear-eyed analysis last week, the European Commission published its proposals for the follow-up period from 2020. The Commission notes that since 2005, the U.S. cut its CO2 emissions by more than 12% (a little less than the EU, which cut emissions by just under 14%), thanks largely to shale gas. EU firms and households, the commission says, are increasingly concerned by rising energy prices and widening cost differentials with the U.S. Between 2008 and 2012, the average electricity price paid by European industrial firms rose by 16.7% while American firms are paying 2.3% less, so prices paid by American firms are 45% lower than EU firms.

As the U.S. powers into an era of cheap, abundant energy, across the Atlantic the European Commission reckons electricity prices will rise 31% before inflation by 2030 from 2011, and will consume an increasing share of European GDP. Widening energy-price disparities may reduce production and investment and shift global trade patterns, the commission concedes. However, it adds, if other countries outside Europe agreed to cap their greenhouse-gas emissions, they would help Europe’s energy-intensive industries—hardly an inducement for them to do so. [click to continue…]

As discussed yesterday on this site, a new report by economist Roger Bezdek demonstrates that carbon energy has immense social benefits, and, consequently, carbon pricing schemes can have devastating social costs.

Today’s post takes a closer look at Bezdek’s discussion of the health risks of policies, such as carbon taxes, cap-and-trade, renewable energy quota, and carbon capture and storage (CCS) mandates, that raise household energy costs.

Although fuel poverty is typically discussed as a European problem, millions of Americans also face harsh tradeoffs between paying their utility bills and purchasing other necessities. The relevant concept here is energy burden, defined as the “percentage of gross annual household income that is used to pay annual residential energy bills” for electricity, heating, motor fuel, and cooking fuel. More simply, energy burden is the “ratio of energy expenditures to household income.”

For low-income households, small increases in energy bills translate into large increases in energy burden:

For example, consider the case where one household has an energy bill of $1,000 and an income of $10,000 and a second household has an energy bill of $1,200 and an income of $24,000. While the first household has a lower energy bill ($1,000 for the first household compared to $1,200 for the second), the first household has a much higher energy burden (10 percent of income for the first household compared to five percent of income for the second).

In other words, carbon taxes or their regulatory equivalent are regressive, because energy expenditures consume a larger portion of the budgets of low-income households than high-income households. The regressivity of high energy costs is greater than you might suspect. According to Bezdek:

• Families earning more than $50,000 per year spent only 4% of their income to pay energy-related expenses.
• Families earning between $10,000 and $25,000 per year (29% of the U.S. population) spent 13% of income on energy.
• Those earning less than $10,000 per year (13% of population) spent 29% of income on energy costs.

These percentages are higher still when energy expenditures are compared to after-tax income. For the 8.7 million Americans earning $10,000 a year and less, energy costs consume more than 69% of after tax income:

Even without carbon taxes, cap-and-trade, or national renewable energy quota, the energy burden of all U.S. households has increased significantly over the last decade, especially for low-income households: [click to continue…]