The renewable lobby justifies subsidies for solar, wind, and ethanol—poised to expire at year’s end—as being needed to produce more domestic energy and create new U.S. jobs. Yet this illusion of a government-funded ‘green’ energy revolution turns out to be just another tool of crony capitalists. These provisions strip U.S. taxpayers of their hard-earned cash and redistribute it among politically connected firms (ie. Solyndra) that are often incapable of competing in the marketplace.
While Congress is debating those selective subsidies as part of its larger spending battle, the oil industry using private capital and new technology to meet the very goals advocated by renewable proponents: producing more domestic energy and creating new, well-paying opportunities for American.
These investments lead not only to more jobs in the oil sector but other industries as well. Consider a small sampling of those reaping the benefits of America’s recent shale gas boom:
- Steel Manufacturers in Ohio (The Wall Street Journal “Left for Extinct, a Steel Plant Rises in Ohio”)
- Landscape Architects in Pennsylvania (The Patriot-News “Landscape architects find new business in Marcellus Shale”)
- Truckers in Oklahoma (Reuters “Oil convoy blues: trucking game foils crude traders”)
- Sand Mines in Iowa (NPR “Natural Gas Extraction Creates A Boom For Sand”)
- Chemical Companies in Louisiana (WWL “Chemical industry in Louisiana could be set to boom”)
- Travel Industry in North Dakota (Associated Press “ND oil patch airports see booming business”)
- Higher Education in West Virginia (Associated Press “Colleges expand offerings amid natural gas boom”)
The list goes on and on.
Only a few years ago, U.S. oil imports total 60% of consumption with analysts forecasting that they would exceed 75% in the not too distant future. Legislators then leveraged concerns about imports, especially those from the Middle East, as another justification for subsidizing ‘green’ firms.
Those fears weren’t realized though. Oil consumption peaked in 2005 as a result of increased efficiency, higher prices, and higher fuel economy. Today crude oil imports stand at 46% and could be lower still with more enlightened policies.
How exactly did this reversal occur? In a Wall Street Journal column this week, internationally renowned oil and gas expert Daniel Yergin explains:
U.S. crude oil output has risen by 18% since 2008 … The big surprise is onshore, where the United States is experiencing an oil boom.
The reason is the sudden appearance of a new source, “tight oil,” which is extracted from dense rocks. For years, tight oil has been a very marginal business. In 2000, it was only about 200,000 barrels per day, 3% of total output. Today it is about a million barrels per day. By the end of the decade, according to IHS Cambridge Energy Research Associates’ estimate, it could reach three million barrels per day, over half of current domestic crude oil production.
The dramatic increase in tight oil has been made possible by the same technology combo, hydraulic fracturing and horizontal drilling, that created the “shale gale”—the explosive growth in natural gas production from shale rock.
The spread of fracking has generated debate about potential environmental impact, underscoring the need that these resources continue to be developed in a safe and transparent manner. It’s vital that we do so, because shale gas now accounts for 34% of total U.S. natural gas output. Just a few years ago the expectation was that the U.S. would be importing large volumes of natural gas and becoming heavily dependent on world markets—and spending upward of $100 billion a year for those imports. Now people, including President Obama, talk about a hundred-year supply of domestic natural gas. Shale gas has also proved to be a job creator—over 600,000 jobs, according to the IHS Global Insight study released last week.
Environmentalists just don’t like oil. However, the fact remains that mobility is an important value to Americans. Our economy and preferred way of life is based on our ability to move goods from manufacturer to consumer and our capability to travel freely.
With a low population density, mobility is not a luxury, it is a necessity. (North America has a population density of 32 people per square mile; for a point of reference, compare that to Europe which averages 134 people for every square mile.)
Cities will continue to grow and with them so will public transportation and the use of commuter vehicles like “smart cars.” But, suburban and rural areas will also grow because a large number of people enjoy the personal benefits that they provide. For people who live in suburban and rural areas small subcompact cars do not provide the comfort and convenience that they need. As a result, gasoline consumption which has plateaued in recent years will not go much lower anytime soon.
Accepting that reality should lead to an energy policy that takes advantage of our abundance of fossil fuel resources and encourages the investment needed to bring them to market. At a time when 20 to 25 million Americans remain under or unemployed, the government should not turn its back on activities that create good paying jobs and contribute to economic growth in multiple states.
Congress should say no to subsidies and yes to conditions that encourage private, job creating investments.