Facts vs. Reality For Obama’s Energy “Blueprint”

President Obama knows how to deliver a speech with eloquence. But eloquence is not a viable substitute for substance. Case in point: the President’s recent address announcing his administration’s “Blueprint for a Secure Energy Future.”

Wrought with ideology and political rhetoric, his lofty promises of energy independence just don’t square with the facts. Just consider his claims regarding foreign imports, domestic production, and federal regulations.

Foreign Imports

The President’s call to reduce U.S. oil imports by one-third by 2025 may resonate with his political base but is disconnected from reality. The baseline of his goal is 2008’s net, not gross, imports of 11 million barrels a day. According to the Energy Information Administration (EIA), total imports neared 13 million barrels daily the same year. The difference involves oil exported for economic reasons. For example, it is cheaper to ship Alaskan crude to Japan and buy foreign oil to replace it.

Current net imports have dropped to about 9 million — a reduction caused by our devastating recession. EIA analysis shows only slow growth in oil use in coming decades, with imports dropping from 50 percent of our total use to almost 40.  So policies already in place, like the recent CAFE standards, have slowed imports. We are at the point where gasoline consumption may have peaked. Other uses of oil such as diesel and jet fuel may determine how much growth takes place in coming years.

Likely for policies reasons, President Obama’s “energy security” address also promoted the inaccurate impression that most of our imports come from the most politically unstable region of the world — the Persian Gulf. Yet, the area only accounts for about 15 percent of our imports. Canada and Mexico rank as our leading sources of oil imports.

Domestic Production

The President mocked the popular “Drill, Baby Drill” slogan by claiming that oil companies are ideally sitting on most leases they hold. That’s far from the truth. Once a company obtains a lease through a bidding process, it must conduct geologic evaluations, environmental impact analyses, engineering studies, and obtain permits. All of this can take years with no guarantees that the lease will contain economic quantities of oil and gas. Yet, the administration’s definition of “inactive” includes these vital activities that comprise such a significant portion of traditional energy development. As such, calls for “Use It or Lose It” policies provide little more than political cover for the administration’s lethargic leasing process.

The United States currently produces about 5.5 million barrels of oil a day. Our peak production of 10 million occurred in 1970. It is unlikely that we could ever reach that level again, but we could produce much more than we are. Alaska and our Outer Continental Shelf are rich in potential petroleum reserves. Access to these resources could enable us to produce perhaps 2 million or more barrels of oil in the coming decade or, perhaps, by the end of this one. But we will never increase domestic production, if we never start.

Our self imposed embargo makes us more reliant on imports than we need to be and diverts needed investments from here to other countries. That is foolish policy.

Federal Regulation

Another part of the President’s import reduction initiative relies on imposing aggressive CAFE standards and putting a million electric vehicles on the road in four years. The current CAFE standard, which has been embraced by auto manufacturers, is challenging. Meeting these higher mileage mandates comes at a cost — at least an additional $1,000 per vehicle.  Going beyond the current standard, as EPA is considering, could price many Americans out of the market and make it more difficult for them to buy the larger vehicles they want.

EPA’s potential overreach in the area of natural gas development stands to work against our energy future too. It should be the fuel of the future for power generation and possibly for centrally fueled vehicles like buses and delivery vehicles. Yet, EPA’s campaign to impose unnecessary regulation may choke gas’ potential.

The forceful push for electric vehicles as a solution to oil consumption use is misguided. They are too expensive, require large subsidies, and rely on battery technology not ready for prime time. In time, hybrid technology and battery technology may improve and become more cost competitive. Pushing technologies before they are commercially viable will only saddle us with unintended consequences.