The energy policy of the United States seems designed to purposely and artificially raise prices to the consumer by throttling supply.
Gasoline and Diesel prices are spiking upwards again, breaking records. Gasoline prices at the pump are predicted to be over $4 a gallon by summer. Propane prices are at an all-time high at $2.58 a gallon, 31% higher than last year or 260% higher than it was during the year 2000. Residential Heating Oil prices are pushing $3.46 a gallon, $0.98 a gallon more than this time last year. Natural gas was $9.71 for a thousand cubic feet in January 2004 compared with $12.38 January 2008. Crude oil per barrel prices are over $100 a barrel. Electrical rates in the state of Illinois have risen from 30 – 55% since 2007. The Wall Street Journal reports more and more people cannot find the money to pay for their heating bills. In a recent American Online poll, 46% Americans stated they no longer could afford to fill up their automotive gasoline tanks.
Adding an additional burden to the consumer is the soaring price of food staples, which have risen about 75% since 2005. These worldwide increases are a direct reflection of energy prices and the fact that energy is now directly competing with food through bio-fuels. There are numerous reports of food riots in the lesser developed countries (LDC) due to these increases of prices.
The question is: what is the underlying cause of a rapidly rising energy prices? As is any complex phenomenon, the roots of the rapid rise are multifaceted. There is an increasing demand for energy as economies like China and India rapidly industrialize. There are supply related issues from the major producers, restraining or at their limits of production capacity. But first and foremost for the American consumer is United States government policies that result in increasingly higher energy and food prices. The government’s actions and inactions are key to why the American consumer faces stifling and mounting energy costs.
Any commodity price is set by the interrelationship between supply and demand. Government policy over the last several decades in all fields of energy production has had the direct impact of restraining energy supply while demand has grown. This government interference has reached a crisis level where high energy prices will sap the strength of the United Sates economy and create a condition of stagflation. As these policies have impoverished the United States they have enriched Middle East, African and Venezuelan oil suppliers. In addition, this policy has undermined the security of the United States by weakening the United States economically, destabilizing the LDCs by food shortages, and through direct payment “leakage” to terrorist organizations.
It is rather doubtful that United States energy policy could have been more poorly formulated. The United Sates government has in virtually all incidents greatly restricted new energy sources and low-cost energy production. Conversely, the government has championed unrealistic energy alternatives that are high cost and result in increased food prices. The predictable result is a restriction of available energy and rapidly rising energy prices.
The United States is the only country in the world that outlaws usage and production of critical domestically located natural resources. The areas where large quantity proven petroleum reserves are to be found have been placed off-limits, mainly by Democrats in the United States Congress. The East and West coasts of United States, along with Alaska, contain vast quantities of both Petroleum and Natural Gas.
In a small area of the Arctic National Wildlife Refuge (ANWR) is the largest quantity of proven petroleum reserves on United Sates soil. The Coastal Plain of ANWR's 1002 area is the nation's single greatest onshore oil reserve. The USGS estimates that it contains a mean expected value of 10.4 billion barrels of technically recoverable oil, worth over a trillion dollars in today’s oil prices. To put that into context, the potential daily production from ANWR's 1002 area is larger than the current daily onshore oil production of any of the lower 48 states. ANWR could produce nearly 1.4 million barrels of oil daily, while Texas produces just over one million barrels a day, California just less than one million barrels a day and Louisiana slightly more than 200,000 barrels a day. The quantity of oil that ANWR could produce is equal to or greater than the amount that the United States imports from politically unstable regions like Venezuela and Nigeria, and only slightly more than is imported from Saudi Arabia. The reserves are equal to 30 years of Saudi Arabian imports. In addition, the revenue from these reserves would go into the US economy rather than the economies of our potential enemies.
ANWR is 19,049,236 acres in size. It is only slightly smaller then the state of South Carolina. The area where the bulk of the petroleum reserves is located is less than 2,000 acres, slightly smaller than the Columbia, South Carolina airport. Environmental extremists have characterized the use of these resources as the rape of an untouched wilderness.
Prudhoe Bay, Alaska, has for over 2 1/2 decades supplied 20% of America's domestic production, a $260 billion offset to the trade deficit. Experience with drilling in this region, along with the supporting 800-mile pipeline to southern Alaska, has shown that oil can be recovered with little or no environmental damage. Moreover, the target area is treeless tundra with a low density of life. The people who know the area best, Alaskans, overwhelmingly support exploration and production on the Coastal Plain of ANWR.
97% of natural gas consumed in the U.S. is from the U.S. and Canada. However, natural gas production has peaked in North America. Between 1999 and 2004, natural gas prices tripled as imports from Canada slowed and domestic production failed to keep up with demand. Congress has stopped exploration on virtually all promising areas. To feed the increasing demand, liquefied natural gas (LNG) terminals are being proposed. Natural gas is expected to peak globally around 2020, leading to serious global economic conflicts as China and other large and growing economies continue down the path of increased dependence on fossil fuels. These factors and others make LNG a very costly alternative to domestic natural gas.
ANWR and Prudhoe Bay are also the largest potential sources of natural gas. 34 trillion cubic feet (tcf) are currently estimated in known North Slope discoveries. At least another 10 trillion cubic feet is recoverable from ANWR. That has a market value of over 500 billion dollars. In addition, there is a huge resource base of discovered and undiscovered Alaskan gas, estimated at 235 tcf, with another 100 tcf of gas hydrates. Those numbers should be compared with a total United Sates Consumption of 22 tcf a year. However, very little natural gas has been extracted in the Northern Alaska region due to regulatory, congressional sabotage and legal challenges. The construction of a pipe line, first proposed in 1976, has been continually obstructed by Congress.
Another area where Congress is purposely trying to increase energy costs is House Bill 3221, The New Direction for Energy Independence. Under the provisions of Section 7604 – inserted by Democratic Congressman John T. Salazar — 4.2 tcf of natural gas located under the Colorado Roan Plateau would be placed off-limits. This is the richest area of potential natural gas deposits in the lower 48 states. It could provide enough natural gas for 4 million homes for the next 20 years.
Another promising source of domestic energy is petroleum reserves located off the Atlantic, Pacific, Alaskan and Gulf United States coastal areas. Since 1981, the U.S. has observed a moratorium on coastal drilling, except for a portion of the Gulf of Mexico and limited areas off of Alaska. In 2006, the House voted to relax the prohibition on offshore drilling, but the measure died in the Senate. There may be close to 95 billion barrels of oil affected by the ban, according to the Interior Department. The House-passed bill would have allowed individual states to ban drilling up to 100 miles from their shores.
Cuba is now planning on exploring in the waters adjacent to the areas outlawed for United States companies. Cuba's wells could eventually be as close as 60 miles to Key West. The Congressional response to this is typified by Senator Bill Nelson's (D-FL) proposal to deny U.S. visas to executives from oil companies involved in the Cuban program. However, Cuban officials have stated they have willing partners from Canada, Spain, Norway, Brazil, India, Malaysia, Venezuela and China. The net result may be countries unfriendly to the United States drilling off the coast, while US companies are frozen out.
The oil and natural gas in Alaska and the rest of the United States can lower the price of energy world-wide and make the United States virtually independent. In fact, it is the polices of Congress — resulting in decreased domestic production – that have made the US dependent on Middle East and Venezuelan oil.
The Energy Independence and Security Act 2007 prevents US government departments and agencies from buying alternative fuels that generate more pollution in their life cycle than conventional fuel from customary petroleum sources. Among other things, this seems to bar fuel made in part from oil derived from Canadian oilsands. If this law stands, it will require government agencies to purchase from Middle East sources, achieving the exact opposite result of "energy independence." The law also seems to state that biofuels cannot be purchased by US government agencies.
A much promoted oil alternative is biofuels. In particular, ethanol — the conversion of corn to an alcohol that is then mixed with gasoline — has much political support. Farming districts have reaped the benefits of higher corn prices. The industries that build, operate and maintain biofuel plants have also advanced this alternative. But having food compete with fuel has had the direct affect of raising food prices worldwide. And recent research has shown that biofuel pollutes more than petroleum products, and the net energy gain from biofuel is only marginally positive. That is to say, the energy you get out of biofuel is only slightly more than you expen in the growing, harvesting, manufacturing and distribution process. Furthermore, ethanol, particularly E85, has been reported to reduce fuel efficiency up to 15%.
The economics of ethanol show that production is not viable unless it is significantly subsidized by the government. Through federal excise tax forgiveness, there is a net subsidy of 52 cents per gallon of ethanol blended fuel. When all 200 American ethanol subsidies are considered, they cost about $7 billion USD per year, equal to roughly $1.90 for each gallon of ethanol. Considering the massive loss of tax revenues, increased pollution, and the marginal net energy gain, using ethanol makes little environmental and economic sense. Because of the politics of biofuel, it is rather unlikely that biofuels will die until the subsidies are ussustainable and food prices become out of reach to the consumers. However, considering that the alleged purpose of subsidizing biofuels is energy independence, this goal would be easier achieved by domestic petroleum and natural gas sources.
In lesser developed nations the rise in food prices has already led to great discontent and food rioting. From Mexico to Africa and Asia, food is becoming scarce. By the end of 2008, predicts Lester Brown, president of the Washington-based Earth Policy Institute, almost a third of the US corn crop, which has traditionally helped to feed 100 nations, will go for fuel. Mr. Brown points out that, in an increasingly fuel-scarce world, the price of corn will henceforth be tied to the mounting price of oil. 25 million people in India are believed to have cut their meals from two to one a day. The calorie intake from an average meal in El Salvador has fallen by half in less than two years. Riots have broken out from Mexico to Mauritania. As food is increasingly being diverted to fuel, the price of food will impact the political stability of the LDC world. It seems illogical to destabilize the world when so much domestic oil and gas is available. In the long term, reliance of biofuel is unsustainable.
Jean Ziegler of the United Nations “The Right To Food Committee” has called for a five-year moratorium on biofuel production to halt the increasing catastrophe for the poor. According to Ziegler, the rising practice of converting food crops into biofuel is "a crime against humanity," creating food shortages and price jumps that cause millions of poor people to go hungry. The European Organization for Economic Cooperation and Development warns that “the current push to expand the use of biofuels is creating unsustainable tensions that will disrupt markets without generating significant environmental benefits.”
Another only recently recognized hazard of biofuels is the propensity of producers and suppliers to expand growing acreage to reap higher, subsidized prices. Especially outside the US, biofuel suppliers have started the destruction of forestlands to harvest biofuel crops. The net effect of biofuels is an environmental disaster with little in the way of redeeming results.
With regard to electrical generation, the policy of the US government is to favor the most expensive forms of production while placing insurmountable roadblocks in front of the cheapest, cleanest, and most renewable energy sources. This has resulted in the reduction of our energy generation surplus and makes the United States vulnerable to brownouts and electricity disruptions.
Radical environmentalists strongly supported by Congressional Democrats have objected to most forms of electrical generation. Hydroelectric power – though cheap, renewable and nonpolluting – found disfavor with the Clinton administration and later congressional Democrats. Numerous power-generating dams were removed during the Clinton years. During this period the Quaker Neck Dam on the Neuse River in North Carolina, the Edwards Dam on Maine's Kennebec River, the Western Canal Dam on a tributary of California's Sacramento River, the Savage Rapids Dam on Oregon's Rogue River, and the four Snake River dams in Idaho were removed. Currently, hundreds of power-generating dam are being considered or scheduled for destruction. Some notable dams presently designed for removal are Cowlitz Hydroelectric Project Dams, Condit Dam on the White Salmon River, Elwha and Glines Canyon Dams, and Goldsborough Dam, all in the state of Washington. The result has been a loss of 105,043 thousand Megawatthours, a 30% reduction of hydroelectric power since 1997.
In California there is a concerted effort to destroy the Klamath dams. These dams provide cheap, renewable energy to 70,000 homes in Oregon and California. Replacing this energy with natural gas would release 473,000 tons of additional carbon dioxide into the atmosphere every year. This is roughly equivalent to the annual exhaust of 102,000 cars.
As hydroelectric power is eliminated, the lost generation capacity must be made up by other sources. Congressional Democrats have opposed nearly all forms of electrical power generation with the exception of wind and solar. However, even wind power has been restricted for aesthetic and environmental reasons such as bird strikes. Democrat Senator Kennedy has successfully opposed a large wind farm off shore from Nantucket Sound. Alternative electrical energy sources have only made moderate gains and have not been able to take up the lost hydroelectric generation capability. From 1993 to 2007, only 23,336 thousand Megawatthours of alternative electrical energy have come online. This is less than one-fourth the lost hydroelectric capacity.
The bulk of new electrical capacity that has become available since 1993 is from coal fire plants (329,359 thousand Megawatthours) and natural gas plants (467,418 thousand Megawatthours), and the near 100% uptime rate of nuclear power plants resulted in a gain of 94,703 thousand Megawatthours.
The least expensive method of producing electricity is by hydroelectric plants at 2 cents a kWh. Equally efficient is power generation through nuclear fission; a nuclear power plant produces electricity at around 2 cents a kWh. This is compared with a coal-fired plant at 4 cents per kWh, Natural Gas at 8 cents per kWh, Fuel Oil at 9 cents per kWh, Wind Power for 8 cents per kWh, and solar photovoltaic at 25-160 cents per kWh.
Wind power has been much promoted by the Environmentalists. However, wind is not a constant, requires large areas for construction and is only practical in certain locations. Other forms of electrical generation are required to supplement wind power. It is doubtful that acceptance of wind generation will persist if sea and entire landscapes are covered with wind generators. At best wind power will fill a small percentage of electrical needs.
Experience in countries such as the Denmark– where 16% of the country’s total electricity needs come from wind — has shown that fluctuations of the wind put the electrical grid under enormous strain. In certain periods there can be as much as 30% power available differences. High winds can provide excess power, followed by insufficient generation capacity and a grid incapable of bringing new power online fast enough to respond to wind speed shifts.
Nuclear power is emission-free, safe and cheap. However, the regulatory hurdles are so great that no new licenses have been issued for plant construction since the 1970s. The growing need for electricity has been filled with coal and natural gas generating facilities. Coal is highly polluting though inexpensive. Natural gas produces fewer greenhouse gases but is less efficient. Because Congress has restricted the exploitation of new natural gas sources and Canada has peaked, natural gas prices will continue to rise, making this form of electrical production more expensive.
Natural gas is progressively becoming the favorite for home heating. However, with constricted supplies and growing demand, the cost for heating homes with natural gas is climbing.
Many believethat Liquified Natural Gas (LNG) may replace the decline in natural gas production. However, the International LNG market is highly dynamic, with countries little or no domestic natural gas production paying premium prices for LNG. With Asias customers willing to pay up to $20 per MMBtu — over three times the US domestic gas cost — and the limited number of US terminals that can accept LNG shipments, it seems unlikely that LNG will replace the declining production of domestic and Canadian Gas.
The energy policy of the United States seems designed to purposely and artificially raise prices to the consumer by throttling supply. US policy encourages inefficient alternative energy sources while stifling nuclear and hydroelectric power in a regulatory straitjacket, while considerable supplies of domestic petroleum and natural gas have been placed off-limits.
The rationale for this seemingly illogical policy is loosely stated as a method of saving the environment via the reduction of greenhouse gases. However, this does not hold up to close scrutiny. Ethanol marginally promotes energy independence, but produces increased greenhouse gasses and reduced gas mileage. And the conversion of food to fuel threatens to cause instability throughout the lesser developed countries.
The destruction of energy producing dams may improve the life for some fish, but that loss of electricity will inevitably be replaced by coal and natural gas fired plants with accompanying environmental effects.
Not drilling in ANWR may provide a more natural habitat to a handful of arctic creatures but will reduce the quality of life for millions of Americans. Moreover, limiting domestic oil production results in a transfer of wealth from the United States to producer countries.
The price of propane has already become too high for many homeowners. There is a growing movement in rural locations to augment home heating with wood and corn husk burning heaters. These units are highly inefficient, greatly polluting and give incentive to destroy forestland for home heat usage.
A primary reason for the near fanatic resistance of congressional Democrats to exploiting oil and gas deposits in Alaska is retaliation against Alaskans, who are chiefly registered Republicans. This seemingly vengeful policy is not untypical for the Democratic Party.
Years of extraordinarily bad energy policy is cascading to a global meltdown. Food and energy shortages can lead to regional and global conflict that will have more of an adverse environmental impact than any of the effects the policy was said to cure. It is nearly too late to be able to mitigate years of bad policy. Politicians of either party during this election year are not addressing the fundamental problem of high energy costs. There are empty platitudes offered up regarding energy independence, but nothing that will actually lower energy or food costs.
Both parties are responding to overblown concerns of global warming in a way that could be catastrophic to humankind as well as the environment. The problem of greenhouse gases will not be solved by destroying dams, limiting nuclear power, and encouraging biofuels. It is time for people to stand up with solutions that work that don’t include the degradation and starvation of considerable elements of the human race.
Read more articles by William Weronko