The White House released an infographic entitled “The Obama Energy Agenda & Gas Prices” that highlights a number of facts with regards to domestic oil production, improved fuel efficiency, improved transportation fleet and a clean energy future.
While a picture may say a thousand words, this graphic conveniently omits critical facts and points that demonstrate that this Administration is choking off oil production and trying to use taxpayer money to force uncompetitive energy sources and technologies into the market.
- “Increasing Domestic Oil Production.” The facts on the infographic highlight that U.S. crude oil production in 2010 was the highest it has been since 2003 and that the Administration offered over 6 million acres onshore and 37 million acres offshore for lease. But here’s a number of things the graphic doesn’t share: (1) Production in the western Gulf of Mexico dropped nearly a third of a million barrels per day since last April, and the increased production in 2010 is a result of increased horizontal drilling in North Dakota. (2) We can’t drill off the Pacific Coast, Atlantic Coast, or the eastern Gulf of Mexico. (3) The U.S. Environmental Appeals Board withheld air quality permits preventing Shell from moving forward to develop 27 billion barrels of oil off the coasts of Alaska. The Environmental Protection Agency already issued two air permits, but Earthjustice filed a petition to review the permits, causing the Appeals Board to act. (4) The Administration’s own Energy Information Administration projects that oil production will decline significantly in 2011 and 2012.
- “Better Mileage for Our Cars.” The second part of the White House’s infographic focuses on improved fuel efficiency and touts that the 35.5 mile-per-gallon (mpg) fuel efficiency standards for model years 2012–16 will save consumers $3,000 and reduce oil use. Fuel efficiency standards are one of many examples of the government dictating choices for American consumers, and they showcase the government’s belief that consumers and producers are disinclined to save money. There are many reasons why consumers purchase vehicles, including size, safety, fuel efficiency, costs of repairs, and price. It’s not the government’s role to restrict that choice and ignore other factors. Although the Administration acknowledges a higher sticker price for vehicles as a result of its mandate, some experts argue those estimates are low. And while many Americans simply cannot afford to purchase a new vehicle now, those who are buying still prefer larger vehicles, which demonstrate the government’s inability to predict what consumers want. Rebecca Lindland of the forecaster IHS Automotive recently said, “The change in consumer buying behavior toward better fuel economy is not aggressive enough to meet the 35.5 mpg standard.”
- “Improving Transportation.” The third layer of the picture highlights the Administration’s work in promoting electric vehicles, cleaner buses, paratransit vans, and increased biofuel production. The real title of this section should be “What Exists in the Marketplace Only Because of Taxpayer Subsidies.” These technologies rely heavily on the government, from direct subsidies, consume tax rebates, loan guarantees, and production tax credits. The infographic even mentions that the stimulus bill funded the newer bus fleets. It also says, “To help advance the commercialization process, the administration has set a goal of breaking ground on at least four commercial-scale cellulosic or advanced bio-refineries over the next two years.” In reality, the profit motive is enough incentive to advance the commercialization process; the fact that the production of cellulosic ethanol necessitates the government’s help simply means the value does not exceed the cost and it’s a bad deal for consumers and taxpayers. When the government distorts the market so heavily with preferential treatment, it crowds out investment for the good ideas.
- “Investing in a Clean Energy Future.” The last fragment of the infographic pushes President Obama’s desire to eliminate tax breaks for the oil and gas industry and use that money to help “invest” in clean energy to meet his standard of 80 percent clean energy by 2035. First, these tax breaks are not specific to the oil and gas industry, and repealing them would be a punitive tax hike on the industry. Secondly, increasing production of these energy sources would affect electricity production, not transportation fuels. We use very little oil to produce electricity. Because a clean energy standard would mandate the production of pricier electricity, President Obama’s clean energy standard would drive up rates, which, ironically, would make electric vehicles less economically enticing. Obama’s proposal for a clean energy standard is cap and trade by another name.
This may be the Obama Administration’s energy and gas price agenda, but it’s not a good one for the economy, consumers, or taxpayers.
Nicolas Loris is a Research Assistant at The Heritage Foundation . http://www.heritage.org/ Roe Institute for Economic Policy Studies. Loris studies energy, environment and regulation issues such as the economic impacts of climate change legislation, a free market approach to nuclear energy and the effects of environmental policy on energy prices and the economy.