The Energy Spectator
Energy Independence Now
The energy deficit needs to be fixed, and it will take some common sense to do it.
The United States currently suffers from three deficits: a fiscal deficit, a defense deficit, and an energy independence deficit. While current political discussions focus on our weak economy and drastically underfunded military, the debate on energy independence has stalled. This is a critical problem. America cannot grow its economy or build up its military to meet current and future threats unless it develops resources for energy independence.
With oil prices climbing steadily and the ever-volatile Middle East experiencing political turmoil, proponents of different energy independence strategies nevertheless promote their own plans and technologies to the detriment of other solutions. This is unacceptable. We need to consider every option for energy independence. And we need to start close to home, with more domestic drilling.
The United States actually possesses vast oil and natural gas reserves, but the Obama administration has prevented our country from tapping into them, strangling energy corporations with excessive regulations, drilling bans, and permit denials. Dr. Joseph Mason, an economist at Louisiana State University, claims that as many as 20,000 sorely-needed jobs in this down economy have been lost due to drilling moratoriums in the Gulf of Mexico. Not only do Obama’s policies kill jobs, they also fly in the face of public opinion. According to a Rasmussen poll, 76% of Americans think our country isn’t doing enough to develop our oil and gas resources. Clearly, Obama’s energy-killing policies need to be reversed and domestic production must begin anew to realize America’s energy potential.
While government subsidies have long been an important facet of any energy independence strategy, the current state of our nation’s finances and economy has rendered them unaffordable. In their absence, the United States should lower all corporate taxes and reduce industry regulation across the board. This move would ultimately increase tax revenues, and effectively spur private growth and innovation in energy independence.
Oil, natural gas and biofuels currently all receive tax subsidies. Recently, however, many elected officials have voted to end energy subsidies in order to reduce the budget. In the past these subsidies were necessary to compensate for the destructive U.S. corporate tax rate of 35% (the highest in the world when combined with state taxes). Congress should act to lower corporate taxes to internationally competitive rates, ending the need for subsidies and returning productive capital from bureaucrats to businesses. At the very least, America should bring its corporate taxes in line with fellow mass consumers Russia (20%) and China (25%). Capital gains taxes in the United States — where the maximum rate is 39.6% — should also be reduced to compete with Russia (13%) and China (20%). Corporate taxes have significant national security and geopolitical relevance, and the United States should bring theirs in line in order to stay competitive on the world stage.
Not only would lower tax rates spur more innovation and production than any proposed subsidies, they would also liberate private capital to invest in energy independence. Reduced tax rates result in greater tax revenues and therefore help solve the nation’s debt crisis, ensuring greater economic security. After corporate and capital gains taxes were lowered during the Bush 43 administration, revenue more than doubled from $136 billion in 2003 to $274 billion in 2006, according to IRS reports.
While alternative fuels are certainly an important part of the solution, natural gas is too often overlooked. Let’s consider the costs of alternative transportation fuels over the average 12-year lifespan of a vehicle. When life-cycle costs are compared, natural gas is currently a more economical decision than flex-fuel powered vehicles, although both are more expensive than gasoline at current figures (keep in mind that these dynamics could change due to oil shocks or increased demand for traditional fuels — both real risks). Three compact vehicles; the Honda Civic DX on gasoline, the Honda Civic GX on compressed natural gas (CNG) and the Chevy HHR on E-85 are compared in the table below:
*All Prices as of 7/12/11
| Honda Civic DX (Gasoline) | Honda Civic GX (CNG) | Chevy HHR (E-85) | |
| Initial Cost | $15,800 | $25,500 | $19,000 |
| Average Annual Mileage | 12000 | 12000 | 12000 |
| Highway MPG | 39 | 36 | 32 |
| Gallons Per Year- Annual/MPG | 308 | 333 | 375 |
| Cost Per Gallon Equivalent | $3.69 | $2.06 | $4.42 |
| Annual Fuel Cost | $1,137 | $686 | $1658 |
| Life Cycle (years) | 12 | 12 | 12 |
| Total Lifetime Fuel Cost | $13,644 | $8,232 | $19,896 |
| Life Cycle Cost (Vehicle+ Fuel) | $29,444 | $33,732 | $38,896 |
Over the lifetime of a vehicle, drivers of the CNG car save over $5,000 compared to the E-85 vehicle. The price of E-85 at $3.18/ gallon also does not reflect the true market price which would be higher without the $0.45 per gallon subsidy. Eliminating that would create an even greater cost discrepancy with other alternatives.
Lawmakers need to consider these issues and take action. The consequences, if they don’t, will be grave. Persian Gulf countries and OPEC respectively provide 17.1% and 48.8% of America’s oil. The Middle East is historically unstable. Possible future conflicts may cause the closing of the Straits of Hormuz or Suez Canal, with serious consequences for the oil market. The United States was once beset by an OPEC embargo, and there’s no guarantee that won’t happen again.
Developing a secure and independent domestic energy market free from the circumstances of mostly-malevolent Persian Gulf countries? That sounds like a very worthy investment compared to the potential costs of doing nothing. Solve the energy deficit, and we can boost the economy and reduce the strength of threats to our national security.
About the Author
Travis Korson is the Manager of Public Information at the Center for Security Policy in Washington, D.C.
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Von Mises Jr.| 7.20.11 @ 6:52AM
Obama was blatant in defying the ruling against the moritorium and now denying leases, but the policy has been the same for Democrats for decades. They have de facto stolen our citizens natural resources by buying up oil rich lands and denying drilling.
Obama's financial aid to Brazil further illustrates that progressives are not against oil. They are against capitalism and liberty.
Russia, China, Saudi Arabia, Iran, Venezuela and other statist finance their regimes with oil profits. So it is absurd to conclude that we have the only statist in the world that hate oil. They just hate not being able to sieze the profits to fund their statism.
David W| 7.20.11 @ 9:03AM
We have already heard the President of Iran, Barack Obama, ooops, sorry, wrong person, Mahmoud Ahmadinejad state that the oil countries of the middle east must shut off the oil to the infidels. If Obama (right president) allows Iran to gain control or to exert undue influence on the actions of other countries, we could very well have another embargo. And the effect would be much worse than the first time.
Stormy| 7.20.11 @ 9:47AM
I fail to understand why a Honda Civic costs $10,000 more designed to run on natural gas than gasoline. People have been converting gasoline-use vehicles for decades to operate on natural gas. So, why is it so much more expensive to build?
john dubose| 7.20.11 @ 10:16AM
Some economics ..
1. It cost serious bucks to convert an engine to Nat Gas.
2. Right now, there are few places to fill up.
3. Over time as new ways are found to use Nat Gas, its energy/price ratio will approach that of oil.
4. Everybody in a decision making capacity in the energy and transportation industries know this stuff.
The market will take care of it. We need no more Federal intervention.
Al Adab| 7.20.11 @ 4:16PM
Many homes already use NG for stoves furnaces etc. Could one not install a pressure tank/gauge on the home side of the meter in order to refuel a NG vehicle at home? The cost would be metered and charged just as the other household uses are. Such a choice would allow the consumer, not the government, to opt in as he might wish.
I once had a propane powered vehicle. Keeping the upper cylinders oiled extnded the life on the engine greatly and there was little inconvienience in buying from our local propane distributer.
John Navratil| 7.20.11 @ 4:37PM
Al Adab,
The motor fuel you are talking about is principally propane which is liquid at low pressure. As a motor fuel it's called LPG and with a little training and equipment could be transferred at the house. However, this is the expensive stuff - the liquids which are dropped out of natural gas early in the process. It is definitely not the natural gas (mostly methane) which is piped to your house.
The motor fuel called CNG (compressed natural gas) requires compression to 3000 psi and is half the price. It is possible, but not economical in equipment or energy, for Joe Average to be filling this from the natural gas supply to the house.
Al Adab| 7.20.11 @ 4:55PM
John,
Appreciate the further info. We can likely agree though that engineering matters can be overcome although a what cost might remain problematic. It was a propane vehicle and I drove it many years without difficulty.
Al Adab| 7.20.11 @ 5:53PM
John,
It also comes to mind that NASA had small nuclear (plutonium) powered generators on the moon landers. It would fit under the hood and would provide electricity for many years to drive a electric vehicle. Motors could be mounted on the wheels/axles. Might be prohibitivly expensive (several million) but where are they going to build the power plants needed to recharge all those Chevy Volts every night?
Ben| 7.21.11 @ 1:11PM
Al,
The beauty of nighttime EV charging is that there is plenty of excess capacity on the grid. Demand is so low at night that many utilities have to shut down plants and then start them up again in the morning—a process that is very costly. Well over half of the current U.S. fleet could be transitioned to electric without adding a single power plant.
John Navratil| 7.21.11 @ 1:41PM
Ben,
An EV for the commuter car does have several advantages. Putting the batteries on the grid during the peak afternoon hours is a benefit, as well. All of this drives overall system efficiency up.
The big problem is that EVERY vehicle has a mission. Just as you don't drive the Porsche to the HomeDepot to pick up drywall, you won't do much long hauling with the Volt. It won't make a good delivery vehicle, although CNG would be a good fit for that market.
I don't think half the fleet could go electric. It would be a stretch for me to believe that half the cars in a two-car family could do so. It might be possible for half the cars in a two-car family living within twenty miles of work to do so, but once you get outside of the battery range the attraction drops precipitously.
John Navratil| 7.21.11 @ 1:46PM
Al Adab,
A problem with a reactor on the moon might kill or doom three astronauts. I don't see Big Sis going anywhere near portable plutonium. It would present some interesting terrorism issues, don't you think?
Then consider (darkly) that NASA's responsibility to the astronauts, who knew the risks, was not to drive them to zero.
Louis Jenkins| 7.20.11 @ 10:55AM
Until Obama is put to bed we will not have a comprehensive oil/energy policy. The Liberals love to interfer with its production, and will continue to do so. I have always said that unleashing the oil production capabilities of this nation would go a long way toward solving the depressed state of our economy, but who is listening? Certainly not the Commander n Thief.
David Wilhelms| 7.20.11 @ 11:10AM
You lost me at "defense deficit." How does the U.S. have a defense deficit?
Skippy| 7.20.11 @ 4:24PM
Because we don't spend enough on defense.
Our defense, that is.
Not the defence of NATO and the rest of the latte-sipping 3-day/week workers in Franceistan.
John Corn| 7.20.11 @ 7:52PM
our navy is the smallest since the 30s and average age is about as old. Only the submarine fleet is relatively current.
The AF fighter fleet is ancient, most C-5s are over 35 years old, it will be amazing if all of our tankers stay airborne until the new ones arrive.
Is that enough of a deficit?
Joe D.| 7.20.11 @ 12:00PM
What subsidies are given to Oil and Gas companies. Business tax deductions are one thing and subsidies or welfare are totally different, no matter what Obama says.
He has called taxes, revenue and spending, investments and those making $250,000, rich. That does not make it so. Legitimate tax deductions are not money received but protection from tax confiscation.
So if there are more subsidies than for ethenol which is a stupid forced policity of the government, I want to be educated.
JFGalt| 7.20.11 @ 12:54PM
The whole corporate tax structure needs to be revamped. We need to reward companies that employ Americans instead of punishing them or driving them to outsource overseas. This nation probably has more energy and minerals that is blocked by politically motivated environmentalists and their govt flunkies than anywhere in the world. We are our own worse enemy! The other thing is that people scoff at wind and solar energy as a path to energy independence because the lefties push it. Yes, gas, oil and coal may be cheaper in the short run but it is only one part of the equation. Solar is on the verge of becoming massively cheaper with infinitely more efficient cells and wind is constantly renewable although not practical everywhere. Yes they are not efficient yet but ITS A START in the right direction. At least those are clean. Cheap energy in this country again can help lead us out of the mess we are in although I think that what may happen is that we'll just end up exporting it to keep prices here at home the same and the big corps will then keep their profits high inspite of its benefit to the whole. Capitalism's biggest weakness lately is that it has been taught to kill the golden goose to try to get at the eggs.
TrueBlue| 7.20.11 @ 1:39PM
The problem with Wind and Solar energy is that their feasibility is based entirely on what region you're in. Wind isn't useful for much more than pumping a water well if you don't have consistent, and not overly strong, winds in your region. Same goes for Solar, if you have a massively cloudy region (Pacific northwest for example, with their 261 days overcast in a year).
In regions like the Pacific northwest you're talking about approx 18 yrs before your solar panels would make up the cost for installing them, and even the highest quality ones barely last more than 1/3 of that time before you need to replace them. Not cost effective in that region, and never will be. Put those same ones somewhere in Nevada though, different story. I refuse to look at Solar as the be-all-end-all of our energy problems like many people are saying. You also have to consider the amount of space that all those panels take up a considerable amount of space for the power produced. Yes, that can be improved upon, but it'll be a long time until it's truly efficient.
In my opinion Nuclear is the way to go as far as energy production for electricity. Using breeder reactors (like the rest of Europe) would fix a lot of the "waste" problems we have. But first they'd have to undo the mess Carter created with his executive orders killing our ability to build them, which Obama certainly won't do.
I definitely agree with getting us off our dependence on outside countries for our oil useage in the short term until we get something better. 65% from outside the country with all the resources we have available? Giving money to Brazil before developing our own? Of course, we'd also have to increase the number of refinerys we have to deal with any increases in oil production because the ones we DO have are already at max capacity. That'd create a good number of jobs there too.
Al Adab| 7.20.11 @ 3:50PM
An energy policy, like that from the Left, which as a baseline assumes we must do with less is a path to failure for the American economy. Contrived and imposed shortages do nothing but raise costs and harm consumers. So called renewable or Green or alternative energy sources all presume central control of the means of production and imposed products similar to the light bulb idiocy.
The actual issue, which is too often conflated into one, involves both direct consumer fuel usage ie gasoline and indirect power production of electricity. Production of domestic oil and gas coupled with new construction of refineries will alleviate the constraints on the first. Generating plants of all fuel types but most notably clean coal, natural gas and nuclear will increase electric production and lower costs on that ledger also.
Unless the federal government ends its policy of scarcity, environmental worship and over regulation consumer costs will continue to rise further retarding the growth of the economy. Indistry must be allowed, indeed encouraged, to expand production as a major factor in restarting economic growth.
Marc Jeric| 7.20.11 @ 7:29PM
1) Globaloney warming hoax;
2) Marxists in political power;
3) Eco-nazis in charge of environment;
3) Subsidies to the dreams of alternative energies; these do not exist.
There is no solution to these problems but an electoral revolution (I doubt it can happen with the criminal unions in charge of our education).
Al Adab| 7.20.11 @ 7:46PM
Just an aside and totally off subject: Does anyone remember the events of July 20, 1969 anymore? Have we fallen so far into our national decline that the events of that day are irrelevant?
John Navratil| 7.21.11 @ 1:51PM
Al Adab,
I remember it well. It was the day after Chappaquiddick. Only the Kennedy's could organize a moon landing to get themselves off the front page.
I am bad ;)
POST American| 7.20.11 @ 10:29PM
----90's Show 'complacency op' ALERT!-----
FACT IS the Bush/Clinton/Bush Jr/Obama
agenda is absolutely continuous. RED China
-Globalisation TREASON and American eco
takedown.
FACT IS ---it's Agenda 21, now hiding behind
terms like 'Smart Future'.
PLEASE, stop pitching decades stale FAKE OUTS.
weddingdresses | 7.21.11 @ 6:00AM
so far into our national decline that the events of that day are
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Theo Prinse| 7.22.11 @ 5:42PM
The problem is not first of all energy dependancy of an entity that is hostile for ideological reasons for that is what islam-oil represents.
(shariah the threat to america an exercise in competitive analysis report of team b II)
The first problem is that (islam)-oil has reached Peak-oil and structural high prices caused by the demand of the Chinese ..
The only way to cheap energy is a vast number of Thorium Nuclear reactors (Molten Salt Reactors MSR & Very High Temperature reactors VHTR) in combination with a world wide Electric Automobile Industry.
Both Thorium reactors & Electric cars have great saving potential & thus contributes to curing the economical crisis or else .. end up in a asymmetric Third World War !.
1. Energy independence as important as it is is only one of many measures to be taken !
2. The islam must be wiped of the face of the Earth
3. The liberal democrats like the outreaching Clinton's, George Soros-Samantha Powers, Zbigniew Brzezinski, Robert Reich, Larry Summers etc. are evil for the whole of mankind for they are basically advocating communist ideals which reduces or = equal to redistribution and nullify innovation ... which is the only source of empirical falsyfiable proof of physical measurable wealth !
4. The green mafia with their three axes a. the lie of Global Warming (AGW) b. anti-nuclear power c. the lie of sustainability.
5. the theft of aprox. 4 trillion USD by the US based financial mafia like Bernanke, Geithner, Lagarde, Zoelick, Trichet, & later on Draghi but also Greenspan, Volcker etc.
6. the remigration of 12 million illegals in the US
7. moving outsourced industry from China & else back to the United States
8. Apply Nuclear Thermal Rocketry (James Dewar) instead of dependenceof Russian rockets and terra form Mars
9. The CIA's control over drug trafficking from Mexco to the US and weapons from the US to the mexican mafia.
10.The destruction of Iran's nuclear arms capability
11. The dismantling of the Pakistani nuclear arms complex under serious threat of the Pakistan Neo Taliban Jihadi's
Ps. I support Michele Bachmann !