Energy Gridlock

As this is written, the price of oil hovers near $120/barrel. It’s likely headed higher, and the only ones happy about it are big oil, commodities speculators and OPEC.

In a recent opinion piece in The New York Times, columnist Thomas Friedman weighed in on the topic of U.S. energy policy—or, more precisely, the lack thereof. Taking on topics ranging from the proposed federal gasoline tax holiday to the failure of Congress to extend investment tax credits for alternative energy development, Friedman concludes that the U.S. has no coherent energy strategy.

He’s absolutely right, of course. Where he’s wrong is in his primary focus on our lack of development of alternative energy sources.

Don’t get me wrong—solar and wind power are great, as far as they go. Unfortunately, that’s not very far. And, as Friedman points out, we are not incentivizing U.S. companies to invest in alternative energy R&D or manufacturing.

But Friedman drops the ball by failing to mention some of the many ways we could address the supply side of our energy equation. A prime example would be opening up more federal land to drilling for oil and natural gas, whether it’s in the Alaska National Wildlife Refuge (ANWR) or offshore on the west or east coasts and in the Gulf of Mexico. According to Paul Cicio, president of the Industrial Energy Consumers of America (www.ieca-us.com), natural gas production in the U.S. has remained essentially flat since 2000 while consumption has increased 9.8%. This while reserves of trillions of cubic feet of natural gas lie offshore and in other areas.

Cicio says the same situation applies to oil consumption and to electricity use, both of which continue to increase while we do essentially nothing to develop new sources of domestic supply, whether it be nuclear plants for electricity generation or more exploration and drilling of known oil reserves.

And if government policies of not-so-benign neglect aren’t bad enough, a bill currently moving through Senate may make things far worse. Euphemistically titled “America’s Climate Security Act,” S.2191 would regulate emissions of all major greenhouse gases for oil refineries, natural gas processing facilities, electric utilities and industrial users.

Provision of the bill would take effect in 2012 and include ongoing reductions in greenhouse gas emissions, with the eventual goal of cutting emissions to 65% below 1990 levels by the year 2050. An admirable goal, but unrealistic: Cicio says the bill as written will weaken economic growth, increase energy costs and price volatility, and provide more incentive to move manufacturing from the U.S.

On second thought, maybe neglect—benign or not—is not so bad.

It’s tempting to chalk up the gridlock on energy to election-year politics. The sad reality is, however, that the U.S. has had no coherent strategy to reduce demand and pump up domestic supply for…well, forever, I think. Or at least since World War II.

Friedman summed up the situation pretty well: “The…biggest energy crisis we have in our country today is the energy to be serious—the energy to do big things in a sustained, focused and intelligent way. We are in the midst of a national political brownout,” he concluded.

Again, absolutely right, and unless something is done to make better use of the energy resources we have here in the U.S., manufacturers and consumers are in for a long, bumpy ride.