Yes, the RNC talking up the virtues of bucking the party is comical. And yes, there is a certain dissonance in advocating more drilling and investment into alternative fuels.
However, Obama needs to get out in front of this issue. I think that more domestic drilling is a gimmick. It is a diversion of resources that will result in no perceptible reduction in gas prices to the consumer. But that is a difficult sell. He needs to publicize a clear and simple plan to reduce gas prices or the hardship that they cause.
Gas prices could very well be the most important issue in this election.
UPDATE: Obama has a response ad airing in the same states as the RNC ad. Not enormously effective, but decent.
6 comments:
You say that it'll be a diversion of resources. I assume you mean government resources because the oil companies wouldn't invest in alternative energies anyway. And more domestic drilling would only bring in more money to the government through more taxes and lease revenue.
The oil companies ought to be investing in alternative energies. Isn't that what all of those PR ads from oil companies are claiming?
I have to think that there is a limited amount of resources for energy R&D and every dollar spent on oil is a dollar not spent on alternatives.
A big reason that gas prices will be very important is people are totally irrational about them. We obsess over saving a few cents per fill-up. Today in Atlanta, people lined up for a mile to buy gas at $1.99 a gallon with a max of 10 gallons per customer. Drivers were happy to wait for 45 minutes to save $20 on gas. How many other goods or services would we wait in line that long to save $20 on?
I was being sarcastic about the oil companies not investing in alternative energies. They actually do. But they get that money from the profits they make on oil. So more oil profits would equal more R & D money.
And I don't see why the government should not use the money from land leases towards alternative energy.
I don't think the oil companies are going to be hurting for profits any time soon.
Spending the money from leases on alternative energy isn't a solution. The money from land leases is only a small fraction of the money invested by the oil companies in exploration and extraction on that land.
If I thought that additional drilling would contribute significantly to reducing prices or increasing energy independence, I might consider it worthwhile. But I don't see a benefit that outweighs the enormous opportunity cost of diverting R&D from alternative fuels to oil.
The real benefit of domestic drilling is to give domestic oil companies cheaper access to oil. However, that savings will only go to oil company profits because the oil will be traded on a global oil market where prices are rapidly rising and largely unaffected by domestic drilling.
I've addressed this in another post. 25 billion is needed per year to fund R&D for alternative energies. We get 9.4 billion from land leases so it's not insignificant. Plus I suggested using the 30 billion a year we waste on farm subsidies to pay for R&D. Why do the oil companies need to fund alternative fuel research through taxes or other means?
You saw what happened a couple of years ago during the ethanol fad. Billions of dollars were invested in that alternative fuel. Billions more will be invested in others if it's shown that there is a demand for it. And I think the demand for it is there. Government taxes are the least efficient way of going about this. I should know; I work for a defense contractor.
Also environmentalists preventing us from building new nuclear power plants for thirty years have made this problem worse.
I'm hearing about nuclear power with regard to gas prices and energy independence way more than is warranted. It feels like the oil crisis is just being used an excuse to beat up on environmentalists.
Nuclear power doesn't power our cars. They would largely replace coal, which we have in enormous supply. Nuclear power can reduce greenhouse gas emissions as a replacement for coal, but until we are all driving plug-in hybrids, nuclear power plants are irrelevant to oil consumption. Even if we are all driving plug-in hybrids, coal could theoretically meet the electricity needs.
Nuclear power is part of our future overall energy policy, but don't blame high gas prices on environmentalists preventing new nuclear power plants.
I didn't say the land lease money is insignificant. I said it is a small fraction of the hundreds of billions of dollars total that would be invested in offshore exploration and removal.
Government already picks the winners and losers in the economy too much for my taste. I think the government should try to avoid determining the technologies or companies that supply our alternative energies, investing money in practically any new idea. There will be plenty of investors for old ideas with certain profits. The government can help by funding research that may be too experimental for significant private funding.
The better role for government is to align the monetary costs of oil with it's costs to our economy, environment, and national security. To force the internalization of the negative externalities I described.
Also, helping to set priorities by doing things such as refusing cheap access to oil will help. As I said, the revenue from oil will be set by the market, not the cost of extraction. By reducing the costs of extraction, you unnecesarily increase the profit margin of oil and encourage investment in an energy source that imperils our future.
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