Last Friday on a conference call with reporters about the Obama Administration’s long-term energy proposals, Energy Secretary Steven Chu responded to a question about the situation in Egypt, saying: "Certainly any disruption in the Middle East means a partial disruption in the oil we import. It’s a world market and [a disruption] could actually have real harm of the price. The best way America can protect itself against these incidents is to decrease our dependency on foreign oil, in fact to diversify our supply." This is a nice sentiment. Unfortunately, everything the Obama Administration is doing is only increasing our dependence on foreign sources of oil.
Secretary Chu is right: Oil does sell on a world market. But transportation and other distribution factors do segment oil markets somewhat. In fact, the United States is currently paying about $10 less for a barrel of oil than European and Asian nations are. Why? Because of U.S. access to oil refined from Canadian oil sands. Access to these vast natural resources is a great diversification of our oil supply. But now the Obama Administration is trying to make it harder for American consumers to get Canadian oil. The Obama Environmental Protection Agency is stonewalling approval for the Keystone pipeline, which would increase the amount of oil the U.S. receives from Canada by over a million barrels per day. And that is not the only oil the Obama Administration is trying to keep out of American consumers’ hands.
Offshore, the Obama Interior Department has blocked access to 19 billion barrels of oil in the Pacific and Atlantic coasts and the eastern Gulf of Mexico—and another 10 billion barrels estimated in the Chukchi Sea off the Alaskan coast. Onshore, federal leasing of oil and gas exploration in the western United States has dropped significantly in the past two years. According to data compiled by the Western Energy Alliance, the Bureau of Land Management offered 79 percent fewer leases for oil and natural gas development in Colorado, Montana, New Mexico, North Dakota, Utah, and Wyoming in 2010 than in 2005. And then there is the Arctic National Wildlife Reserve, where an estimated 10 billion barrels of oil lie beneath a few thousand acres that can be accessed with minimal environmental impact.
Allowing Americans to develop these resources could easily produce at least 1 million new barrels of oil a day. The Heritage Foundation’s Center for Data Analysis estimates that, if the United States managed to increase its domestic oil production by 1 million barrels a day, it would create an additional 128,000 jobs and generate $7.7 billion in economic activity.
As bad as these existing energy policies are, President Obama’s planned energy policies are even worse. Today, the President is meeting with Senate Energy and Natural Resources Chairman Jeff Bingaman (D–NM) to plot passage of a clean energy standard (CES) bill. CES is just another cap-and-trade, energy-tax-like policy, except it’s all cap and no trade. A CES would mandate that all electricity providers generate a certain percentage of energy from carbon-free sources. Just like cap and trade, this policy is fundamentally just an energy tax that would drive up everyone’s electricity prices. Ironically, this would make electric vehicles even more expensive to operate, but we’re sure the Obama Administration would offer another round of taxpayer-funded subsidies to fix that problem.
Government policies that ban economically feasible energy development while subsidizing economically unsustainable ones only raise energy costs rather than lowering them. What the U.S. economy really needs is a truly free-market energy approach, one that includes (1) real nuclear energy reform, not more loan guarantees; (2) predictable and sensible coal regulations; (3) reduced regulation on renewable energy; (4) an end to all energy subsidies; and (5) common-sense limits to environmental litigation.
Congress should not let unrest in the Middle East scare them into energy policies that would make all our energy only more expensive. More bans on energy development, more subsidies for economically unproven technologies, and expensive new alternative energy production mandates are not the answer. America needs a true free-market approach to energy, and we need it now.