Energy Policy and the Price of Gas

By Peter Bearse, Candidate for NH CD1 US House District

The price of gas is now declining after a huge jump to $147 per barrel of crude oil was followed by recent decreases to $114. Why? -- NOT DUE TO CONGRESS! On the demand side, credit the resourcefulness, self-reliance and do-it-yourself strengths of the American people. They've been finding all kinds of ways to reduce reliance upon foreign oil -- pellet stoves, ride-sharing, better insulation, telecommuting, cutting down on unnecessary trips, etc. So, the people have reduced the price of oil by reducing their demand for it.

On the supply side lies a do-nothing Congress. They have been part of the problem for a generation. They have restricted drilling offshore and onshore -- in Alaska [petroleum deposits in the Alaska National Wildlife Reserve], Colorado [oil tar sands] and other inland U.S. locations where oil has been discovered. Congress has also mounted high hurdles of environmental and other regulations that builders of oil refineries and nuclear plants must jump. So, is it any surprise that we are enriching Arabian sheiks and shipping Alaskan oil to Japan? In addition, "at least 65% of America's undiscovered, recoverable oil, and 40% of it natural gas, is hostage to the Congressional drilling moratorium." [Wall St. Journal, July 24, 2008]

Increasing domestic supplies of oil and accelerating development of alternative, renewable sources would serve to further reduce the price of oil, cut our dependence upon foreign sources, and break the backs of speculation that the price of oil has nowhere to go but up.

CONGRESS SHOULD BE CALLED BACK INTO SESSION IMMEDIATELY -- to get back to work on an aggressive energy policy agenda. This should include a spectrum of elements, from short-term to long-term, such as:

* Immediate actions to remove bottlenecks to exploitation of domestic oil fields -- DRILL, and DRILL NOW!

* A long-term strategy implemented by way of a public-private partnership financed by the U.S. Government and private entrepreneurs to develop and use renewable sources -- to reduce and ultimately eliminate our dependence upon foreign oil. We not only need a domestic "moon-shot" type of plan to be carried out over at least 15 years; we also need a public/private energy counterpart of DARPA -- the Defense Advanced Research Projects Agency.

* A gradually rising charge on power plants' emissions of carbon -- to provide a strong incentive to reduce such emissions and generate financing to help bring alternative energy sources to market more quickly. The charge per ton implied by the European 'cap and trade' system is much higher, but an initial rate might be as low as $5 per ton. This carbon effluent fee approach would be superior to the European - less bureaucracy, less corruption, and less scope for games to be played by big businesses for their own advantage.

* A goal that by 2020, 20 percentage points more of energy be generated from renewable sources.

We can't allow a repeat of the late '70's when, after the price of gas went down, Americans said 'problem?, what problem?,' quickly forgetting that we had a long-term energy supply problem that we needed to face. If we had faced it then, we wouldn't be in the fix we're in now. One of Congress' major weaknesses is short-term-itis, marked by a quick-fix fetish and knee-jerk reactions, driven by attention spans focused on media, fundraising and 2-year reelection cycles.

By contrast, note what our current Representative, Carol Shea-Porter, has done on this issue:

> She has opposed efforts to "remove bottlenecks to exploitation of domestic energy resources";

> She has again (continuing her earlier 98-99% support) supported Nancy Pelosi's and her Party's shutdown of the Congress for a holiday of re-electioneering at the taxpayer's expense rather than deal with Republican efforts to enable oil drilling offshore and inshore. She refers to this in her Newsletter -- self-advertising for more electioneering at the taxpayer's expense -- as an "August District Work Period."

> She has introduced a bill to require investors in oil futures' contracts to take delivery of the oil called for in their contracts. She has proudly patted herself on the back for this initiative during her late flurry of "town meetings" (that also amount to more electioneering at taxpayer's expense, the way she holds them) -- as a bill that would reduce oil speculation and therefore, the price of oil.

Look at these moves in light of the facts of economic life. On the supply side of the oil market, Shea-Porter's initiatives amount to pandering to voters while continuing to block efforts to increase supply. As for "speculation," her initiative is careless and dumb, revealing an ignorance of how the futures markets work. The anti-speculation bill would make the market less responsive to forces to reduce the price of oil. Why? -- Because the futures market is basically a market providing market information about commodities, not the commodities themselves. Limit the futures market to only those who are prepared to take deliveries of oil and you limit the information that market signals can provide about the future. Beware members of Congress who, hankering for reelection, meddle in matters that they know nothing about!

As for advancing the development and widespread adoption of alternative/renewable sources of energy; here, too, Rep. Shea-Porter has been focused on approaches that generate good election-year publicity. She advertises her votes for a package of legislation to provide incentives to those developing alternative/renewable sources, stating that these would be paid for by removing "corporate welfare" for "big oil." She fails to recognize, however, as she failed to recognize when voting for the Agriculture Act, that many incentives would continue to provide "pork" for big operators. Big oil companies are also developing alternative sources and buying smaller, more innovative companies to position themselves to dominate the alternatives market as oil supplies diminish. Here again, we see Congressional initiatives based on ignorance, ideology and the politics of good intentions rather than careful legislating for the good of the country. More targeted incentives are required, focused on innovators, entrepreneurs, specific industry segments and technologies (solar, wind, geothermal, biofuels & others), rather than on good intentions seeking reelection.

What's the common denominator here? It cuts across all issues. It's the need to "Change Congress" - to change the way Congress conducts the people's business. People should count for much, much more than the big money interests in Washington. It's the start of a growing national movement. See Change-Congress.org. Join us.

PETER BEARSE, Ph.D., International Consulting Economist and Independent Candidate for Congress, NH CD 1.

Released by Supporters of Peter Bearse for Congress,

Bio: Peter Bearse, Ph.D., International Consulting Economist, author of Mobilizing Capital & Services: The New Economy (co-author), and Candidate for Congress, NH CD #1.