The Brawl over Oil and Natural Gas

The cost of energy is a crucial, shot-term key to recovering the economy and creating jobs.

Tuesday’s debate brought out stark differences between Obama and Romney on energy policy that directly affects the current recovery.

The two candidates could not be more different in their approach to energy policy. Obama leans heavily toward green energy and Romney tilts toward traditional fossil fuel.

It led to a heated exchange between them on oil and gas production on federal lands. Romney directly challenged Obama’s “all of the above” energy policy.

At stake in energy policy this election is the short-term cost of energy and job creation.

Energy policy is so important to Romney that he has made it central to his campaign. It is point #1 in his 5-point economic recovery plan.

The Obama-Romney Energy Argument

A debate brawl was triggered after Obama said under his administration that oil and natural gas production has increased.

Romney acknowledged production is up, but not because of Administration energy policy. He says it is up in spite of Obama energy policy, not because of it.

It led to this in-your-face exchange:

PRESIDENT OBAMA: And the production is up.

MR. ROMNEY: Production on government land of oil is down 14 percent.

PRESIDENT OBAMA: Governor —

MR. ROMNEY: And production of gas is down 9 percent.

PRESIDENT OBAMA: What you’re saying is just not true. It’s just not true.

MR. ROMNEY: I — it’s absolutely true.

So who is right? Is energy production on federal lands up or down? The answer puts an exclamation point to their opposing energy views.

Is Gas and Oil Production Down on Federal Land?

Oil and natural gas production in the United States is undergoing a renaissance. Domestic production is up for the first time in decades.

It is up everywhere except for federal lands.

The Energy Information Administration (EIA) annual energy outlook for 2012 reports that both oil and gas production started rising just before Barack Obama was elected:

The EIA projects the United States will be a net natural gas exporter by the early 2020s.

Earlier this year the Institute for Energy Research (IER) compared oil and natural gas production on private versus federal lands:

The IER shows overall production of both domestic oil and gas is up while, simultaneously, overall production of oil and gas is down on Federal lands.

In March of 2012 the EIA published this table showing Federal and Indian land oil and gas production from 2003 through 2011:

Use yellow highlighted numbers to verify Romney’s 14% and 9% figures

Do the math. Romney’s percentages are correct.

Romney is right. President Obama has reduced production of oil and gas on federal lands while private lands have more than offset the losses.

EIA Projected Cost of Energy in 2016

This revealing EIA table shows the 2016 projected cost per megawatthour for electricity generated by renewable and non-renewable energy sources. It is levelized to 2009 dollars.

Even with all the ARRA “stimulus” spending and tax subsidies, renewables will still be much more expensive than fossil fuels in 2016.

Natural gas-fired electric plants are the cheapest, most cost effective electric energy source, even when fitted with CCS to reduce their CO2 emissions to zero. Solar and CCS coal are prohibitively expensive. Nuclear, biomass and advanced nuclear are all more expensive than natural gas. Only onshore wind, but not offshore, is competitive with natural gas.

EIA Projected Energy Sources up to 2035

The EIA Annual Energy Outlook for 2012 projects that fossil fuels will still supply 78% of all energy in the United States in 2035.

Renewables, including biofuels, will only supply 15% of all energy in 2035. That is up from 8% in 2010.

Natural Gas and Global Warming

Natural Gas has reduced U.S. CO2 emissions by 5% since 2007

When it comes to global warming, natural gas is out greening, green energy.

We’ve entered a golden age of natural gas production. Its impact is so profound that it is curbing global warming by reducing CO2 greenhouse gas emissions into the atmosphere by replacing coal-fired electric plants.

Even fitted with CCS to reduce CO2 emissions to zero, natural gas would still be the cheapest widely used energy source there is many years into the future.

Because of growing natural gas usage, the United States is the only industrialized nation reducing its greenhouse gas footprint!!

Conclusions

No matter what, fossil fuels will be the most important energy source in the U.S. for many decades to come. Renewables are now and will remain more expensive energy sources for many years to come.

That will be true well beyond the current recession.

Domestic production of oil and natural gas is up. Contrary to what the President says, production on Federal lands have been reduced under his Administration.

The economy is in a fragile recovery right now. It could go either way. Energy costs and domestic energy production will play an important roll in this economic recovery.

Obama’s far-reaching green energy vision, though the proper course for the long-term future, it is not the proper course in the short-term recovery of an ailing economy. President Obama’s Blueprint for a Secure Energy Future sets production goals and policies for renewables, but nary a one for economically friendly fossil fuels.

The most logical energy policy is to push short-term domestic fossil fuel production and promote maximum use of inexpensive natural gas everywhere it can be used. It is the only energy source that has significantly reduced U.S. greenhouse gas emissions and the only one that will into the foreseeable future.

The more energy costs, the greater the drag on the economy. The lower energy costs, the more it strengthens demand. Lower energy costs has the same effect as a tax cut. It increases demand by putting more cash in the pockets of consumers. That has always been true. It always will be.

President Obama is pushing green energy that is dragging down the economic recovery.

When it comes to energy policy and the economic recovery, challenger Mitt Romney holds all the cards.

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About azleader

Learning to see life more clearly... one image at a time!

Posted on Oct 21, 2012, in 2012 Elections, climate change, culture, economics, Global Warming, Life, news, Politics, Thoughts. Bookmark the permalink. 7 Comments.

  1. Well done as usual, AZ. I liked Obama’s comment that gasoline prices were low when he took office because the economy was in the tank and people weren’t spending as much on gasoline. There is probably a small element of truth in what he said; but I guess by that same logic that gas prices are high right now because the economy is doing so well. :-) . I don’t suppose it has anything to do with a falling dollar.

    • I’ve been wondering why gas prices are so high right now. I suspect it goes beyond the refinery issues that have been blamed.

      Intuition suggests that last summer’s drought and major losses of the corn crop is a major culprit. To meet the 10% ethanol mandate in gasoline takes 40%+ of all corn grown in the United States in a normal year.

      The U.S. corn belt also supplies half of the world’s corn.

      You have three major competing forces chasing a seriously depleted corn harvest this year. They are U.S. human and livestock food production, world corn need and the 10% ethanol mandate.

      The United Nations was so concerned about world food shortages they asked the U.S. to temporarily suspend its 10% ethanol gasoline mandate. We ignored that request.

      Bottom line: This has skyrocketed corn prices which has to make gasoline cost more to.

      I have not yet tracked down the cold hard facts so have not written much about it.

  2. Time to get rid of the ethanol subsidies, unless the stuff is made from sugar cane. Corn made ethanol is a loser. But corn and ethanol have big political lobbies, and they keep the cheap ethanol out from places like Brazil or Cuba. Finally, does the future cost of wind keep in place the current wind production tax credit which is a subsidy? I read an article not sure how true but it said total dollars on energy subsidies for green now outweigh the cookies handed out to the oil and gas companies. Wish I could confirm this.

    • I don’t know if green energy subsidies are more than they are for oil and gas companies.

      However, I’d be surprised if they aren’t!

      Oil and Gas get $4 billion and, according to Romney, $90 billion has been thrown at green energy. For example, Solar is a taxpayer money trap that will likely never pay off. It is forecast to cost nearly $312 dollars per megawatt hour in 2016 compared to $89 for natural gas AFTER it is retrofitted for CCS to remove all its CO2 emissions (It is $63 without).

  3. Great article. I’m a big believer in green energy. We need to be investing in it, but the technology is not yet able to meet our needs. I agree with you that natural gas should be the short term solution. The EIA report you cited states that transportation and electricity generation are by far the worst producers of co2. It seems that natural gas can- as you wrote- be used to replace coal burning power plants. Unfortunately such a substitution can not be so easily made regarding transportation. The infrastructure is not unplaced to support a move away from oil. Although, maybe we should consider instuting mandates that car companies begin to produce more natural gas cars.

    I have been writing about fracking and prices, you article was helpful. I hope to post it soon. Although with the extensive research that you have done here I may have to do some reworking of my post. Thanks, love all of the charts.

  4. I agree with you about green energy and conservation is a critical element as well.

    We need a long-term, eco-friendly energy solution for the future. I’ve thought for many years the solution is right in front of us… hydrogen. But perhaps echos of the Hindenburg still ring in our ears. In the meantime we have to make do with what we got.

    I like the EIA. One of the best things about it are its massive amounts of data and great charts, graphs and tables. Now they have a pretty cool interactive state energy portal.

  1. Pingback: Are Energy Prices High Because Production is Low? « Rational World

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