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Release Stranglehold On Domestic Oil

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By WILLIAM D. BALGORD Guest columnist

The Tampa Tribune

Published: January 4, 2009

It's going to be another cold winter in many parts of the country. Staying warm will likely come at a high cost, with heating bills expected to jump by as much as 25 percent. Those bills may become even steeper during the next few years, if Congress pursues any of the counterproductive energy solutions that lawmakers and candidates have recently touted in their campaigns.

More than one of the proposals floating around Capitol Hill would increase the tax burden on domestic oil producers. That, in turn, would ultimately impact the retirement funds of millions of Americans, since the majority of oil industry shares are owned by individual investors and pension funds held by retirees, union workers (firefighters, teachers, etc.), and other hard-working individuals. Increased tax burdens weaken American companies, thereby: (1) driving down the value of domestic energy shares, (2) placing U.S. industry at a disadvantage to global competitors, and (3) increasing America's reliance on imported oil.

The widely publicized energy bill pushed by House Speaker Nancy Pelosi, for instance, doesn't actually address our most pressing problem: energy security. The so-called energy legislation fails to provide sufficient access to our nation's most-rich energy resources.

Pelosi's plan landed in the headlines just as the oracles of "Peak Oil" were again predicting the demise of petroleum. World production capacity appears stuck at 85 million barrels per day against growing demand in China and India. Until very recently, Americans had been paying a heavy price to import 70 percent of our current oil consumption, while Democrats continued to chant: "We can't drill our way out of the problem."

Yet geologists report that huge quantities of hydrocarbons (oil and natural gas) still lie buried at various locations around the globe. A recently released international study estimates more than 90 billion barrels of recoverable oil remain in the Arctic alone.

Added to that are immense amounts of oil and other fuels in the combined proven and projected reserves of oil shale, offshore natural gas and petroleum, coal, and uranium in North America. These are available and their use will be necessary to make an orderly transition to the future, as we develop non-carbon technologies that can't yet compete economically or practically.

Brazil just discovered its third huge offshore field and became energy independent. Prospects for similar finds off the U.S. coast are regarded as excellent, and finding one would go a long way toward achieving energy security. Sources state that drilling in certain proposed offshore areas could produce oil in as little as 1 1/2 years.

What has prevented oil producers from expanding current production (before the recent economic downturn)? Please understand once the economy recovers, oil prices will again resume their upward trend. And $4-plus gasoline will be not far behind. OPEC, by then enjoying a high return from a barrel that costs only a few dollars to pump, would again see little reason to alter the status quo. Not until substantial new supplies are certain of entering the market would OPEC augment production to recoup lost revenue. Neither could other exporting countries (Russia and Mexico), lagging far behind in modernizing their oil fields, be expected to help out.

Nor would efforts by Congress to curb oil speculation address the fundamental cause - recurring threats of interrupted supply during international crises and natural disasters - but would instead drive oil futures trading right out of the country. By talking up new regulations for commodities trading and proposing windfall-profits taxes, Congress is simply deflecting attention from the high prices its own policies have helped create by artificially restricting supply.

Another energy policy that's better at garnering attention than actually achieving its intended purpose is government subsidization of renewable energy. In fact, our government's subsidy track record provides one of the strongest arguments against energy subsidies in the future.

In the 1970s, the federal government pumped hundreds of millions of dollars into developing solar-thermal and -photovoltaic technologies. Three decades and quite a few tax dollars later, these government-backed technologies aren't even close to being commercially viable. A more recent example is the $1.3 billion that in 2003 President Bush dumped into a Freedom Car: a vehicle that would run on hydrogen-powered fuel cells. Four years later - you guessed it - taxpayers have yet to see any Freedom Cars on the market.

If energy sources such as wind, solar and even ethanol were such great ideas economically, the government wouldn't need to continue subsidies or offer tax incentives to artificially boost demand.

Voters have already made clear what they want: Meaningful legislation to permit more drilling, not a hodge-podge of proposals designed to assuage environmental groups. Access to the Outer Continental Shelf and Alaska's North Slope would ultimately increase our domestic reserves by more than 500 percent.

When it comes to energy security, that's a great place to start.

William D. Balgord, consultant and writer, heads Environmental & Resources Technology, Inc. in Wilmington, N.C. Contact him at envrt@yahoo.com.

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