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  • Obama's Costly Energy Plan

    Barack Obama released his “New Energy for America” plan today during his speech at Michigan State University. His entire energy plan is laid out here. Relieving America from its foreign oil addiction was the gist of his speech:

    Without a doubt, this addiction is one of the most dangerous and urgent threats this nation has ever faced – from the gas prices that are wiping out your paychecks and straining businesses to the jobs that are disappearing from this state; from the instability and terror bred in the Middle East to the rising oceans and record drought and spreading famine that could engulf our planet.

    Though there was some good in Obama’s speech and in his plan, it was mostly bad. The bad policies include:

    • Immediately Provide Emergency Energy Rebate: To compensate for the high costs of gas and energy prices and revamp the struggling economy, Obama conjured up a plan to give $500 to individuals and $1,000 to families as soon as this fall. The Foundry has written more extensively on this here, but to summarize this idea, it would reduce supply, increase the demand for gas, and rely on windfall profits taxes on big oil, which have been tried and failed miserably. Economist Don Boudreaux puts it this way: It’s like trying to put out a fire by dowsing it with jet fuel.
    • Tapping the Strategic Petroleum Reserve: The SPR, created after the 1973-1974 Arab oil embargo, is a federally maintained petroleum stockpile intended to make up for any shortfall caused by a temporary supply disruption. Granted, an extra 3 million to 4 million barrels per day would lower prices at the margin, but the SPR could maintain that pace for no more than six months. After that, the price of oil would likely return to its previous level, and the SPR would be empty and thus no longer available for its intended purpose as an insurance policy against a supply disruption. What would Obama do if the U.S. were hit with a severe energy crisis and the SPR were tapped dry? Think of the national security and economic implications.
    • Cracking Down on Speculators: Speculators have been receiving a lot of the blame for the rise in oil prices, but this is misleading. Heritage economist David Kreutzer gives a good primer on how speculators can help consumers at the pump, and J.D. Foster writes that the speculators’ role in increased oil prices is marginal, at best. Ultimately, speculators do little to affect supply and demand.
    • Capping-and-Taxing: I mean, trading. Obama plans to implement an economy-wide cap-and-trade program to reduce greenhouse gas emissions 80% below 1990 levels by 2050. The Lieberman-Warner cap-and-trade legislation that quickly died on the Senate floor in June proposed 70% reduction of 2005 levels by 2050. The Heritage Foundation released a study on the economic costs of the Lieberman-Warner climate change legislation that detailed the burden cap-and-trade legislation would impose on the economy. If the Lieberman-Warner bill would have imposed a $4.8 trillion hit to GDP by 2030 and nearly 1 million jobs lost in certain years, just imagine what Obama’s plan would do. The Heritage analysis of the Lieberman-Warner bill also projects a huge jump in energy prices, including gasoline. So, is Obama for lowering gas prices or raising them? Hmm.
    • Renewable Fuels Mandates and Fuel Economy Standards: Under Obama’s new energy plan, 10% of America’s electricity will come from renewable sources by 2012, and 25% by 2025. Now that food prices have risen dramatically, there is bipartisan consent, along with statements from environmental and global hunger groups, that the ethanol mandate has been an absolute failure.

    Furthermore, Obama proposes to have 1 million plug-in hybrid cars — cars that can get up to 150 miles per gallon — on the road by 2015, and he suggests that they all be built here in America. (We’ll save the protectionist argument for another day.) The question now is: Where is the electricity generated that the hybrids receive? Howard Learner, executive director of the Environmental Law & Policy Center, a Chicago-based advocacy group notes that “plug-in hybrids are perhaps not good for all areas. … [S]tates that are heavily coal, that equation doesn’t work out very well for the environment.” And aren’t hybrids more expensive?

    There is a bit of silver lining, however, but even the good news comes with some bad.

    • Increase Domestic Supply: Obama recently shifted his position on off-shore drilling, but the only time in his eight-page energy plan that offshore is mentioned is during his use or lose it initiative, which requires that “oil companies to diligently develop these leases or turn them over so that another company can develop them.” His plan recognizes that U.S. oil and gas play a critical role in America’s energy policy and includes drilling in Bakken Shale in Montana and North Dakota, Barnett Shale formation in Texas and the Fayetteville Shale in Arkansas, and the National Petroleum Reserve-Alaska (NPR-A). It also includes recovering more oil from existing fields and Prioritizing the construction of the Alaska Natural Gas Pipeline. Search his plan and see if you can find the words “outer continental shelf.” What about “ANWR”? Nothing.
    • Increase Nuclear Power: The presidential nominee does recognize that “It is unlikely that we can meet our aggressive climate goals if we eliminate nuclear power as an option.” But here’s the problem. His “New Energy for America” plan calls the geologic repository Yucca Mountain “not suitable.” Instead, he will lead federal efforts to look for safe, long-term storage. Yucca Mountain, as critical as it is to the management of used nuclear fuel, is not alone a long-term solution. The amount of used nuclear fuel already accumulated in this country is near the 70,000-ton statutory limit. Furthermore, if nuclear power production increased by 1.8% annually after 2010, a 120,000-ton (what most scientists believe its actual capacity is) Yucca would be full by 2030. Fortunately, Heritage’s Jack Spencer outlined a free-market approach to managing used nuclear fuel that would better serve consumers as well as the nuclear industry.

    Granted, Obama’s plan does take some baby steps in the right direction by increasing supply and advocating nuclear, but even these parts of his plans have flaws. No mention of the Outer Continental Shelf. No mention of ANWR. No clear solution to nuclear waste. And those are the good parts.

    The unfortunate part his plan is that it repeats the same mistakes of the failed policies introduced in the 1970s, along with a few other bad ideas for good measure. These policies will lead to more restrictions on energy supply and higher costs for Americans — all to change the earth’s temperature .1 of a degree.

    Posted in Energy [slideshow_deploy]

    13 Responses to Obama's Costly Energy Plan

    1. Robert, AZ says:

      This plan is just a joke. So many of his concepts for "fixing" the economy only involve more government spending. However, if we move to drill in ANWR and the Outer Continental Shelf, we would not only be able to stimulate our economy with more $ left over from cheaper gas prices but we would be creating a more competitive market for oil which is always better for the consumer. The crazier thing is that if we moved to drill we could be more responsible environmentally than all of those other countires we are buying fuel from right now. Call me nuts but I just can't imagine that Nigeria has strict oil policies when it comes to drilling!

    2. John Orth, Grafton, says:

      After all of the efforts that have been put into searching for a suitable storage site for spent nuclear fuel, how does Obama think he is going to find a more suitable site? Just another promise of "Change" with no substance.

      Jack Spencer has the right solution to privatize the Yucca Moutain project and add the reprocessing technology to the equation to reduce the volume of spent fuel for Yucca Mountain. This also increases the supply of useable Uranium fuel.

      In the interim, while we develope the recycling/reprocessing technology facility, we can use Yucca Mountain as a temporary storage site. One of the least know features of the Yucca Mountain design is that the spent fuel casks are stored on retreivable rail cars that can be remotely monitored and retreived for later use.

      Leave the technology up to the engineers and private sector and remove it from the Political arena entirely. I have visited the Yucca Mountain facility, reviewed their technology and DOE application and am convinced we could get Yucca Mountain opeational much sooner if we removed the politicial review and delays from every step of the process.

    3. jono, iowa says:

      Okay, if we were to commence drilling tomorrow, it would take years before we get any of that oil. If you are looking for a quick fix, which it seems you are, quit driving. The world's oil supply is at its peak production and its only downhill from here. Oil must become a thing of the past because its not gonna last long. And yes, we need to get away from nuclear energy-that also is no solution.

    4. Falstaff, Virginia says:

      There is much fault to find with Senator Obama's recent energy proposals and his reversals leaves one searching for solid ground. However, Mr Loris' criticism contains numerous flaws and inaccuracies which only make the energy problem more opaque.

      o Renewable Fuels Mandates and Fuel Economy Standards. Mr Loris confuses _electricity_ generation with transportation fuel. Ethanol as a fuel is used almost exclusively for transportation, so an otherwise valid corn ethanol criticism is completely invalid regarding electric generation. Mr. Pickens celebrated plan proposes 20% of _electric_ generation in ten years from wind alone, the DoE in twenty. Thus Sen. Obama's renewable electric energy proposal for ten and twenty-five years is at least reasonable; if it is flawed it is not due to crop and food conflicts. As usual though the Senator's proposal lacks in any detail or substance so it is difficult to be sure.

      o Tapping the SPR. It is fine to highlight Sen. Obama's reversal on this point, but the criticism of any reliance on the the SPR however small is specious. As the US does not require an infinitely large SPR to insure security, there must also be some amount of the SPR which can be reasonably be tapped without adversely impacting US security. The question is how much. Further, the fact that a tap on the SPR is a short run measure misses the point of its impact on price volatility. An announcement that the US is willing to some part of the SPR for other than catastrophic supply interruptions significantly increases risk to those betting on an inelastic oil supply and demand at any given point in the future, as former Speaker Gingrich has stated.

      o Plug-in Hybrids. The issue of electric capacity to charge PHEVs has been well studied by EIA, NREL and others; it is clear that the over night spare electric capacity existing the US, today, is more than able to accommodate many millions of PHEVs though not the entire US light vehicle transportation fleet. The 30-40 miles of daily short distance driving targeted by PHEVs accounts for _one-third_ of the oil usage in the US, or half of the imported oil. Electric utilities are eager to play as it allows them to sell otherwise unused over night kilowatt-hours.

      "GM Teams With Dozens Of Utilities on Plug-In Cars Collaboration Seeks To Smooth the Path For Electric Vehicles"

    5. mark , Houston says:

      I have a question for all you liberal goose steppers out there. The chosen one (Obama) has never had any type of real experience with national government , he was raised with a silver spoon in both hands and a blindfold over his eyes. early in his life he seemed to bounce between being a proud american to being a radical muslim . he has had family within his life influence his upbringing. he has flip floped more times than anyone can count . yet when this masonic figure opens his mouth to say anything you liberals get exited . how can you trust this so called messiah ? he has done nothing yet you seem to trust his every move without question . Does anyone really believe that this golden child will really keep his word on the energy crises . remember , he is the most liberal senator in congress . remember , he has only been in the senate for under 200 working days out of his entire career . so , what do you (can you) see in this snake oil salesman ?

    6. jono, iowa says:


      seriously, you think obama was raised with a silver spoon and is a radical muslim-wow-maybe you should do some research. who by the way called him the messiah-oh yea, an attack ad. john mc cain needs to attack obama over frivolous things to divert attention from the real crises in this nation. you tlak about snake oil salesman-wow is that ever ironic. why don't you go research how much money mc cain just took from a wealthy oil family if you want to talk about oil snakes-over $250,000 right after reversing his stance about drilling off shore. hmmm…. whos in the hands of the oil companies.

      Its also amusing how mr. mc cain resorts to the low ball tactics that probably cost him the republican nomination in 2000. whats even better is he is working with the same people bush used to smear him. what a great guy!! you must be part of the elite who wants their rights to continue to be trampled upon by the government. I know I sure do not think it is fair or 'compassionate' to tax someone who works for a non-profit organization more than some millionaire who has more money than they know what to do with.

      at least obama had the foresight not to vote for authorizing the president to go to war.

      go watch the sexual predator oreilly and his liars at fox some more and bring back some more outrageous unsubstantiated claims.

    7. Pingback: the bakken formation

    8. Dennis Sidwell, Sout says:

      I am not quite sure what the entire hullabaloo is about. Senator Obama believes government can and should solve the energy difficulties we are currently experiencing. I don’t think we need to pursue the solution much beyond the differing onions of government is the solution, private industry is the solution.

      Perhaps folks should address their proposals and disagreements to their support for government action or let the private sector find and solve the up and downs of our economy?

      Thank you.


      Dennis Sidwell

    9. Ed Avery-2902 Hwy 47 says:

      It is unbelievable that in 2008 the flim flam man(obama0 is being considered as a canidate for President of our country. How can apparently educated people fall for him. There is nothing he can demonstrae as having any quality for the job.

      As a Texan i have seen what oil exploration and production can do to the economy, if the goverment would get out of the way and let industry get after production it would be the biggest stimulas to the economy our country can experience plus keeping the money sent to other countries would strength the dollar. we hear all kinds of reasons not to produce our own oil and frankly they are made by people that are ignorant or have a monetary benifit to not drill. We will be depending on oil for a long time as there is no alternative source that is as efficient and economical. ethinol is a disaster, it has put a lot of cattle feeders out of business and has hurt the chicken production along with the hog feeding. other food that requires corn has increse in price. The lower income workes that have to drive to work are being hit in fuel and food prices. Is this compassion???My belief is Nancy Pelosi and Harry Reed are not concerned about the economical hardship being fostered on the country, plus the national security.

      Any statement that includes "we are addicted to oil or even if we drill now it be 10years before we can get it out of the ground" is blantely false. In 1940 we had 13 fighter planes at Selfridge Field, in 1943 when we made a bombing raid over Germany it consisted of 2000 bombers and 1000 fighter escorts. The Alcan Highway was built in 1 year. Of course there was no EPA or a bunch of envirolmental's to hamper production. And all of our problems are because "some" people have gotten their panties in a wad that the enviromental temp will increase 1 degree in the next hundred years.

    10. Pingback: McCain’s Energy Plan: The Good, The Bad and Some Ugly » The Foundry

    11. Tikeer says:

      Why not drill in Bakkan shale? There is about 3-4 billion barrels of recoverable oil in Bakkan, and as long as oil hovers above $60 a barrel drilling would be advantageous.

      Besides, offshore drilling comes with the threat of hurricanes, which could destroy drill sites and refineries along the coast.


      New Mexico

    12. Howard says:

      In the Bill Oreilly interview of Barack Obama, regarding the discussion

      about Obama's energy plan, in response to Bill asking

      Barack, what if the development of alternate energy

      sources don't deliver. Obama compared his approach

      to John Kennedy's space program, and how if you go

      for it , the answers will come. But, the distinction between

      our space program and our energy challenge is … If it had taken

      us longer than we thought to get to the moon … or, if we hadn't

      gotten to the moon … no big deal. But, if we put all our hopes

      into alternative energy, and it doesn't happen in time … or, if

      it doesn't work, our entire economy, as well as our national

      security could end up in ruins. Our country's entire energy

      infrastructure revolves around petroleum. All the gast stations,

      all the vehicles. Democrats keep citing how long it will take

      to get more oil out of the ground. But, even if an alternative

      fuel is found tomorrow, how long will it take America to

      transition from our existing infrastructure to a completely

      new one? In the meantime, people have to get to work, and

      goods have to get to market. This is an important reason to

      secure our energy needs with oil drilling and mining oil shale,

      while we try to develop alternate energy. Obama seems to be

      playing fast and loose with our country's future … gambling

      with our future, all based on hope and faith … with consequences

      which could be dire. Obama's plans, or lack thereof, are

      extremely irresponsible. Not suprising from a candidate who

      does not have the experience, qualifications, or judgement to lead, as

      President of the United States.

    13. George Meredith MD V says:

      One of President Obama’s key objectives, this first term, is clean air and reduced dependence on foreign energy imports. Biofuels and massive wind farms are not the answer. Too expensive. Would have to borrow hundreds of billions of dollars to accomplish a tiny increase in “renewable energy sources…or would have to run the printing presses at the Treasury non-stop!

      Let me suggest an alternative:

      · An adjustable oil and natural gas import tax…this would have OPEC on their knees begging us to buy their oil at $20 a barrel within 4 months

      · Reduce the national speed limit to 55 mph

      · Remove permitting obstacles to all new US toll roads

      · Remove all governments and labor unions from all mass transit in the US…let the private sector do faster, better, safer and cheaper

      · Expedite licensing of new nuclear power plants…think about all the truly good paying jobs involved here…nuclear power is our cleanest energy source

      · Quickly proceed with permits for the newly discovered oil and gas fields in the Gulf of Mexico and in North Dakota (horizontal drilling)

      · Remove permitting obstacles to new natural gas lines

      · Remove any import taxes and/or regulations to the new turbo diesel VW Jetta TDI, that gets ….are you ready?……58 mpg!!!

      Mr. President: forget about biofuels and wind farms…they are dead end streets. Furthermore, the above listed alternatives would cost the government nothing! Just step aside and let the private sector do it cheaper and better. And we would not have to borrow a penny for these projects! Private capital would rush into these projects!

      You want clean air, good paying jobs and less dependence on foreign energy supplies, why here is your answer!

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