Obama Issues Plans for 2nd Term: REP Index Comments

President Obama issued a document that lays out his plans for a second term http://www.barackobama.com/truth-team/entry/the-presidents-plan-for-a-second-term.  Below is a quick REP Index (http://www.caem.org) reaction to the energy component of the plan.

Obama Recommendation: Developing homegrown energy: We’ll cut our oil imports in half, produce more American-made energy—like oil, clean coal, natural gas, and new resources like wind, solar and biofuels—and create hundreds of thousands of jobs in the natural gas industry while doubling the fuel efficiency of our cars and trucks.

REP Index comment: “Homegrown energy” is not a legitimate economic goal.  “Efficient energy” is the right focus.  See blog posts below on Oil Imports and Energy Independence.  Natural gas vehicles should be a function of market forces not government encouragement or mandate.

Obama Recommendation Cut net oil imports in half by 2020. President Obama is raising the bar on his previous goal of cutting imports by a third, or 3.7 million barrels a day, by 2025.

REP Index comment: Cutting oil imports is not an efficient goal if it means denying ourselves cheaper energy. See earlier posts on oil imports in energy independence.

Obama Recommendation To reach this goal, he will pursue an all-of-the-above energy strategy.

REP Index comment: An “all–of–the–above” energy strategy is like having an all-of-the-above music listening strategy in which the government continues to support 8 track tapes (most reading this will not even know what an 8 track tape is) in order to make sure they get their fair market share. Apparently the government would think it dangerous that DVDs are cornering the market on video replays over VHS. The market will determine whether it values diversity. If gasoline for transportation and fossil fuel for electric generation are the market choice after externalities have been internalized than that should be supported even if it means less renewables and less reliance on natural gas in the transportation sector.

Obama Recommendation Opening up millions of acres for exploration and development, including more than 75 percent of recoverable oil and gas resources in the Gulf of Mexico and the Arctic.

REP Index comment: Excellent recommendation, but why not 100%.

Obama Recommendation Expanding domestic oil production by reducing the review period for drilling permits by as much as two-thirds while implementing important safety measures to help prevent another environmental disaster.

REP Index comment: Excellent recommendation, as long as safety measures do not become an excuse for government intervention in which costs far outweigh the benefits.

Obama Recommendation Doubling fuel economy standards, an essential step toward energy independence that will save 2.2 million barrels of oil a day by 2025 while effectively halving many families’ gasoline bills.

REP Index comment: Again see earlier posts on oil imports in energy independence. CAFÉ standards are grossly inefficient and dangerous. If market prices for gasoline drive consumers to more efficient automobiles then so be it. But for the government to mandate technology standards to achieve higher levels of vehicle efficiency is the very antithesis of good public policy. Friedrich Hayek declared that such standards suffer from fatal conceit. Suppose it turns out that the Middle East achieves some degree of political stability and we are thus saved from paying a substantial premium for oil.  Gas prices plummet and consumers decide they want cheaper cars with lower mpg.  Why should government deny consumers that option?

Obama Recommendation Expanding the use of ethanol and other biofuels, including implementing a renewable fuel standard that will save over 300 million barrels of oil by 2022.

REP Index comment: There is no way to conceive of achieving this other than with government mandates and subsidies and putting government in a position to pick losers and losers.  As such, this will lead to increasingly dysfunctional ecoviergy markets.

Obama Recommendation Promoting advanced vehicles, including natural gas, electric, and hybrid electric vehicles, while investing in clean domestic energy sources including wind, solar, clean coal, nuclear, and biofuels.

REP Index comment: There is no way to conceive of achieving this other than with government mandates and subsidies and putting government in a position to pick losers and losers.  As such, this will lead to increasingly dysfunctional ecoviergy markets,

Obama Recommendation Support 600,000 natural gas jobs by the end of the decade. To safely develop natural gas—an abundant source of American energy—and support more than 600,000 jobs.

REP Index comment: Perfect example of Frederic Bastiat’s theory of the broken window fallacy.  We can increase jobs for glaziers by throwing rocks through windows.  But what is not seen is the number of jobs lost by having to pay for the new windows.  Spain lost roughly 2.5 jobs for every green job created and the green jobs are disappearing as subsidies and mandates are removed because of high energy prices and high unemployment in Spain (25%).

Obama Recommendation Streamlining the oversight of natural gas drilling while taking steps to protect the quality of our air and water and requiring the disclosure of chemicals used in hydraulic fracturing on public lands.

REP Index comment: Beware enviros and natural gas fracking.  Gas fracking means a hundred years of abundant natural gas and thus squeezes out renewables.  Enviros must attack fracking to make renewables viable.  President Obama’s recommendation is what the attack will look like.

Obama Recommendation Improving access to natural gas fuels along heavily-trafficked trucking routes, helping convert municipal bus and truck fleets to run on natural gas, and creating a new tax incentive for medium-and heavy-duty trucks that run on natural gas or other alternative fuels.

REP Index comment:  See comments above about fatal conceit and the broken window fallacy.  Efficiently functioning markets must drive such changes if they are needed.  Forcing them into the market just promotes further dysfunction in ecoviergy markets.

Obama Recommendation Supporting research and development into new ways to convert and store natural gas.

REP Index comment: This is a private market function.  Government involvement will only crowd out private sector efforts and delay innovation.

All in all, typical progressive recommendations that portend ill for efficient ecoviergy markets.


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