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Nothing more clearly indicates U.S. President Barack Obama’s economic muddledom and ideological stubbornness than the dog’s breakfast of energy policies revealed in Tuesday’s State of the Union address. The good news is that hydrocarbons are back (as long as you forget Keystone XL). The bad news is that “clean” energy isn’t going away. Instead it’s “all of the above.”
Without his nose growing visibly, the President claimed the government was behind the technological advances that led to the current shale gas boom, and even suggested that he might take credit for the rise in domestic oil production. In fact, Mr. Obama’s administration has hampered and castigated oil companies at every turn. In the light of the hysterical grandstanding over the BP Gulf spill (whose impact proved to be greatly exaggerated), it was ironic indeed to hear the President now declare a great opening up of offshore exploration.
The industry has responded to attacks by becoming more innovative and productive. According to the U.S. Energy Information Administration, between 2007 and 2010, U.S. oil production grew from 5.1 million barrels a day (mbd) to 5.5 mbd. The agency predicts domestic production will hit 6.7 mbd by 2020, helping take imports down to 36% of domestic usage in 2035 from 60% in 2005. So much for peak oil. Meanwhile, the EIA also predicts that by 2016, thanks to the shale boom, the U.S. will be a natural gas exporter.
This reluctant acknowledgment of the success of private innovation was accompanied on Tuesday by the usual cheap shots. The oil industry has been subsidized (a dubious claim) for too long. Its profits are too fat. The administration will demand that oil companies release details of fracking chemicals – as if they might wilfully poison Americans without public oversight.
These political sideswipes are unlikely to appease the environmental lobby. If the President thinks he won any Greenie Points by kicking the Keystone XL pipeline down the road, he certainly lost them all – and probably then some – with his support for fracking and offshore drilling. Radical environmentalists don’t want to hear about energy security, objective risks, or practical safety measures: they want to close down hydrocarbons as the work of the climate devil.
Over in the dodgy logic section, Mr. Obama suggested that shale gas success demonstrated that it took time for energy research to pay off, thus he was right to stick with promoting alternatives. However, the cases are entirely different. U.S. government research laboratories may indeed have been involved in technologies such as fracking and directional drilling, but these technologies were first developed in the private sector. Government presence should be attributed more to jumping on winners than skill in picking them. Plus, there is the private sector’s incurable penchant for grabbing government funds. When it comes to alternatives, however, while rent seekers are as thick on the ground as subsidized solar panels, the government has no winners on which to jump.
For the rest of this column, please go to the National Post/Financial Post website: http://opinion.financialpost.com/2012/01/27/obama-loves-oil-not/