A Bipartisan Fix

Good opinion piece today in the WSJ:

Partisan sides are using a serious crisis to advance political agendas, create political attack sound bites, and launch hearings to "expose" the culprit. Pick your favorite: speculators, Big Oil, environmentalists, China, India, etc.

This is not leadership.

A fundamental misunderstanding of how markets work, and how an effective government can support the private sector, is delaying remedies that will bring down energy prices now. These remedies are to be found in both supply and demand – and both Democrats and Republicans need to demonstrate their command of this fact. Energy is too important a cornerstone of domestic prosperity and international stability to be used as a debating prop.

Your claim that any oil we drill for now will not come on line for five years or longer – and will thus have no effect on prices today – is incorrect. Unlike past oil crises, where the spot price of oil (that is, today's price) rose more than forward prices, the oil price for delivery in 2012 is trading at $138 per barrel. The market is sending a clear price signal that our problem is in the future – because we do not have the will to curb demand or increase supply.

How many houses would someone invest in if there were a future guarantee that the price would not decline? It is anticipation of ever-increasing prices that fuels the mania.

I do disagree with this however:

Efficiency is a huge source of new energy. It is scandalous that we have let the mileage standards decrease over the past 25 years. Whether through mandates or tax policy, active government intervention is needed. Republicans have to stop acting as if the "market" is some pristine state of nature that is not subject to active shaping.

He could not be more wrong here. Consumers are already effecting the market for cars with poor gas mileage. SUV sales are falling fast and small cars are doing quite well. This alone is driving fuel economy standards without any work by the Energy Department. Active government intervention is only needed to free up the markets, particularly drilling. It is NOT allowing the free market to work that is the problem, not a lack of government intervention.

Congress and OPEC

Good perspective from IBD.

Congress and Opec

New polls show that Americans, far from thinking that we can do nothing, want Congress to drill, and drill some more if necessary, to break the energy crisis.

A Pew Research poll out Wednesday found that 47% say exploring and drilling for more oil and building new power plants should be the top priority for U.S. energy policy, up from 35% in February. And 50% now say they favor drilling in ANWR, up from 42%.

That follows a Rasmussen poll in June showing that 67% of Americans support drilling for more oil, and 64% think it will help bring down the price of energy.

Government Subsidies To The Rescue

What does government sponsorship of industry get the tax payer? Usually nothing like in the case of Syn Fuel in the 1970's and marginally more from sources like wind and solar. This opinion piece in the WSJ makes several great points. Here is a sample:

The wind and solar lobbies are currently moaning that they don't get their fair
share of the subsidy pie. They also argue that subsidies per unit of energy
are
always higher at an early stage of development, before innovation makes
large-scale production possible. But wind and solar have been on the subsidy
take for years, and they still account for less than 1% of total net
electricity
generation. Would it make any difference if the federal subsidy
for wind were
$50 per megawatt hour, or even $100? Almost certainly not
without a
technological breakthrough.

The real question for me though is "why should any of these industries be getting a subsidy?" Let consumers decide and pay for the best alternative for them. Right now, that is hydrocarbon based energy for me and my needs. IF you want to be "green" then pay $20/kw-hr for wind or solar while I enjoy $0.10/KW-hr coal. Afterall, 30 years of government subsidies for the solar business has got us nothing but expensive options.