February 13 2013
The State of American Energy
Last night, during his state of the Union address, the President bragged about how fabulous his energy policies are working out for the American people: Gas production is at a 15 year high; cars go twice as far on a gallon of gas, and he is now set to tackle climate change by investing in “clean” energy like wind and solar energy.
Too bad all of us are living in actual America instead of the world the President describes. In reality, the White House’s intervention in energy production is making energy more expensive than it should be. This impact American families as well as our economy, since it means manufacturers pay more to create goods, businesses to innovate, the costs of groceries and consumer goods goes up, and the poor and middle class have to work harder to make ends meet.
Let’s take some of the President’s boasts. Gas production may be at a 15 year high, but the Obama Administration is hardly the reason why. According to Thomas Pyle with the Institute for Energy Research, “despite federal lands and waters much larger than the combined private and state lands in the U.S., the CRS says 96% of this increase in oil production occurred on non federal lands. Something is very, very wrong with the president’s energy programs.”
In other words, we could be producing a lot more affordable energy if the Administration allowed more exploration on public lands, which would both create jobs in the energy industry and in manufacturing and transportation.
Similarly, the President’s claim that, “We have doubled the distance our cars will go on a gallon of gas,” is because the administration has jacked up requirements for how far manufactured cars must go on a gallon of gas. New cars are expected to cost about $2000 more because of this mandate. As I’ve written before, that’s bad news for many potential new car buyers who will be priced out of the market, causing the price of used cars to spike. The newest standards will also saddle the car industry with an additional $156 billion in compliance costs and paperwork. No surprise the President left that out of his speech.
The President indicated that his Administration will continue to dish out money to industries like solar and wind production. This may sound good in a speech, but Americans know that many of these “investments” end up being a complete waste as the green energy companies go bankrupt. Overall, in spite of massive government subsidies, solar and wind continue to make up a small portion of American energy production and can, as in the case of California, cause energy prices to soar.
Energy policy has become a regular feature of the President’s speeches, but the policies the Administration is advancing misses the real key to advancing the goal of making sure that Americans have reliable, affordable energy: freeing up energy companies to do what they do best, which is create energy at a low cost. Excessive regulations, taxpayer handouts, and subsidies are distorting markets and making it impossible for energy companies to compete fairly.