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Home>Stand with Big Oil and the American People

Stand with Big Oil and the American People


April 03, 2012

by Holly Fretwell

 Congress has a choice, “[t]hey can stand with the big oil companies, or they can stand with the American people,” asserts Obama, as if it is an either or decision. In reality, they are mutually inclusive. The President even admits this in his ‘all of the above’ approach to energy.

                “I want to make clear, we all know that drilling for oil has to be a key part of our overall energy strategy.  We want U.S. oil companies to be doing well.  We want them to succeed.” To encourage development for increased oil in the future companies must invest. They will only invest if there is a foreseen return on that investment.

                Oil companies do earn profit (perhaps not as much as often perceived, but that is a story for another day). And they receive subsidies. I agree with the current administration about eliminating oil subsidies. But rather than transfer subsidies from oil to alternative fuels, remove all energy subsidies and see what the market will bear. Renewable energies already receive substantial subsidies. Even so, energy return per tax dollar spent is multiple times greater on oil and gas than it is for renewables. 

The Solyndra fiasco is just one case in point that demonstrates how difficult it is to politically choose technology for the future.  No one individual has all the information that markets provide. And politicians are not motivated to maximize the return on tax dollars. Politicians don’t bear the full cost of their actions – Obama may have lost sleep over the political ramifications of the Solyndra affair but tax payers lost $535 million.

                The rhetoric for America to become energy independent is ridiculous, impossible, and illogical. Obama reiterates in his speeches that America consumes more than 20 percent of the world’s oil but only maintains 2 percent of the global oil reserves. Most of that is used to power our transportation fleet. Not wind, solar, or biomass can replace that given current technology.

While global proved reserves continue to grow faster than consumption, U.S. proved reserves are declining(link to Fretwell April Charticle). Shifting from global oil supplies to US supplies means faster depletion of US resources and higher prices. It is like depleting your pantry when you know a hurricane is coming instead of replenishing before the storm.

The current administration is not alone by using political rhetoric to push for energy independence; we have heard it from every President in memory (see charticle here). Such political posturing does nothing to enhance social welfare.

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