We need to be realistic in our energy aspirations

[peejay 327]

COMMENTARY

We need to be realistic in our energy aspirations

Here's my five-point plan

By LOREN STEFFY

2008 Houston Chronicle

We aren't going to be energy independent.

As we wrestle with rising oil prices and search for alternatives, we need to be realistic in our aspirations. The world consumes the energy equivalent of about 80 billion barrels of oil a year. At current prices, that's almost $10 trillion, and our share is about one-quarter of that.

Our economy — like most economies — has always relied on imports, and energy is no different, but our energy imports are out of balance. We now import almost three-fourths of our oil, which holds our economy hostage to the supply constraints that now are driving prices to painful levels.

The solution sounds simple. We want a fuel source that's cheap, reliable and clean.

We have a host of options that get us two out of three — but they're not cheap.

A few weeks ago, I criticized Boone Pickens' energy plan because of its heavy focus on wind power and natural gas vehicles. As often happens when you voice skepticism for something popular, people asked the inevitable: "So, what's your plan?"

I don't have the benefit of a $58 million marketing campaign, but I'm willing to throw down my own five-point proposal, culled from years of writing about, researching and discussing the issue with energy experts, including Pickens.

My plan begins with the idea that energy is really about economics. The solutions, therefore, must make economic sense. That doesn't mean consumers won't have to pay more — we will. And providers must be able to make reasonable returns.

Subsidies are fine to develop technology, but we can't sustain businesses that aren't profitable without them, which is why I'm skeptical of wind power.

Avoid unintended effects

Just as the federal enthusiasm for ethanol led to a wave of subsidies that helped feed higher food prices, we must be careful about picking winners before we understand the rules of the game.

Here, then, are the five broad elements of my plan:

1) Enact meaningful conservation programs from the home to the highways. As consumers, we have to do our part. We need to embrace changes, some unpopular, that have an immediate impact on consumption. That means lower speed limits, synchronized street lights, tax credits for highly fuel efficient vehicles and incentives for car pooling and telecommuting. We also have to realize that energy, regardless of its source, is simply going to cost more.

2) Invest in infrastructure. Our transportation network wasn't designed for oil in excess of $120 a barrel. We need better mass transit, a more responsive air traffic control system, and more funding for highway improvements. Whether we use electric cars or natural gas vehicles, we'll still need better roads. In the meantime, improving traffic flow and road conditions can reduce congestion and save fuel.

3) Develop what works. That means more drilling, both offshore for oil and onshore for natural gas. We may not like seeing platforms on the horizon when we go to the beach, but it's a reminder of the cost of getting there.

New drilling won't solve our problems, but it will buy us time. There's still millions of cars, trucks, airplanes and boats that need liquid fuel. And they're going to need it for years to come.

Approve nuclear power plant permits for proven technology and encourage the construction of new reactors through federal incentives. It gets back to economics. We know it works, and it's more reliable than wind or other renewable generating sources, so it deserves incentives. Taxpayers, in other words, get a better return on their investment. Provide subsidies for developing better waste-storage solutions.

Recognize that coal is going to be part of the plan. It's too abundant to ignore, yet too dirty to keep using unless we develop viable clean-coal technologies.

As crude prices rise, embrace emerging extraction technology, such as oil shale. The technology isn't economically viable yet, but a decade ago, extracting oil from the Canadian tar sands wasn't financially viable, either.

4) Continue researching alternative fuels that show economic promise and fund it through federal grant programs and modest tax incentives for promising technology. We need to keep our options open. Rather than allowing Congress to pick technologies that reflect political favoritism, develop a basket of alternatives — from biofuels to hydrogen — that make financial sense. Recognize that the benefits from any renewable fuels are probably two decades away.

In electricity, alternatives such as wind and solar power should continue to be developed as auxiliary sources, but they can't be added to baseload generation until technology makes them more reliable.

Alternatives must make sense for Americans' pocketbooks, and they must be widely available on a cost-effective basis and must allow companies that deliver them to make money.

5) Be prepared to pay for it. Reallocate transportation taxes. As gasoline use declines, we'll need another revenue source, such as a tax on road usage or miles driven, to offset the loss of gas taxes.

Enact a phased-in carbon tax and use the proceeds to fund emission control research as well as infrastructure improvements mentioned in Step 2. Forget cap and trade markets. They're still a tax, but the benefit goes to the middleman, not the taxpayer.

Must be a collective effort

All these steps are incremental. Politicians like to throw down challenges, as if weaning ourselves from oil is like a moon shot. NASA's Apollo program, though, was focused on a singular goal in which cost was no object.

What we need — as Richard Lester, a nuclear science and engineering professor at the Massachusetts Institute of Technology noted in a recent speech in Philadelphia — is more of an energy Marshall Plan, in which everyone works together to rebuild our economy around new forms of energy.

Those new forms will be reliable and cleaner than what we have now, but they won't be cheaper. If they were, we'd already be using them.

Rather than embrace platitudes about energy independence, we need to recognize that the era of cheap energy is over. The question is: What are we willing to do about it?

http://www.chron.com/disp/story.mpl/busine...fy/5909558.html

[Trumplestiltskin 5,791]

Does drilling buy us time though?

An interesting point was made in a thread last week that the cost of oil at the wholesale level is relatively low - and that opening up new areas of oil exploration for drilling won't yield tangible benefits for roughly 5 - 10 years (a moot point perhaps) but more importantly - that the huge investments required for opening up new oil fields (costs which are recouped over a period of many years when the fields become productive) makes the venture cost-prohibitive for the oil companies.

The other 4 points are fair though.

Edited July 28, 2008 by Number 6

[Hilarious Clinton 452]

Sounds like a good plan.

[w¡n9Nµ7 §£@¥€r 123]

... the huge investments required for opening up new oil fields (costs which are recouped over a period of many years when the fields become productive) makes the venture cost-prohibitive for the oil companies.

Oil companies will drill if they expect positive ROI. They won't if they don't. They know their business better than anyone else.

[ready4ONE 5,400]

"We now import almost three-fourths of our oil, which holds our economy hostage to the supply constraints that now are driving prices to painful levels."

There are no 'supply constraints' at present. The whole thing is essentially a speculative rip off.

[w¡n9Nµ7 §£@¥€r 123]

Sounds like a good plan.

I thought you were opposed to a carbon tax

[Trumplestiltskin 5,791]

... the huge investments required for opening up new oil fields (costs which are recouped over a period of many years when the fields become productive) makes the venture cost-prohibitive for the oil companies.

Oil companies will drill if they expect positive ROI. They won't if they don't. They know their business better than anyone else.

I'd have to ask my old co-workers at BP who worked on the marine side (safety inspection and loss investigation) - but I've heard the argument before. The cost of developing a new oil field is fantastic. They'll only do it - if doing so is within their profit margins (given the length of time it takes to recoup the exploration costs).

Its the downside of that whole "let the free market do its thing" approach.

[Hilarious Clinton 452]

Sounds like a good plan.

I thought you were opposed to a carbon tax

I am opposed. Overall it's a good plan though.

[w¡n9Nµ7 §£@¥€r 123]

Sounds like a good plan.

I thought you were opposed to a carbon tax

I am opposed. Overall it's a good plan though.

Ok. Of course, the plan intends to pay for the infrastructure improvements with a carbon tax. Without the carbon tax, the plan falls apart.