I read an article from Fox News earlier this evening regarding Mitt Romney’s energy independence plan. According to the article:
In a campaign speech in Hobbs, N.M., a few weeks ago, the GOP presidential nominee told the crowd, “I will set a national goal of North American independence by 2020. That means we produce all the energy we use in North America.
Seems like every presidential candidate since Carter has had one of those. None of them achieved it but they did bring us close. In spite of its many critics, NAFTA did do one good thing for the United States: made Canada and Mexico our two biggest oil providers, providing us with more than half of our oil. Saudi Arabian imports are now between 13-15%, which means less American money being redirected to terrorist groups and theocratic uprisings. Venezuelan imports are even less. OPEC’s stranglehold over us has been substantially reduced. And North American energy production is rising. All of this is good. But someone with no understanding of basic supply and demand or cost-benefit analysis decided to attack the GOP nominee.
Here’s what the beef was all about:
In addition to opening up new areas for offshore drilling, Romney says his energy independence goal can be accomplished by speeding up the time it takes to get permits to drill on federal lands. The way to do that, he says, is by putting state regulators in charge of the federal process just as they already are on state and private lands.
Said the article.
My immediate reaction: FINALLY! This is the Mitt Romney I’ve been wanting to see. After a mediocre campaign with mediocre positions, not much detail on how to get government out of our lives, and poor understanding of the duties of the federal government, Mitt Romney took a tenth amendment position that is much needed. A great deal of the mountain west is federally owned land. It should be given back to the states and the states should be in charge of any resources within their borders–with the federal government only involved in cross-border disputes.
But Pete Maysmith, executive director of Colorado Conservation Voters wasn’t exactly happy. He said:
“Governor Romney’s energy proposal … ignores the facts and is a giveaway to his big oil campaign supporters at the expense of our air, land and water. Energy production in the United States is at a 20-year high. So the problem is not regulations, the problem is not lack of access to federal lands.”
I don’t care what your political views are or who you are voting for. And there are many reasons not to like Mitt Romney. However, this is not one of them!
I don’t know if Mr. Maysmith is right or wrong about energy production being at a 20 year high. What I do know is this: IT DOES NOT MATTER!
That’s right. His conclusion might be partially factual in this and only this: most large energy companies are more than willing to comply with basic safety regulations. I’m a member of the Houston Economics Club, and such was the position that Andrew Slaughter, a former Chair of the National Petroleum Council, took at one of our meetings last January.
Most of the anti-fracking hype has been factually incorrect; I won’t get into detail on that but I’m just giving you an example: energy companies have engineered new methods of groundwater protection. So the private sector has addressed the problem, to the point where regulation should be toned down to a property-damage perspective. Not all regulation is bad. Property rights are paramount, and property damage must be prevented.
If you want more information on groundwater protection you can find it in this presentation by Slaughter found here
The point of my article is simply this: his premise is patently false, as is his conclusion that we should not increase access to federal lands.
It is not a matter of energy being at a 20 year high it is a matter of IT COULD BE HIGHER!.
Just because an industry is doing better than ever is no excuse for them not to try and do even better. America needs cheaper energy to prevent an economic collapse. I’m going to go through the dynamics here to justify my premises.
Our demand is probably higher than its even been, which means unless the supply goes up the price of your electric bill or filling up your gas tank will never be lower. It’s bad enough that Ben Bernanke’s quantitative easing policies devalue the dollar and enable speculators to drive up the price. It’s also bad enough that because of the globalized 21st century economy, prices rise even further due to the unrest in the Muslim world driving down production in the OPEC countries. Finally there is the rapid industrialization of several large emerging economies: China, India and Brazil. Brazil has a growing offshore oil supply and is ramping up its production, but China and India are not oil rich nations and cannot do the same.
So your energy prices are high, and they will only go higher if there isn’t more expansion of domestic energy production, not just in oil, but in natural gas, wind, nuclear, clean coal, and even–when cost effective–solar. Quite frankly, claiming our production being at a 20 year high (if that’s true) as a reason to stop expanding is pure economic dumbassery.
With our rising national debt, our lackluster job growth, our politicians’ inability to lessen the uncertainty on the private sector, and the Federal Reserve’s massive injections of new dollars into the market–that aren’t backed by economic growth–we face a much bigger problem than the problems conservationists tackle on a regular basis. We face the threat of an economic meltdown, the fall of the United States as a superpower and a much more difficult way of life than anyone in this country who is under the age of 70 or didn’t grow up in an undeveloped country could ever imagine. Its not a matter of Democrats vs. Republicans (and I know the irony of me saying that from a Republican website), its a matter of supply and demand.
Fiat money, when not backed by a hard asset such as silver or gold, is only good if there is demand for it. Demand for the US dollar is not rising as fast as the Federal Reserve is running its printing presses. This will lead to inflation, as long as the Fed continues to pursue this while keeping its interest rates low. Even Keynes, whose followers today laugh at the thought of a dollar collapse and who didn’t predict the housing bubble or 2008 economic crash (with the exception of Nouriel Roubini and few others), knew that increasing money supply should be done during a period of strong economic growth, not the anemic year-to-year growth we have seen over the past couple of years. If you increase the supply when the demand isn’t nearly as strong, you devalue the dollar.
Some Austrian school economic alarmists believe hyperinflation is inevitable. While they deserve credit for predicting the 2008 crash years before it happened, I can’t say I agree with its inevitability. However, I do see it as a possibility. Continuous increases in the money supply, with weak increases in demand for that dollar, and politicians’ inability to tackle our national debt could lead to a fall in confidence of our dollar. That’s the difference between hyperinflation and inflation. The latter is rising prices, the former is when other countries see a significant reduction in the value of your currency, and begin to dump it for other currencies or commodities. Demand for your currency plummets and as a result, the price of everyday living requirements skyrockets.
It’s not a risk worth taking, and neither is inflation. So while our politicians bicker like children and fail to address the debt, economic growth is the only thing that will stop the two.
Increasing our domestic energy production is perhaps the best shot we have at this for many reasons.
Ramping up energy production will create jobs in the industry. More unemployed people go back to work, start paying taxes again, and revenues to the federal government increase.
When people aren’t unnecessarily wasting as much of their money on gasoline and utilities they can be more productive with that spending by spending it on other industries or investing it into new capital. This creates even more jobs. And I do say we are wasting because if the price can be much lower, you’re being inefficient. Inefficiency is a waste.
Lower energy prices cause the price of other goods to come down across the board, because transportation costs pretty much affect everything. So this offsets some of the inflation that will happen as a result of quantitative easing.
The growth in the economy will strengthen demand for the US dollar, further offsetting Bernanke’s disastrous easing policies and preventing a dollar collapse prior to his replacement in 2014 (in the case of a Romney victory).
I imagine that Bernanke’s replacement in the event of a Romney victory will be Martin Feldstein. My familiarity with his work suggests to me he would finally allow interest rates to rise and roll back QE3. If this were to happen, we could prevent a debt crisis and a dollar collapse provided our politicians finally figure out how to balance the federal budget. With economic growth, balancing the budget comes much easier.
What I hope everyone takes away from this article is: WE SHOULD NEVER STOP! We should never stop trying to ramp up energy production so long as it cannot meet the demand at the cheapest possible price–and for you conservationists out there, I mean we will do it in a responsible manner. Pete Maysmith–who I hope reads this and learns a thing or two–made a huge error in his premise by ignoring the laws of supply and demand. This line of thought is poisonous, and I ask of my readers that you share this article with as many people as you can. The less people believe his ridiculous notion, that the goal for any or industry to stagnate or decrease production at any level, for any reason, other than falling demand or maxed out capacity, the better off we will be. And as the research shows, rising global energy demand is inevitable and we are far from incapable of increasing the supply in a responsible manner.
Aaron Alghawi obtained a B.S. in Economics from Texas A&M University in 2012, and is a National At-Large Board Member of the Republican Liberty Caucus.