Question for Energy Debate: Market? What Market?

By September 27, 2007Energy

Excellent column by Mackubin T. Owens, professor of national-security affairs at the Naval War College, in the New York Post on energy legislation in Congress, highlighting the folly of raising taxes on domestic oil producers and the bills’ disproportionate focus on alternative fuels. Congress is sprinkling fairy dust, Owens opines.

If it’s serious about energy independence, Congress should expand access to abundant domestic supplies, increasing access to non-park federal lands in the West, Alaska and under the waters off our coasts. The estimated recoverable resources in these areas: 635 trillion cubic feet of natural gas (enough to meet the annual needs of the 60 million American homes fueled by natural gas for over a century) and 112 billion barrels of oil (enough to produce gasoline for 60 million cars and heat for 25 million homes for 60 years).

Congress should also not be hiking taxes on domestic oil producers: That discourages new domestic production, increasing our dependence on imported oil – the reverse of improved energy independence.

The historical record drives home the facts about taxes on domestic producers. For instance, the Carter-era “windfall profits” tax cut U.S. production by as many as 1.2 billion barrels, the Congressional Research Service reported. The report found that, by reducing domestic production by 3 percent to 6 percent, the tax boosted oil imports by 8 percent to 16 percent, “[making] the U.S. more dependent upon imported oil.”

In other energy discussions, Daniel Gross — author of “Pop!: Why Bubbles are Great for the Economy” — speculates about alternative energy. Interesting stuff:

There’s been fantastic growth in wind, solar, ethanol. We have government subsidies for all of these things, which encourages people to invest in them even at high levels. And you can see it crossing over into the popular culture. It’s not just business publications. It’s everywhere you look – TV, radio, newspapers, company’s websites. Everybody is talking about producing alternative energy, using alternative energy.

So, I think the stars are aligning for a bubble in alternative energy.

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