On last night's Kudlow & Co., I discussed how absurd US energy policy is.
The United States is heavily dependent on fossil fuels (>80%), most of which come from places we would rather not send our money to. We consume 26% of the world's energy, with only 3% of the world’s known oil reserves.
It turns out that for the past 3 decades, we've had a George Costanza Energy policy -- every decision we have made as a country has worked to drive energy prices higher. Had we made the opposite decisions (see embedded YouTube clip above), crude oil prices would be much lower than they are today ($130.17 as I type this).
What follows is a list of energy-related policies of the United States. On many of these, I have no opinion -- but I wanted to list as many as I could to demonstrate why oil is where it is
US Policies with an impact on Energy:
- Limit areas available for offshore drilling;
- Stopped the planned rise of CAFE standards for automobiles;
- Restricted nuclear power generation of electrical;
- Federal Reserve policies since 2001 led to a very weak US dollar (raising oil prices);
- Energy conservation policies? None;
- Provided little or no incentives for hybrid automobiles;
- No major US R&D research on energy;
- Game changing breakthroughs over the past decades in solar, battery, or energy generation technologies? None;
- Failed to raise efficiency standards for appliances for decades;
- Iraq and Afghanistan Wars contributing to Middle East tensions
- Kept CAFE standards for light trucks/SUVs much lower than autos;
- Ridiculous corn ethanol policy (driving food prices higher as Oil rises);
- Mass transit system is not a priority;
- No special capital gains treatment for VC alt.energy investment;
- Failed to aggressively promote efficiency improvements for residential energy use, transmission of power, or consumption;
- Amongst the lowest gasoline taxes in the developed world;
- Limited hydro-electric power generation;
- Created a tax incentive [ADCS] that encouraged purchases of large inefficient vehicles;
- Aggressive tax incentives for battery technology development? None;
- Exempted light trucks, SUVs, and pickups from gas-guzzler tax;
- Discouraged clean coal, including gas liquification from coal;
- Limited or non-existent state tax Incentives for building energy efficient homes;
- Failed to aggressively promote compact fluorescent light bulb;
- Allowed tax credits for residential solar power to expire;
- Americans, on average, live further from where they work than Europeans do;
- No special capital gains tax treatment for clean energy technology development;
And that's just off the top of my head.
Some of the above is being responded to by the private sector. With oil at $130+, there are significant price incentives for these technologies.
However, markets develop solutions only after the economics of it are feasible. This means we are starting R&D with oil at previously unthinkable levels. Imagine if we had some form of energy leadership 10 or 20 years ago when oil was $8.
What other policies does the US have that has led to higher Oil prices?