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Commentary

Romney’s Historic Opportunity: Low-Cost Energy Fuels Economic Recovery


     
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Energy, the lifeblood of the economy, is the Achilles heel of President Barack Obama. Mitt Romney can win the November election if he concentrates his campaign on a sensible energy policy.

Mr. Romney will have to make a case not merely against Mr. Obama’s failings but also for why he has the better plan to restore prosperity. (WSJ 4-26-12)

...optimistic conservative vision that can inspire the party faithful, appeal to swing voters and set out a governing agenda should he win in November...

As a presumed candidate for the U.S. presidency, Romney should spell out now a coherent policy of low-cost and secure energy that would boost the U.S. economy, ensure jobs and prosperity, and raise people up from poverty. Fundamentally, he and his surrogates must educate and inspire the public.

He should pledge specific goals: lower gasoline prices, cheaper household electricity, cheaper fertilizer for farmers and lower food prices for everybody, cheaper transport fuels for aviation and for the trucking industry, lower raw material costs for the chemical industry. He should also indicate the kind of people who would be part of his team, who would fill the crucial posts and carry out these policies. His running mate should have a record of endorsing these goals.

Obama has made it easy for Romney

It’s a winning situation for Romney; Obama has already provided him most of the ammunition:

  • Under Obama, the price of gasoline has more than doubled, from $1.80 (U.S. average), and is approaching $5 a gallon. His secretary of energy, Dr. Chu, wanted the price to rise to “European levels of $8 to $10.” The rise in gas prices is really hurting the middle class, and particularly the two-car couples who must commute to work. Yet everything Obama has done or is doing is making the situation worse.

  • He has vetoed the Keystone pipeline, which would have brought increasing amounts of oil from Canada to Gulf-Coast refineries, created “shovel-ready“ jobs, and improved energy security.

  • He has kept much federal land off-limits for oil and gas production—particularly in Alaska and offshore. The Alaska pipeline is in danger of running dry. Even where exploration is permitted, drilling permits are hard to obtain because of bureaucratic opposition.

  • To Obama, oil is a “fuel of the past”—not so to millions of drivers. He’s looking to put algae in their gas tanks—the latest bio-fuel scheme! In his 2008 campaign, Obama promised that under his regime, electricity prices would “skyrocket.” He seems to have kept his promise—with help from the misguided “Renewable Electricity Standard,” which mandates utilities to buy costly “green” energy from solar/wind projects and effectively become tax-collectors. He also promised that potential builders of coal-fired power plants would go “bankrupt.” That too would happen, thanks to extreme, onerous EPA regulation.

  • The latest EPA plan would stop the construction of new coal-fired power plants by setting impossible-to-obtain emission limits for carbon dioxide. True, the EPA has made exceptions if the power plant can capture and sequester the emitted CO2, but the technology to do this is not available, and its cost would be prohibitive anyway.

  • It seems likely that, if Obama is re-elected, his EPA will use the CO2 excuse to close down also existing coal-fired plants—and may not permit the construction of any fossil-fueled power plants, including even those fired by natural gas, which emits only about half as much CO2 as coal. The Calif PUC has already banned gas plants (on April 19, 2012) in order to reach its unrealistic goal of 33% green electricity.

  • One can see the signs of impending EPA efforts to stop the exploitation of shale gas by horizontal drilling, using the claim that “fracking” causes water pollution.

The only explanation for this irrational behavior: the Obama administration, from top to bottom, seems possessed by pathological fear of catastrophic global warming and obsessed with the idea that no matter what happens to the economy or jobs, it must stop the emission of CO2.

The starkest illustration of this came in his [Obama’s] answers to questions about climate change in which he promised to make this article of faith for the left a central issue in the coming campaign. This may play well for the readers of Rolling Stone. But given the growing skepticism among ordinary Americans about the ideological cant on the issue that has spewed forth from the mainstream media and the White House, it may not help Obama with independents and the working class voters he needs as badly in November as the educated elites who bludgeoned him into halting the building of the Keystone XL pipeline. This conflict illustrates the contradiction at the core of the president’s campaign. [Commentary Magazine 4-26-12]

The situation is tailor-made for Romney to launch an aggressive campaign to counter current energy policy—and the even worse one that is likely to be put in place if Obama is re-elected.

What Romney must do to win the November election

Romney has to make it quite clear to potential voters why low-cost energy is absolutely essential for economic recovery, for producing jobs, and for increasing average income—especially for the middle-class family, which is now spending too much of its budget on energy essentials. Romney should hold out the entirely realistic prospect of U.S. energy independence—often promised, but never before achieved—or even of the U.S. becoming an energy exporter.

  • Romney can confidently promise to reduce the price of gasoline to $2.50 a gallon or less, with a gracious tip of the hat to Newt Gingrich, who had proposed such a goal in one of his campaign speeches. To accomplish this, the world price of oil would have to fall below $60 a barrel from its present price of $110.

  • But this bright energy promise is entirely possible due to the low price of natural gas, which has fallen to $2 from its 2008 peak of $13 per mcf (1,000 cubic feet)—and is still trending downward. All that Romney has to do is remove to the largest extent possible existing regulatory roadblocks.

It is essential to recognize three important economic facts:

  • Since many of the newly drilled wells also produce high-value oil and NGL (natural gas liquids), natural gas becomes a byproduct that can be profitably sold at even lower prices.

  • Natural gas currently sells for less than 15% of the average price of crude oil, on an energy/BTU basis. This means that it pays to replace oil-based fuels, such as diesel and gasoline, with either liquefied natural gas (LNG) or compressed natural gas (CNG). This may be the most economical and the quickest replacement for heavy road-vehicles, earthmovers, diesel-electric trains, buses, and fleet vehicles.

  • It also becomes profitable to convert natural gas directly to gasoline or diesel by chemical processing in plants that are very similar to refineries. Forget about methanol, hydrogen, and other exotics. Such direct conversion would use the existing infrastructure; it is commercially feasible, the technology is proven, and the profit potential is evident—even if the conversion efficiency is only modest—say, 50%.

Thanks to cheap natural gas, Romney’s promise for lower gasoline prices is easily fulfilled: with reduced demand and increased supply globally, the world price of oil will decline, and so will the price of transportation fuel. So by satisfying transportation needs for fuel, it should be possible to reduce, rather quickly, oil imports from overseas; at present, 60% of all imports (in $) are for oil. At the same time, oil production can be increased domestically and throughout North America. The U.S. is on its way to become not only energy-independent, but also an exporter of motor fuels—with a huge improvement in its balance of payments.

Billionaire oilman Harold Hamm, CEO of Continental Resources and discoverer of the prolific Bakken fields of the northern Great Plains, complains about current energy policy that’s holding back development. “President Obama is riding the wrong horse on energy,” he adds in an interview with Stephen Moore. We can’t come anywhere near the scale of energy production to achieve energy independence by pouring tax dollars into “green energy” sources like wind and solar. It has to come from oil and gas. Hamm is an energy advisor to Romney. Similarly, Governor Bob McDonnell, intent on making Virginia the energy capital of the East Coast by developing offshore oil and gas, complains, in a WSJ op-ed, that Obama’s words are “worlds apart from his actions.”

Another promise Romney can confidently make is that he will cut the price of electricity in half—or even lower. This promise can be fulfilled not only by the low price of natural gas but also by the much higher efficiency of gas-fired power plants that can easily reach 60% or more, compared to the present 35%-40% for nuclear or coal-fired plants. Higher efficiencies reduce not only the cost of fuel (per kilowatt-hour), but effectively lower the capital cost (per kilowatt).

Efficiencies can be raised even higher with “distributed” electric generation, if such gas-fired power plants are located in urban centers where co-generation becomes an attractive possibility. This would use the low-temperature heat that is normally discharged into the environment (and wasted) to provide hot water for space heating and many other applications of an urban area: snow and ice removal, laundry, and even cooling and water desalination. Again, this is proven technology, and the economics may be very favorable. Distributed generation also improves security (against terrorism) and simplifies the disposal of waste heat.

Low-cost natural gas can also provide the basic raw material for cheap fertilizer for farmers, thus lowering food prices, and feedstock for chemical plants for cheaper plastics and other basic materials. Industries can now return to the United States and provide jobs locally—instead of operating offshore, where natural gas has been cheap.

With the exploitation of the enormous gas-hydrate resource in the offing, once the technology is developed, the future could not look brighter. Somehow, Romney must convey this optimistic outlook to the voting public.

“Natural gas is a feedstock in basically every industrial process,” and the price of gas in the U.S. is a fraction of what it is in Europe or Asia. “This country has an incredible advantage headed its way as Asian labor costs rise, as the cost to transport goods from Asia to the U.S. rises, as oil prices rise, as American labor costs have stagnated or gone down in the last 10 years. We have a really wonderful opportunity to kick off an industrial renaissance in the U.S.” (Aubrey McClendon, CEO of Chesapeake Energy, WSJ 4-26-12)

Slaying the “Green Dragon”

Romney should speak out on the “hoax’ (to use Senator Inhofe’s term) of climate catastrophes from rising CO2 levels. He should also make it clear that there is no need for large-scale wind energy or solar electricity—and even the construction of nuclear plants can be postponed. Many environmentalists will be relieved to avoid covering the landscape with solar mirrors, windmills, and—yes—hundreds of miles of electric transmission lines and towers.

In his book Throw Them All Out, Peter Schweizer reports that 80% of the Department of Energy’s multi-billion green loans, loan guarantees, and grants went to Obama backers. Romney should proclaim that there will be no more Solyndras or other boondoggles, and no need for government subsidies for “green energy“ or for crony capitalism. The marketplace will decide the future of novel technologies, such as electric cars, solar devices, etc. Many Washington lobbyists will lose their cushy jobs.

There’s absolutely no need for bio-fuels, either. Yes, that includes algae as well as ethanol, which is now consuming some 40% of the U.S. corn crop. The world price of corn has tripled in the past five years—even as the EPA plans to increase the ethanol percentage of motor fuels from 10% to 15%! True environmentalists are well aware of the many drawbacks of bio-fuels, among them the damage they do to croplands and forests in the U.S. and overseas and to the vast areas they require that could be devoted to natural habitats.

Finally, Romney should make it clear that if elected, he will appoint a secretary of energy, secretary of interior, administrator of NOAA, and administrator of the EPA who share his convictions about energy. Above all, he should recruit a White House staff, including a science advisor, who will bring the promise of low-cost, secure energy to the American economy.

Perhaps the WSJ (April 27) said it all: “Did you like the past four years? Good, you can get four more.”


Atmospheric physicist S. Fred Singer is a Research Fellow at the Independent Institute, Professor Emeritus of Environmental Sciences at the University of Virginia, and former founding Director of the U.S. Weather Satellite Service. He is author of Hot Talk, Cold Science: Global Warming’s Unfinished Debate (The Independent Institute).

Hot Talk, Cold ScienceFrom S. Fred Singer
HOT TALK, COLD SCIENCE: Global Warming’s Unfinished Debate
S. Fred Singer is a distinguished astrophysicist who has taken a hard, scientific look at the evidence. In this book, Dr. Singer explores the inaccuracies in historical climate data, the limitations of attempting to model climate on computers, solar variability and its impact on climate, the effects of clouds, ocean currents, and sea levels on global climate, and factors that could mitigate any human impacts on world climate. Learn More »»






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