Monday, June 23, 2008

Bush's Energy Policy: A Lie and a Smear

Bush's Energy Policy: A Lie and a Smear

President Bush's June 18 statement on energy policy was the latest inthe continual series of low points comprising his administration. After eight years of failing to develop an effective and sustainableenergy policy (six of them with a compliant Republican Congress), his answer to the nation's energy dilemma is to claim that high prices are the Democrats' fault. Even Mr. Bush knows that this is a lie. Oil and gas are products in a global market, and their prices in the U.S. are reflections of that. Global demand for oil and gasoline has expanded exponentially over the past decade, while supplies have not. As usual, he hasn't read - or ignores - the reports that his own government's agencies have issued.

The Government Accountability Office (GAO) issued a report in February 2007 titled "Uncertainty about Future Oil Supply Makes It Important to Develop a Strategy for Addressing a Peak and Decline in Oil Production" (www.gao.gov/new.items/d07283.pdf). The GAO report cited the International Energy Agency's conclusion that most countries outside the Middle East have reached their peak in conventional oil production, or will do so in the near future (p.7).*

Whatever amount of price-gauging and speculation that is forcing up prices in the short term has gained traction because of the market's recognition of the fundamental shift in the energy picture that is underway. The U.S. can do little to control this global market - nor, interestingly, can the major oil companies, which the GAO report notes now account for only 22% of global production (p.25).

If the most pernicious fiction that the President conveyed was that current high prices are the result of the Democrats blocking energy proposals that he and the GOP have pushed for years, he did a further disservice to the country by trotting out those same "solutions" as a way to address the problem.

The three centerpieces of his proposal are:

1) Opening up the Arctic National Wildlife Refuge (ANWR) to exploration and drilling - This has long been a goal of the GOP and the Bush-Cheneyadministration, but that doesn't make it a solution. The U.S.Department of Energy's Energy Information Administration (EIA) released a recent report on the prospects of ANWR, which stated that "With respect to the world oil price impact, projected ANWR oil production constitutes between 0.4 and 1.2 percent of total world oil consumption in 2030, based on the low and high resource cases, respectively. Consequently, ANWR oil production is not projected to have a large impact on world oil prices." (http://www.eia.doe.gov/oiaf/servicerpt/anwr/results.html.)

Note that the agency was directed to support the administration's agenda, so the report strives to give the most optimistic picture of potential reserves in the refuge, using the high end of estimates of oil that may lie there.

2) Drilling in areas of the Outer Continental Shelf currently off limits - The EIA has released a similar report to promote this option, but the analysts still have to convey some reality:

"The projections in the OCS access case indicate that [expanding] access... would not have a significant impact on domestic crude oil and natural gas production or prices before 2030... Because oil prices are determined on the international market, however, any impact on
average wellhead prices is expected to be insignificant."
(www.eia.doe.gov/oiaf/aeo/otheranalysis/ongr.html)

3) Expanding production from oil sands/shales - The White House statement of June 18 refers to the "incredible potential" of oil shales. The GAO report notes that 2005 worldwide production of oil sands, largely from Alberta, contributed approximately 1.6 million barrels of oil per day, and production is projected to grow to perhaps 3.5 million barrels per day by 2030.(p.20).
It's important to remember that global consumption is currently at about 80 million barrels a day, with the U.S. consuming about 20 million barrels per day. But the GAO report contains the reminder that production from oil sands causes significant environmental problems - it's very energy intensive, using large amounts of natural gas and water, and produces large amounts of toxic wastewater. The environmental effects in Canada have been serious, which raises the question of whether this is a worthwhile trade off, since by some estimates it takes as much energy to extract oil from the sands/shale deposits as we get out of them.

This suite of non-solutions, then, form the justification for the Bush smear on June 18. The background to the story is even sorrier. Energy analystMatthew Simmons has stated that he briefed Bush and his advisors about the "peaking" of global oil production during the 2000 campaign and during the early days of his administration when their energy policy was being developed.** You may recall Dick Cheney raising the dire prospect of energy shortages during the spring of 2001 when his secretive energy task force was meeting. Unfortunately, the centerpiece of their energy strategy turned out to be the invasion and occupation of Iraq.

We can look to the GAO report for the final nail in Bush-Cheney's coffin of failure: "there is no coordinated federal strategy for reducing uncertainty about [the peak of oil production]'s timing or [for] mitigating its consequences." We do, however, have an estimated $3 trillion dollar price tag for the occupation of Iraq.

There is no single answer, and certainly no easy one, for the energy dilemma. The oil that lies in the few areas of the U.S. now off limits is not insignificant, but it can't meet current levels of domestic use. We import over half our oil because domestic reserves can no longer meet that demand. Conserving more will save us money, but will not mean more oil in our future (unless we begin stockpiling, an option that also has obvious limitations), because oil on the global market not used in the U.S. will be grabbed by other consumers such as India and China. In an era of high prices, however, conservation will be a necessity. Reality-based planning for a changing energy system will be another necessity - something that Bush and the GOP apparently despise. But their cynical use of non-solutions to a painful problem has become even less affordable.

* The GAO report also notes a cause for further concern - "Estimates of how much oil remains in the ground are highly uncertain because much of these data are self-reported and unverified by independent auditors... Some experts believe OPEC estimates of proven reserves to be inflated." This reflects the premise of Matthew Simmons' book"Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy." (http://www.simmonsco-intl.com/research.aspx?Type=msspeeches.)

**http://globalpublicmedia.com/matt_simmons_speaks_about_bush_iraq_and_more

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