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BREAKING THE CODE OF THE FOSSIL-FUEL DILEMMA

Ed Ross | Monday, February 27, 2012

The U.S. fossil-fuel dilemma is that the United States has vast, albeit finite, fossil-fuel resources, but we donít exploit them sufficiently because of environmental and political reasons.

Many environmentalists and political activists believe their use causes man-made global warming, and by exploiting finite domestic energy resources we only discourage the development of infinite alternative energy sourcesósolar, wind, geothermal, etc. Thus we have allowed ourselves to become dependent on expensive foreign oil from volatile regions of the world.

As gas prices again soar, there is a way out of this dilemma, if only we have the common sense to see it.

The U.S. economy runs on cheap fossil fuels. Alternative energy sources may one day replace them, but that day is decades away. The technology and infrastructure will take many years to develop.

In the meantime, U.S. economic recovery and prosperity remains dependent on keeping fossil-energy costs, especially for petroleum, low. An obvious way to do that is to exploit our untapped domestic sources.

We canít effectively exploit those resources for the reasons above, strongly supported by the administration of President Barack Obama, and because neither Republicans nor Democrats have offered the American people a comprehensive energy strategy that makes long-term sense.

Policies like capping and trading carbon credits result in soaring energy costs without guaranteeing successful, efficient alternative-energy development.

Presidentís Obamaís other approach, government picking winners and losers in the alternative energy industry with tax credits and loan guarantees, gave us Solyndra and crony capitalism.

Whatís needed is the sufficient exploitation of our existing oil and gas resources, without completely ignoring environmental concerns, coupled with policies and incentives to ensure that alternative energy resources will be there when the oil and gas fields one day run dry.

First letís deal with environmental concerns. Man-made global warming is not settled science. Indeed, scientists now have convincing data to show that global warming has not taken place over the past 15 years. The scientific debate is between those who focus on CO2 in our atmosphere and those who believe the Sun and the oceans are the principal regulators of climate change.

As the jury remains out on climate change, efforts to minimize green-house gases and air pollution are prudent, so long as they are not draconian and do not cause energy prices to rise precipitously and hobble economic growth. The international auto industry, for example, already is making highly fuel efficient, clean hybrid and gas-powered cars that get between 30 and 40 mpg, and with the proper encouragement and incentives they can do much better.

The air U.S. citizens breathe is far cleaner today than it was 30 years ago, and it gets cleaner all the time as older, dirtier, and less efficient cars, trucks, and factories are replaced with newer ones.

Whatís needed most in the alternative energy industry is technology that will provide more efficient and powerful, fast charging batteries for electric cars and other uses and more efficient solar panels. Both remain highly inefficient and expensive. And thereís a way to provide incentives for their necessary research and development that is encouraged rather than discouraged by the greater use of our oil and gas reserves and that doesn't use U.S. taxpayerís money.

The Alaska Permanent Fund (APF), established in 1976, is managed by a semi-independent corporation to be an investment for a percentage of proceeds from oil and gas sales and royalties. The APF sets aside a certain share of oil revenues to continue benefiting current and all future generations of Alaskans, which includes annual dividends to Alaska residents.

A National Permanent Fund could provide incentives (prizes and grants) for the development of efficient, cost effective alternative energy sources. It, like the APF, would be managed by a semi-independent corporation (avoiding the mistakes of Fannie Mae and Freddie Mac).

It would receive no tax-payer funds, and it would not provide loan guarantees. It would model itself after the most transparent and successful non-profit charities, and be overseen by a special joint committee of Congress. Its board members would not receive exorbitant salaries, bonuses, or golden parachutes.

The objective of this approach would be to allow the private sector and the consumer, not the federal government to decide which technologies are winners and losers. Industries would compete openly for grants and prizes.

Nothing that involves government, even remotely, is without its problems, but this approach provides the needed capital for the research and development required with minimal government involvement.

Those who chant ďdrill baby drill,Ē principally Republicans, can hope that Republicans will win the White House, 60 seats or more in the Senate and regain a strong majority in the House so they can do what Democrats did between 2008 and 2010óanything they want. That isnít likely in 2012 and may never happen.

Those who want to keep gas and energy prices down to support economic recovery and prosperity by opening up untapped resources must put forth a rational and comprehensive U.S. energy strategy the American people, Democrats and Republicans, can buy into.

These arguments arenít likely to persuade environmental and political fanatics, but they donít have to. They are an obstreperous minority; but they canít swim upstream against a strong current either. Provide a balanced strategy the majority of Americans will buy into, and it will sweep them along.

Finally, there are the arguments you hear that it will take years to develop untapped U.S. oil resources, that granting leases and permits today will have little or no impact on the current rise in gas prices, and that the demand for oil and gas in China and around the world will only suck up increased U.S. output. I disagree.

If Congress passed legislation establishing a NPF and the President signed it into law with the announcement that he was opening up new oilfields, approving the Keystone pipeline, and establishing the goal for U.S. energy independence in 12 years (what experts say is doable); gas prices at the pump would drop like a rock.

As the U.S. economy improves and demand for oil and gas increases, the principal beneficiary of increased U.S. output and lower prices will be the American consumer.

  

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Related Links

The Alaska Permanent Fund

The Dilemma of Fossil Fuel Use and Climate Change

Global Warming: The Fossil Fuel Dilemma

Drill Baby Drill

President Obama: No Magic Bullet to Lower Gas Prices

 

 

   

 

Copyright © Edward W. Ross 2006-2012 All Rights Reserved

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