The Fault of the Government

I have long maintained that the root of our energy problems in the U.S. stems from our failure to enact a consistent, long-term energy policy. Big energy projects generally take years to complete, and when there is an extra risk that the government will change the rules halfway through the project, companies are going to take a very cautious approach. So, we end up with less energy than we might have if there was more consistency.

For the first time, it seems that the public overwhelmingly thinks so as well:

Drivers blame D.C. for high gas prices

According to a Consumer Reports Auto Pulse Survey released Thursday, 77% of consumers said the root of high gas prices lies with the government’s failure to implement an effective energy policy. That compares with 75% of drivers who blamed oil companies, 70% who said foreign oil producers were at fault and 68% who thought the Middle East conflict was a leading cause for record fuel costs.

So, 152% of those polled thought it was either the government or Big Oil behind the problem. (Must have been a case of “Vote early and often.”)

One thing that was surprising to me was the number of people who favored off-shore drilling:

As a result, 90% of those surveyed support an increase in alternative energy development, and 81% want the U.S. government to allow more drilling on and off our nation’s shores. Americans also favored conservation measures, with 83% saying they supported tax incentives for alternate transportation.

Of course I know one person who voted for Big Oil as the culprit behind oil prices. He works for the government. Chuck Schumer, notorious demagogue when the topic is oil, had this to say following the recent congressional hearings into the impact of speculation on oil prices:

Schumer downplayed the role of speculators in driving up oil prices, and he placed blame on the oil industry and the Organization of Petroleum Exporting Countries.

“I think it is interesting that the big oil companies and OPEC are blaming speculators for out-of-control prices, when they may be much more of the cause,” said Schumer.

Attaboy, Chuck. Keep looking for that boogie man. But don’t be surprised if you spot him during your morning shave.

26 thoughts on “The Fault of the Government”

  1. This probably is more on-topic in the “Oil cracks $140” post comments, but “consistency is the hobgoblin of the simple mind”.

    The important point about oil breaking $140 on Libya’s threats isn’t the $140/bbl:

    This is a defining moment in history where any exporting oil nation can manipulate the US government with an unsupported comment in the media.

    At this point, if the USA pulled “bullying” trade tactics with Canada (like the softwood lumber or BSE crap), just about any obscure Canadian politician could cause oil to jump $10/bbl in an afternoon with threats to cut oil exports to the USA. Hopefully US politicians clue into this and start thinking before they act on the world stage.

  2. The new study put out by the US Energy Information Administration, finds that OffShore drilling would have no significant long term impact. Quote: “Any impact on average wellhead prices (of oil, now through 2030,) is expected to be insignificant.”

    A separate EIA study finds that Alaska National Wildlife Reserve drilling would reduce the price of oil by only 2 to 4 cents per gallon by 2024.

    Considering these minor price reductions could be wiped out by global oil markets next week, much less decades from now;
    Why aren’t these studies being covered in this political discussion about oil drilling?

  3. I am not so much for Big Government deciding what the policy should be.

    Instead, I’d rather that the Big Government reduce regulatory involvment in the energy process, and the transportation process, and allow the market to shape the response to energy prices.

    What has come of America when we can no longer see the light at the end of a tunnel, unless the government points it out to us? That’s not the way We Are. Or at least not How We Are Suppose To Be.

  4. What has come of America when we can no longer see the light at the end of a tunnel, unless the government points it out to us?

    That’s not the issue. We don’t need them to point out the direction. We need them to stop changing the rules every couple of years.

    Let me give you an analogy. Say you are thinking of buying a new house. You want to lock in your mortgage at 6 percent. What if your bank had the option of changing the interest rates any time they felt like it? You would be much more cautious about spending your money in that case. (Of course this is similar to what has happened with the sub-prime crisis, in which people got cheap introductory interest rates, only to see them escalate after a few years).

    Cheers, RR

  5. Try checking out the Drive $marter Challenge ( You can enter your specific vehicle data and figure out how much money you can save my taking six fuel-efficiency steps. They also provide other fuel-efficiency tips to help you save on gas costs.

  6. US energy policy? We don’t have one.
    As much as i dislike simple pandering, Shumer has a point: OPEC. The world’s oil is controlled by thug states.
    The answer is a lot more domestic energy. But we have to use the private sector and market mechanisms — not government programs — to get there.
    Tax imported oil, and keep gasoline above $5 a agllon is one big step forward. Open up shale lands. A huge X-prize for the first commercially produced EV. Tax rebates for eevry EV sold.
    We can do it.

  7. I agree gas needs to be taxed more heavily, but there has to be a mechanism to rebate those taxes to people who have to drive. Truck drivers, famers, construction trades, all are essential to the economy but will get disproportionately screwed by a gas tax.

    I live in a major city with an excellent mass-transit system, yet have many colleagues who choose to drive every day. They should be paying a lot more for gas than those who have no other option than to drive.

  8. Benny said: ~“But we have to use the private sector and market mechanisms — not government programs — to get there.”

    I don’t concur — at least with respect to nuclear energy.

    We need the AEC to step up with a massive nuclear reactor building program. There should be one standard reactor design and the AEC should have the authority to step past all of the local zoning issues and required permits. A nuclear expansion in the hands of private industry would be too fragmented and too burdened by regulations — both of which unnecessarily drive up costs and needlessly consume time.

    The US Navy has been in the nuclear reactor business the last 55 years and it has worked well. A government-led and operated nuclear program could do the same.

  9. Hawkshaw:

    I disagree.

    Get rid of the loopholes for bypassing safety requirements, and increase the strength of fines for safety violations such that a automatic bankrupting of the corporate controller is a given on large items (security & radiation and radioactive material releases).

    Mandate standardized reactor designs as well (not specific designs, but that a specific design can be easily mass produced and “safed”). Then let the market do its work.

    Navy reactors work safely because they are simpler, run on high grade fuel, and are very compact in design.

    Powerplant reactors have to run on low enrichment fuel (typically 5%), and are dubbed by Navy folks to be “dirt burners”. Also since a Navy reactor will at worse sink a vessel, and kill a few thousand soldiers (I don’t take this lightly, but killing soldiers is a lot less frowned upon than families in suburbia by the NIMBY public), the same strict level of controls and accountability are not in place.

    You do NOT want the government running power plant programs set in the middle of your town. You don’t want the cops and the robbers on the same team.

  10. The French developed a standard plan for nuke plants, then built many. Makes sense to me. Some nukesters say there are better and cheaper plants that can be built. One way or another, we should should nuke up bigtime. For once, we can’t let lawyers stop progress.

  11. Except of course that Nuclear power isn’t competitive in an open market.

    It does best with a Federal monopoly.

    Which is pretty much what the first generation of Nuclear power plants got.

    And of course France, Britain, Russia, China, South Korea, Sweden, and Japan. All of them operate as Federal Monopolies.

    US was merely one step away from being a defacto monopoly.

  12. You mention that you are surprised by the number of Americans that favor off-shore drilling. I would like to see a post outlining your thoughts on off-shore drilling in American waters….specifically the environmental cons vs. the energy pros.

  13. The “fault of the government”? People! You are the fracking government! The power lies in your choice of elected official.

    Stop blaming the oil companies, speculators and OPEC. If I had something everyone wanted and demanded then I would charge whatever my customer was willing to pay.

    Offshore drilling? No impact. The oil market is global. Not regional or national. Oil companies drilling in the Arctic or wherever will sell their product on the same market at the same market prices as every other oil company. And it would be at least a decade before any of that oil shows up as gasoline at the pump.

  14. “And it would be at least a decade before any of that oil shows up as gasoline at the pump.”

    I hear that over and over but I read the other day Thunderhorse in the Gulf of Mexico was discovered in 1999. It was supposed to go online in 2005, but was delayed due to a hurricane that caused some damage. So that’s a possible 6 year timeframe from discovery to production.

  15. I agree with Benny, we should be nuking up big time, not only to produce electricity, but to also make liquid fuel for transportation. Nuclear should be the biggest part of America’s quest for energy independence.

    The problem is, we should have started a long time ago. I thought for sure we would start on Sept 12, 2001. We are wasting time.

  16. ~ “You do NOT want the government running power plant programs set in the middle of your town.”


    Why not? I actually trust a responsible government agency more than I do a for-profit utility company that is tempted to take shortcuts and slack on training to increase profit margins and satisfy stockholders.

    A Federal agency to build and run a network of nationwide reactors wouldn’t be much different than when we let the Tennessee Valley Authority build dams and powerplants on the Tennnessee River and electrify the Mid-South. (A Federal Nuclear Power Agency could also feed the profit from selling the electricity back into the U.S. Treasury.)

    I don’t want or advocate an end-run around safety requirements (nuclear power is serious business). I just want a Federal Act that circumvents all the local permitting and zoning issues that make building a reactor a time-consuming and expensive process. The many-layered bureaucracies that imposes an unnecessary drag on siting and building new nuclear reactors is a serious obstacle to ever seeing nuclear power as a fast solution to our energy probles.

    As a side benefit, just think of the stimulus to the economy building +/- 100 new nuclear reactors across the U.S. would provide.

  17. ~ “Some nukesters say there are better and cheaper plants that can be built.”

    Pebble bed reactors that are physically impossible from melting down and that can be refueled while operating. China is now building several.

    Whay aren’t we? The politics of fear that still carries over from Three Mile Island and Chernoble.

    We need true leadership to over come that fear.

  18. Hawkshaw–
    Excellent point about pebble-bed nuke plants.
    As an aside, for decades people who worried about our industrial base were pooh-poohed. I think it was a Bushie or Reaganite who said, ‘We don’t care if we sell potato chips or silicon chips.”
    We are paying the piper now. I understand there is a plant in Japan that makes a key component for conventional nuke plants. and it can only make a couple of these a year. We have lost the ability to make nuke plants.
    Now, we need to build millions of EVs every year, nuke plants by the dozen, mass transit. Tons of housing near city cores. We don’t have the factories, the engineers, the know-how. I am not even sure we can atract talent anymore — life is better in Europe and more promising in China.
    We are building huge mansions in West Los Angeles.
    No one wanted to balance the budget, no one wanted to offend anybody on trade issues. Sheesh, we are conducting a $100 billion a year war on borrowed money and no draft, because no one wanted to make the slightest sacrifice. The upper class endured not one, but two tax cuts to help win this war.
    The only upside I see is that the “weak” dollar is causing a surge in exports, and at some point foreign money will come here to buy cheap assets.
    I sure hope someon has Obama’s ear on energy issues. So far he is not impressive on this score.

  19. Robert:

    Here is an interesting link, while I think demand for oil is driving the price up, speculators do have an impact, and so does the Federal Reserve. I’ve been watching the futures markets closely, and the mere rumor of a stronger doller (hah) sends everyone rushing for the door out of oil, it’s going to happen eventually, and at some point shorting the price of oil seems like a good idea.

    Here is some key quotes from Masters testimony:

    In the popular press the explanation given most often for rising oil prices is the increased demand for oil from China. According to the DOE, annual Chinese demand for petroleum has increased over the last five years from 1.88 billion barrels to 2.8 billion barrels, an increase of 920 million barrels. Over the same five-year period, Index Speculatorsʼ demand for petroleum futures has increased by 848 million barrels. The increase in demand from Index Speculators is almost equal to the increase in demand from China!

    In fact, Index Speculators have now stockpiled, via the futures market, the equivalent of 1.1 billion barrels of petroleum, effectively adding eight times as much oil to their own stockpile as the United States has added to the Strategic Petroleum Reserve over the last five years.

    And further to this, if you look at the price of oil over the past 6 months, it’s parabolic rise began with the Federal Reserves decision to cut interest rates, and flood the world with cheap money.

  20. ~ “In the popular press the explanation given most often for rising oil prices is the increased demand for oil from China.”

    So it appears we would be better off if China were still an isolated, repressive, Communist society as it was under Mao Tse Tung.

  21. Island – there probably would have been no damage at all. All oil platforms were shut down and staff evacuated before the hurricane hit, and completed platforms are designed to take a pounding. Unfinished platforms are far more vulnerable.

    We do need to nuke up. The point that nuclear isn’t economically viable may be true, but is to some degree besides the point because:

    (A) part of the reason is the insane cost of jumping through all the regulatory hurdles, which a national program would presumably reduce, and

    (B) if we want to do something for reasons beyond pure present day economics, which is the case here, we need to make some sacrifice. Abyone want to take the ethanol subsidies and make them nuclear subsidies?

    Leadership would be nice. Pity is, we as voters want our politicians to pander to us with “blame anyone but us” statements. We hate anyone who calls on us to sacrifice for the greater good.

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