Obama Signals He Is No Friend Of Conventional Energy

Late last week the Treasury Department's chief economist, Alan Krueger testified that government incentives for oil and gas have led to overinvestment in these fossil fuels.  He said, "To the extent that current subsidies for the oil and gas industry encourage the overproduction of oil and natural gas, they divert resources from other, potentially more efficient investments, and they are inconsistent with the Obama administration's goals to reduce greenhouse-gas emissions and build a new, clean energy economy." This is not good news for industry executives pushing for an expanded role for natural gas as the bridge fuel from dirtier fossil fuels - coal and crude oil - to greener fuels such as wind and solar.

The big push by these natural gas executives to boost the use of gas as a transportation fuel has been dealt a cruel blow.  CNG vehicles will not be sponsored by the Obama administration while hybrid and electric cars will.  The unwillingness of the Obama administration to support increased use of natural gas even at the expense of oil and coal, has been a signal it is blindly committed to green energy sources despite overwhelming evidence they are largely uncompetitive without government subsidies and even then cannot expand fast enough to assume a meaningful role in the nation's energy supply.  Despite the fact that President Obama comes from Illinois, a large energy producing state, he views himself as the anti-Texan president.  Therefore, oil and gas is bad and green energy is good.

This testimony clearly signals the energy industry will remain a target of the current government.  That means higher taxes, reduced incentives and tighter regulation.  All will lead to reduced profitability regardless of how high oil, gas and coal prices rise in the  future.  The Obama administration is telling the industry that eventually virtually all economic rents will be taxed, mandated or regulated away.  

Political populism is behind President Obama.  This is what won him the presidency and has dominated his term in office so far.  He loves the campaign trail - witness his health care rallies - but has demonstrated few clues about how to govern.  Government policies and actions based on the philosophy enunciated by Mr. Krueger's testimony will not decimate the energy industry immediately, but watch out for events several years down the road when domestic energy supplies shrink and we become more dependent on foreign energy sources.  The horror scenario will be our inability to adequately warm the population in the midst of an abnormally cold winter, as global cooling is not becoming more likely.  Dead Americans will become the issue and energy executives, rather than government bureaucrats or politicians, will face the public's wrath.

If you think this is scenario is unreal, I suggest you review the winters of the late 1970s when fiscal shortages came close to cutting off all natural gas supplies to the Carolinas and Mid-Atlantic regions of the country.  The shortage was the direct result of over-regulation of the energy industry beginning in the late 1960s and early 1970s. 

I fear we are on the road to a repeat of that 1970s scenario if we allow Congress to embrace the Obama energy policy as reflected by Mr. Kruedger's statements.  Maybe our government energy policy should be to embrace global warming rather than trying to avert it as cold is a bigger killer of people than heat.