The Costanza Energy Policy: 25 Ways to Drive Oil to $150

On last night's Kudlow & Co., I discussed how absurd US energy policy is.

The United States is heavily dependent on fossil fuels (>80%), most of which come from places we would rather not send our money to. We consume 26% of the world's energy, with only 3% of the world’s known oil reserves.



It turns out that for the past 3 decades, we've had a George Costanza Energy policy -- every decision we have made as a country has worked to drive energy prices higher. Had we made the opposite decisions, Crude Oil prices would be much lower than they are today ($130.17 as I type this).

What follows is a list of energy-related policies of the United States. On many of these, I have no opinion -- but I wanted to list as many as I could to demonstrate why Oil is where it is

US Policies with an impact on Energy:

1. Limited areas available for offshore drilling; 2. Stopped the rise of CAFE standards for automobiles; 3. Restricted nuclear power generation of Electrical; 4. Federal Reserve policies since 2001 led to a very weak US dollar (raising Oil prices);

5. Energy conservation policies? None 6. Iraq and Afghanistan wars contributing to Middle East tensions 7. No major United States funding for R&D on energy; 8. Kept CAFE standards for light trucks/SUVs much lower than autos; 9. Failed to raise efficiency standards for appliances for decades;

10. Provided no tax incentives for consumer purchases of hybrid automobiles for decades (in 2005, provided a modest, now expired tax credit); 11. Suburban Sprawl : Americans, on average, live further from where they work than Europeans do; 12. Mass transit system not a high priority; 13. Allowed tax credits for residential solar power to expire; 14. No special capital gains treatment for VC alt.energy investment 15. Ridiculous corn ethanol policy helped drive food prices higher also; 16. Amongst the lowest gasoline taxes in the developed world; 17. No special capital gains tax treatment for clean energy technology development; 18. Created a tax incentive (ADCS) that encouraged purchases of large inefficient vehicles; 19. Game changing breakthroughs over the past decades in solar, battery, or energy generation technologies? None 20. Exempted light trucks, SUVs, and pickups from gas-guzzler tax; 21. Discouraged clean coal, including gas liquification from coal; 22. Limited (or non-existent) state tax incentives for building energy efficient homes;

23. Failed to aggressively promote compact fluorescent light bulb; 24. Limited hydro-electric power generation; 25. Aggressive tax incentives for battery technology development? None 26. Failed to aggressively promote efficiency improvements for residential energy use, transmission of power, or consumption; 27. No new oil refineries built in the USA over the past 25 years.

And that's just off the top of my head.

Some of the above is being responded to by the private sector. With Oil at $130+, there are significant price incentives for these technologies.

However, markets develop solutions only AFTER the economics of it are feasible. This means we are starting R&D with Oil at previously unthinkable levels. Imagine if we had some form of energy leadership 10 or 20 years ago when Oil was $8.

As I mentioned on the show last night, whoever is elected President in November should put together a blue ribbon panel, and develop a real energy policy. Otherwise, we will revisit this post in a few years with Oil at $200 . . .



~~~

What other policies does the US have that has led to higher Oil prices? Use comments to add to the list . . .

Crude Oil, Cash Contract, 1986-2008 (Log)

click for larger chart





Non-Log Chart

click for larger chart





Thursday, May 29, 2008 | 07:10 AM | Permalink | Comments (101)

add to de.li.cious | digg this! | add to technorati | email this post

Comments

and there is Joe Kiernan this AM on CNBS still selling that oil is in a bubble...that global warming is not real...that any attempt to control global consumption should be left to the "free market"...talk about being in a bubble....CNBS is just a joke....

Posted by: grumpyoldvet | May 29, 2008 7:24:28 AM