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What to do about lack of investment in exploration? refining?

June 9, 2008

The Democrats are frustrated the oil companies are generating ‘too much’ profit.  Obama says that ‘once’ he is elected he would impose a windfall profits tax on US oil companies.  I don’t think taxes are the answer, but I am willing to support a ‘windfall’ profits tax on one condition: oil companies should be able to avoid this ‘windfall’ tax by reinvesting the profits that are considered ‘too much’ in one of the following areas:

  • Oil or natural gas exploration within the United States.
  • Refining capacity within the United States.

Whatever amount Obama feels is too much, simply give the oil companies the ability to reinvest it to avoid the tax.  BP CEO, Tony Hayward, is suggesting that the industry as a whole hasn’t invested enough in production capacity.  The past 25 years of LOW prices have caused producers to pull back investment.  Don’t worry, though, $150 oil will get a lot of people back in the game.  I don’t mind a little incentive.  So go for it Obama, stick it to them, but give them a way to make it right - a way to generate more profits in the years to come.

Energy Policy in General

Brad and I have been talking about our energy policy and looking at the energy policies of both McCain and Obama.  McCain’s policy is irrelevant because he doesn’t have a chance in hell of getting elected so I will focus on Obama.  So how does Obama seek to resolve our energy crisis?  His answer is ‘clean coal’.  I think the marketing guy that invented the term ‘death tax’ came up with the phrase ‘clean coal’.  What is clean about coal?  NOTHING!  Dirty or clean, generating electricity for our cities with coal generates 40% of the U.S.’ CO2 emissions and if we are to believe Gore, we need to reduce CO2 soon or we are done for.  Clean coal is 35% more expensive than standard coal and won’t be ready for broad adoption for ten years (after his term in office is complete).  Obama needs to drop the whole ‘clean coal’ thing because:

  1. We currently burn 20 pounds of coal per person in the US and 24,000 people die each year from coal-fired plants in the US.
  2. Burning coal emits mercury and is causing learning disabilities, attention deficit disorder, problems with coordination, lowered IQ and even mental retardation.
  3. Burning coal contributes 40% of all US CO2 emissions.  Coal emits 1.7 times as much carbon per unit of energy than natural gas or oil.
  4. Buring coal requires up-to 260 million gallons of water each day.
  5. The DoE has spent millions on ‘clean coal’ research and is asking for $648MM for ‘clean coal’ for 2009.

The Merritt Muse Energy Proposal

I have a long history of putting my plans in writing.  The energy debate seems like a perfect place to spend a little time.  Brad and I have a proposal that I believe has some merit and makes some sense.  It took us about 10 minutes to draft it, but I think it resolves a number of our problems including:

  • Reliance on foreign oil.
  • Excessively high energy prices.
  • Unnecessary pollution and CO2 emissions.

Here is our first draft:

  • Promote the development of a nationwide nuclear energy program on the scale of France and China.  Pass legislation that will make it difficult or impossible for lawyers to delay efforts to build safe and effective nuclear energy facility throughout the country.  Nationalize program if necessary, but do what it takes to replace 25%+ of coal fired plants with clean energy by 2020.
  • Promote low impact exploration of wilderness areas and near-shore oil and natural gas reserves.
  • Promote the development of oil refining capacity.  Pass legislation that will make it difficult for lawyers to delay the construction of refineries.  Use tax breaks or other incentives to promote this development.  Increase our current refining capacity 25% by 2020.
  • Eliminate all ethanol subsidies and abandon ethanol as an alternative to oil.  Pound for pound ethanol produces more CO2 and its use has the negative downside of increasing food prices and availability. Ethanol sucks.
  • Get the EPA out of the car business.  Let auto makers decide what cars should be built, let the government focus promoting the creation of clean and inexpensive energy such as nuclear production.
  • Stop federal funding clean coal as it is only delaying adoption of clean energy options like nuclear energy, wind energy, hydro-energy and so on.  Clean coal is better than dirty coal, but we ALREADY have a cleaner alternative that is less expensive and produces almost no CO2 emissions.

Look for our formal proposal in the next few days as we talk to our advisors and hear from the various lobbyist that should be posting comments (i.e. ADM).

Written by Alexander Muse · Filed Under Blog, Politics 

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