Drilling or Taxes: Energy Decisions Have Never Been More Important
As the shape of the November elections become clearer, it is becoming more and more apparent that any semblance of a pro-oil administration that we may have had in the past will become a distant memory in January. That’s not to say that the most supportive energy executive branch in history got anything worth mentioning done. Squandered earlier in the decade, the best opportunity for opening up any number of energy-rich areas within the U.S. sphere of influence has long since evaporated. The fruits of that failure are now coming home to roost. In a word -- and within a decade at the most -- we will be bankrupt.
With the executive branch set to embark on another four years of inaction, and a Democratic majority in place, the prospects for continued pain in the domestic energy markets are transparent enough. Declining domestic production is meeting the rising cost of energy in a perfect storm that will send more and more weakened U.S. dollars offshore, increase an already spiraling trade deficit and inflict serious damage to the ability of the American consumer to make ends meet. With more and more of the take-home dollar being spent on foreign energy, there is, of course, less to be spent on anything else. I truly fear that the beginnings of today’s financial woes will seem like a walk in the park in the not-too-distant future.
What can we do? Speaking for myself, I would like to drill for the billions and billions of barrels of oil and similar volumes cubic feet of natural gas that we already know exist within our territorial borders. I’m sure that I am preaching to the choir here, but what I’m about to say next won’t necessarily make the congregation happy. Absent the will to go and get what we could easily have in the most environmentally sound manner ever imagined, we are simply going to have to curb our voracious appetite for energy. There’s just no easy way to go about that task.
My next door neighbor stuck his head over the fence this weekend and remarked to me, “How expensive is gasoline going to have to get before people stop buying it?” I really didn’t have an answer for him, but apparently, $3.50 per gallon is just fine and dandy with the driving public. Lost on him, perhaps, was the reality that we pay maybe half of what most industrialized countries pay for their petrol. A big chunk of that difference is represented by taxes, of course. But, along the way, some of these countries have come to realize that there are other ways to get the job done without oil. As we abandoned nuclear energy as too dangerous, in places like France, they ramped up this component of their national energy mix to reflect the reality that eventually, oil would become too expensive, or worse, too scarce.
It is a fact that the only thing that is going to bring us back to some sort of sane energy policy in this country is significant pain at the pump. And, I’m not talking about $3.50 per gallon; more like $5.00 per gallon, or more. One way to get there is to levy an additional national tax on energy consumption, on top of what is already there. The proceeds of this tax could fund the elusive national healthcare initiative. Along the way, the reduction in fossil fuel emissions (through conservation and reduced demand) would increase the quality of the air we breathe, foster a healthier America -- and yes, cheaper healthcare through less health problems. A markedly lower trade deficit would certainly be a welcome byproduct. The domino effect in any number of areas would simply be staggering.
Having uttered out loud what I know to be a tremendously unpopular idea -- a third rail of politics, if you will, that could rival the idea of repealing the mortgage interest tax deduction -- I want to finish up my train of thought before I get unceremoniously drummed out as Managing Editor of MarEx. No, I don’t really want to increase taxes, but the reality of today (and every tomorrow for the foreseeable future) is filled with the prospects for even more expensive energy that comes from somewhere else. We can’t afford it anymore; not in terms of price, trade deficit, an anemic dollar and any other yardstick you can think of.
In the short time that I do have left as Managing Editor, I can do a few things that might improve the situation. As a starting point, we can continue to be strong advocates for our brown water, offshore exploration and the other maritime components of our domestic energy markets. We can ask people like Ted Kennedy let us proceed with alternative, renewable energy solutions -- like wind farms off the coast of Massachusetts, for example -- especially if he is going to continuously vote against any sort of energy development in the United States. His view from Hyannis port will change a little (for the worse), but we might get a little closer to the goal by using a “maritime solution.”
It’s unfair to pick on folks like Mr. Kennedy alone, however. A majority of today’s Congress, helped along by the dysfunctional states themselves, stand in the way of environmentally sound exploration in a dozen places. I admit that I don’t yet know who I’m going to vote for in November, but you can be assured that it will be the individual(s) who come the closest to fostering a cogent domestic drilling agenda, and a supportive maritime policy to go along with it.
Finding anyone in Washington who remotely understands the importance of all of this is difficult right now. In reality, it may too late. We’re probably ten years from bringing new streams of domestic energy -- of any kind, renewable or not -- in any significant volume to market. By then, we’ll be bankrupt. So, choose your weapon: Drill or Taxes. I know which way I’d like to go. What about you? -- MarEx
(*)Note: as luck would have it, and after I wrote this editorial, the price of crude oil began to drop significantly “in the face of waning demand.”
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Joseph Keefe is still the Managing Editor of The Maritime Executive. He can be reached with comments on this or any other aspect of this e-newsletter at [email protected].