The Eleven "10 percent" Solutions

I was watching the Olympics and was therefore forced to watch an Obama Campaign Ad. It was about energy -- the Obama-nation of our energy supplies.

Our national energy policy is a four legged stool: 1) continued use of the traditional hydrocarbon sources of energy; 2) the expansion of same over the short and medium term; 3) getting more "work" from the traditional sources (conservation/efficiency); 3) Developing Alternative sources to replace traditional sources as that becomes both necessary and economical.

The Obama Campaign energy policy, as put forth in the ad I saw, would cut off two of the legs: Traditional sources of energy and the expansion of same. It would largely make the conservation leg redundant (getting more "work" from mostly traditional sources). His policy is to ruin the tax paying, low cost "legs" while heavily subsidizing the higher cost, budget devouring "alternative leg."

So, after hacking at three of the legs with his rhetorical hatchet, Sen. Obama has left us with the "pogo stick plan." If the nation actually jumps on that pogo stick (as opposed to a politician -- the politician -- hopping on it and hoping to win the race) the nation will surely experience a crash. This should surprise no one: it is, after all, a "crash plan."

Instead of the "pogo stick for America plan," why not return to our traditional approach and simply make it work better? So while I will concentrate on production here, I believe all the legs are important and unlike the Democrats I do not recommend hacking off of any of them.

The eleven "10 percent" Solutions

The energy production leg of the stool has been badly neglected and needs to be addressed. The world has plenty of oil that can be harvested at $60 a barrel. So Republican should announce the goal of bringing the world price of oil down to $60 a barrel by encouraging supply increase and demand restraint. The problem is, how do we get there? The trap is getting caught arguing that any one action will be a solution. That is why I recommend eleven "10 percent" solutions -- the first is remembering there are ten of them and each forms a part of the "100 percent" total solution.

How do we cut the world price of oil in half? I am not a expert in the field so this list is an incomplete "suggested" starting point.

1. Keep the Alaskan oil pipeline full (it does not have to be ANWR oil -- there is other available oil in that part of the arctic). Perhaps the pipeline could also be "doubled up" (as it was originally designed) with a second pipe to bring natural gas to market. It does not make sense to flare gas off above the arctic circle while heating prices go up in the US. Apparently the Russians are building an LNG terminal in Mexico. Perhaps Alaskan LNG could be offloaded there and marketed in California.
   
2. Offshore drilling. Why should Republicans worry about what screen actors in Malibu think? Add California to the list (or at least keep it as a threat).
3. International cooperation to lower the price. It is, after all, a world problem. Perhaps there is room for international guarantees for oil workers and investors whereby the pirates that prey on the oil industry (and cut supply) could be severely "sanctioned" by consuming nations.
4. Additional Nuclear.
5. I like the idea of the jet powered SUV hybrid that goes from 0 to 60 like a muscle car but gets 60 mpg. That's conservation! I ran across it in popular mechanics, so it might not be doable for the average Joe.
   

The following might qualify as "six" and "seven," but are perhaps too complicated for a political campaign.

Shell has an environmentally friendly system to produce oil from shale "in situ" at a cost of $30 a barrel. The technique was developed in the US and they are going to put it to work producing oil -- in the Middle East, of course. This is at the insistence of the Democrat Congress. Way to go, guys (is Mary Landrieu a guy?).

Instead, the Democrats want sales from the Strategic Petroleum Reserve -- this is a one off political stunt whose only effect on the oil price might be to raise it in the future (by reducing easily tapped reserves). But twinned with the development of Oil Shale it could produce both short and long term downward pressure on oil prices.

When oil is above $90 a barrel we will sell a set amount from the reserve. The money will go into a fund. Those who develop oil shale deposits will agree to replace the oil at $60 a barrel -- but at any point over a period of ten years. They can sell the rest of their production at world market prices. In other words, it would be an implicit price guarantee of $60 dollars a barrel for a set amount of oil. This would provide insurance for when the market price of oil falls to say, $35 a barrel -- a price that would make production uneconomic.

If there is a refinery built nearby that relies on shale oil, it can count on a supply of oil at the world market price for at least a set period. The oil that is returned to the Strategic Reserve is bought on the world market at $35. It is twinned with a barrel of shale oil that is sold at the world market price of $35 to the refinery. But the shale oil producer collects $25 from the fund established by the original sales from the strategic reserve. (The refinery might be a captive of shale oil production and not hooked into the world oil market). There might be a world price trigger price of below $40 a barrel, say.

Six and seven are aimed at making shale oil an immense strategic reserve that can be ramped up over several years in a period of shortages. Full commercial development should be based on the economics involved, not subsidies. The infrastructure can be "over built" to help it fill the strategic reserve role, should the market not favor commercial development (in other words, the world price has dived -- a good thing).

And here's a possible "big" Number Eight: There is no Big Oil -- Only Big Government/little oil. The biggest oil companies are mostly government owned and operated. The ones that are not run by governments are bound up in so much red tape they are the abused captives of bureaucrats. We need less government, more oil -- and more freedom.

Number Nine? Convincing the Democrats in Congress to leave OPEC. OPEC raises prices by restricting supply. By that measure the Democrats are the most important member of the group. If they left the group, it would likely fall apart as supplies increased and prices came down.

As I say, a partial list. All are welcomed to make suggestions.

Perhaps House Republicans can come up with an easily understood list of "actions for lower gas prices" and make it an issue.

Update: Jon Utley has a good take that fits with the above. You fact obsessed folks should read: Open ANWR Already!

Also, when the Democrats say opening ANWR would only save "pennies on the gallon" the estimated price when the field came into production was $50 a barrel (2006 dollars). I think they are wrong on the "pennies on the gallon" (it's a dollar or more) and right on the $50 a barrel. Because if we produce, everyone will. See the footnote one at the bottom of this Wilderness Society anti drilling screed (pdf file). The footnote contains a dead link to The Energy Information Agency. Is it policy to toss the embarrassingly off estimates down the memory hole?