Michael Giberson
From The Hill’s Energy & Environment Blog:
A group of military veterans pressed congressional Republicans on Thursday to renew a tax credit for the wind industry that their party’s standard-bearer, Mitt Romney, has vowed to end.
The veterans, who are all employed by the wind industry, secured meetings with staff for House Majority Leader Eric Cantor (R-Va.), House Ways and Means Committee Chairman…
The two elements of half-hearted policy substance mentioned in the article are both suspect: “jobs for veterans,” and “reduces dependence on foreign energy.”
Over the last decade the domestic oil and gas production industry added twice as many jobs as the 37,000 jobs the wind industry claims expiration of the PTC will threaten. The only “foreign energy” we import in any quantity is petroleum, excepting some power and natural gas from Canada, and the wind power subsidy has approximately nothing to do with how much petroleum we import.
On the other hand, increasing domestic oil and gas production actually is reducing “dependence on foreign energy,” including imports from OPEC members and other sources, and even including power and natural gas from Canada.
Using military vets to lobby for wind power tax breaks? I guess some K Street lobbying genius imagined using vets would help the industry get a bit of face time with Republican lawmakers who would otherwise rather meet with representatives of some other special interest group. Don’t our military veterans deserve better than to be made into poorly-informed lobbyists for wind energy?
What’s next, retired firefighters, grizzled ex-cops, harried emergency room nurses?
Why not just round up some starving orphans and have them come plead Congress, “Please, sirs, may I have some more … subsidies for wind power?”
You said “Over the last decade the domestic oil and gas production industry added twice as many jobs as the 37,000 jobs the wind industry claims expiration of the PTC will threaten.”
If you’re going to make this comparison, shouldn’t you consider the cost in oil and gas subsidies for the added O&G jobs?
In addition, you argument about wind not reducing energy imports also applies to natural gas.
Finally, when looking at fossil fuel imports, domestic production today only reduces imports in the short term. Since reserves are finite, any production today reduces future production, and so increases future imports. And future imports will probably be higher-priced than imports today, so depending on the time value of money and you expectations of oil price inflation, production of oil today may actually lead to a larger net present value of oil imports over time than if we were to delay production.
In short, the Vets are using shoddy economics in their pleas for wind subsidies, but that’s no reason for you to stoop to their level.
Tom that is nonsense. Wind Mills are not a meaningful source of power for anybody other than the rent collectors in Washington. And they never will be.
Your argument about finite reserves is also gibberish. How do you know that the future discoveries will not be in the US. 20 years ago, nobody thought there were meaningful quantities of gas and oil in Pennsylvania or North Dakota.
Tom @ 10/19/2012
“If you’re going to make this comparison, shouldn’t you consider the cost in oil and gas subsidies for the added O&G jobs?”
All “oil and gas subsidies” are reductions to real tax obligations resulting from the profitable operation of a business. Added oil and gas jobs would lead to added profits, which would lead to added taxes, which would be partially reduced by added “subsidies”. However, the net result of added oil and gas jobs is added federal and state tax revenue.
One of the largest components of “oil and gas subsidies” is LIHEAP, which is actually a welfare program. It subsidizes low income citizens’ heating bills. The principal beneficiaries, other than the low income citizens, are gas and electric utilities, which are generally prohibited from discontinuing service to non-paying customers during the heating season.
Tom, the brief response to your first point is that the oil and gas job gains don’t depend on oil and gas industry subsidies, and if all the subsidies were yanked oil and gas employment would be very modestly affected.
Substitutability between natural gas and oil is somewhat more significant than the substitutability between wind power and oil, but in any case I said “increasing domestic oil and gas production” was leading to reduced energy imports. Even if increasing domestic gas production didn’t reduce oil imports (I’d say the effects here are very slight now, and will be larger but still very modest for the next several years), increasing domestic oil production is reducing oil imports.
It is true that producing oil today means the foregone opportunity to produce that oil in the future. Maybe we’d be better off now if producers held off production now in order to produce more later, but the dynamic and interactive effects are so complex I’m not sure we can analyze our way to answer answer.
I’d consider: (1) the dynamics between lower energy prices and economic growth, (2) the ability of economies with “surplus energy production” — i.e. energy resource use beyond needed for subsistance — to turn that extra energy into durable public goods like education and invention, and (3) the environmental interactions in production and consumption of oil now vs. later.
Historically speaking, the English Industrial Revolution burned a lot of coal and sparked a lot of economic activity including a lot of research and writing (and not just in England, but similar developments that occured elsewhere) which played out over the last century or two in great improvements in human health and other quality of life improvements.
Sure, it was hell for the lungs of a London dweller in the early 1800s, but some of the suffering residents discovered things of lasting value before they succumbed to their early coal-choked death. Would the world have been better off today had London regulated down coal use much sooner than it did?
Thanks for the thoughtful response, Mike. I can always count on you to give a reasoned reply when we disagree (unlike some of your readers.)
Replies below:
— ” if all the subsidies were yanked oil and gas employment would be very modestly affected.”
Agreed- let’s yank the oil and gas subsidies (much larger than the RE subsidies, since the industries are much larger), which as you say have little effect on jobs, and use the money to keep the wind subsidies which do. At the same time, we can reduce the deficit, since the O&G subsidies are much larger.
— On the effect of O&G production to reduce imports, I think we agree.
— Regarding O&G production today reducing later production, we agree that the effects are very complex. I won’t say that I know if it is better to produce oil or gas today rather than later, but from your response, you seem to agree with me that the ideal timing of O&G production is an open question. Contrast that with the production of Renewable energy. Since it is renewable, there is no trade-off between present and future production, so the ideal timing of renewable energy production is sooner: the sooner you start producing it, the more you get.
— Regarding your English Industrial revolution example, I agree that at that time, producing energy sooner was better than delaying. However, at the time, we were not in an increasing price environment for coal (and would not be for hundreds of years), and the economic returns to added energy production were much higher than they are today. Then, they were just starting to use fossil energy; today we use much much more and dimishing returns are coming into play.
They were undergoing an technological revolution driven by new uses for energy; thet’s not the case today. Another difference between today and back then is that we do have some alternatives… renewable energy can displace much natural gas and coal, while there were no substitutes for coal power back then.
With no substitutes to coal, the cost to human health and reduced future production of coal was probably worth it… but is it still worth it today?
I don’t think we should stop producing fossil fuels, but I do think that subsidies towards fossil fuels do harm, while subsidies to renewable energy do good. It’s an open question (to me) if the subsidies to renewables do enough good to justify the cost, but in the case of fossil fuels, there is little question: we’re spending money to do harm.
So, if the idea is to attack subsidies, I’m all for it. But you’ll do a lot more good if you start with the most harmful subsidies.
This post is based on Tom’s first post. I will not read Tom’s second post. It is undoubtedly based on the same set of confusions and non facts as the first one was.
“shouldn’t you consider the cost in oil and gas subsidies for the added O&G jobs?”
The existence and importance of subsidies to the fossil fuel business seems to be an article of faith among certain political circles. The facts belie those concerns.
Robert Rapier, an energy industry participant and analyst,
http://www.energystrategist.com/811/robert-rapier-introduction
has written extensively on this subject:
http://www.consumerenergyreport.com/2011/08/01/tis-the-season-for-oil-company-misinformation/
“… the subsidies are tax deductions that in most cases are identical to the tax deductions that other companies — including companies with far higher profit margins — receive.”
also:
http://www.consumerenergyreport.com/2011/05/02/getting-even-with-exxonmobil/
The so-called subsidies are not, they are simply features of the income tax system which must determine net income in order to tax it. If the oil and gas companies are profitable enough to increase their employment, they are huge net taxpayers. They are not being subsidized within any ordinary definition of that word.
“… you(sic) argument about wind not reducing energy imports also applies to natural gas”
That is just wrong. EIA says that US has been a net importer of Natural Gas and it still is with a projection that in about 10 years the US will become a net exporter.
Wind mills on the other hand are a footnote to the big picture. EIA lumps them in with hydropower.
“Since reserves are finite, any production today reduces future production, and so increases future imports.”
All kinds of problems with this idea. First, reserves is a technical accounting concept, that measures the amount of resource an owner has identified that he can produce with today’s technology at today’s prices. Necessarily, reserve numbers will not look out more than a generation. Reserves may be finite, but so what?
Second, resources are not defined by nature. They are defined by economics and technology. Ten years ago the natural gas in the Marcellus shale was not part of anybody’s reserves. The oil sands in Canada required sustained high oil prices to make their development worthwhile. The technology to turn coal into liquid hydrocarbon fuels easily used by exiting vehicles was developed and used by the Germans during WWII, and again by the South Africans during Apartheid. The truth is that there is more than enough fossil fuels in North America to last for generations.
Third, why are we concerned about imports. I assume that everyone here knows and understands the case for free trade, and believes that expanding trade leads to greater prosperity, peace, and freedom. The concern with the importation of fossil fuels is a concern with the nature of many regimes that we have to deal with in that market. Many of them are fascist dictators who foment anti-Americanism and who spread poisonous ideologies.
Nobody (or nobody with an IQ over room temperature) cares if we rely on Canada for imported resources. They are our good friends, allies, and neighbors. If they prosper we will prosper, or at least we will unload all of those empty condos in South Florida. Saudi Arabia, Iran, and Venezuela rightly scare us.
Fourth, numerous gurus have told tales of Malthusian energy shortages over the years. They have been uniformly wrong. We should follow their advice on policy.
“production of oil today may actually lead to a larger net present value of oil imports over time than if we were to delay production.”
Unfortunately, we need to eat between now and the long run. Production of fossil fuels creates enormous economic surplus. That is why fossil fuel producers create lots of highly paid jobs. They also send enormous amounts of money to Federal, state, and local treasuries. A nation that is 16T$ in debt needs to do things like produce fossil fuels so that it will continue to be able to pay its bills. Going further into debt to import things we could profitably make here is a recipe for disaster.
“the Vets are using shoddy economics in their pleas for wind subsidies, but that’s no reason for you to stoop to their level.”
A. That is an insult not an argument. B. You provided us with no reason to believe that you have any understanding of economics or energy.
You did not articulate a single valid argument based on fact. In fact your post was devoid of anything but partisan talking points. Begone with you.
I would add that there is no such thing as “renewable energy.” Neither wind, nor solar, nor hydro, nor geothermal are renewable. Each of the aforementioned require the intense expenditure of scarce resources and the use of ever larger chunks of finite real estate to work at any scale that benefits man. The only energy source that might be considered renewable in any meaningful way might be nuclear when used in tandem with breeder reactors that recycle(renew) spent fuel.