On Energy, Obama’s Full of Hot Air

President Obama’s State of the Union address last week left a lot to be desired. Lisa Fritsch summed it up well on this site, writing, “Obama’s speech […] was focused far too much on lofty goals than the nitty-gritty we need to refloat our ailing ship of state.” In fact, in two specific areas his soaring rhetoric belied reality and misrepresented our nation’s future security.


First, in calling for the “reinvention” of our domestic energy policy, the president issued a challenge rooted in ideology rather than grounded in a clear understanding of America’s current and future energy needs. This is especially troubling because his goal flies in the face of science and the free market. He called for voters to “join me in setting a new goal: by 2035, 80 percent of America’s electricity will come from clean energy sources.”

He did hedge in that call by including both nuclear energy and natural gas in his list of “clean energy sources” — good, but not enough to satisfy the all-or-nothing adherents to the remainder of his list: wind, solar, and clean coal. (In fact, even the clean coal entry is dismaying to some.) So until our government officially opines as to what energy sources it deems “clean” and which it doesn’t, we can expect a lot of political wrangling and economic uncertainty when it comes to investing in new energy sources. Those things make it hard to jump aboard when the president requests that we all “get behind this innovation” of “clean” energy.

A quick review of current statistics and future projections, moreover, offers a stark contrast to the president’s wish.

According to the Energy Information Administration (EIA), overall energy demand worldwide will increase by 49 percent by 2035. Given this fact, renewable energies such as solar are far too expensive — and their technological applications still far too cumbersome — for them to even come close to meeting the president’s challenge. The EIA affirms that “most renewable generation technologies are not economically competitive with fossil fuels over the projection period” of 2007-2035.


Plus, one of the only two renewable energy sources deemed viable up until then is hydropower. But the president didn’t even present it as an option, and many environmental hard-liners want us to dismantle hydropower dams, not build more of them. Furthermore, by the time we get to 2035, the world will demand roughly 110.6 million barrels of oil per day — far more than the roughly 88 million barrels we currently consume every day.

The president also seeks to undermine our energy and economic security in the coming years; once again (as in his campaign and his budget last year) he called on Congress “to eliminate the billions in taxpayer dollars we currently give to oil companies […]. So instead of subsidizing yesterday’s energy, let’s invest in tomorrow’s.”

The shortsightedness of his “request” cannot be overstated. Because his tax changes target American companies only, they impede domestic investment and damage American competitiveness. Here’s how.

Specifically, the administration is continuing to push to eliminate “dual capacity” tax treatment for American oil and natural gas multinationals. This wonky term refers to specific tax provisions that allow these firms to deduct from their U.S. income taxes the taxes they have already paid to host-governments on the earnings generated in those countries. We’re the only country in the world that is considering such double-taxation on domestic companies. If these new taxes are enacted, nations such as Britain, France, and the Netherlands — not to mention China, Russia and Venezuela — would not be subject to them; they would receive a big boost at the expense of American businesses and consumers.
With this new tax burden, American energy companies’ ability to compete for energy concessions around the world diminishes substantially. With less money to bid on future projects, and exploration and production budgets slashed to account for this new tax liability, our future access to affordable and reliable energy becomes far less certain.


State-run oil and natural gas companies in the Middle East, Africa, and Asia are 8 or 10 times larger, and have far deeper pockets, than the U.S.-based companies the president is targeting. Removing “dual capacity” treatment makes a mess of this already unlevel playing field. Although President Obama closed his address by saying “We do big things,” the “We” is domestic oil and natural gas companies. And if Congress goes along with his request, the new “We” will be our principal economic competitors abroad.

Sadly, the president’s lofty address to the nation did little to bail any water from the ship of state, especially with his energy policy proposals.

America’s current and future security is based upon a sound economy and energy supply. Thus the president’s unrealistic energy generation goals and detrimental new energy taxes must be rejected. If they are not, the next twenty-plus years will be both expensive and painful.


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