Tuesday, March 15, 2011

America's Energy Policy

If it weren't such a serious subject, America's energy policy would be a lot like that old skit "Who's on First"?


The problem is that our situation is serious and it impacts every single American and beyond that, the vast majority of the world.  I'll explain.  IT's pretty obvious that our own energy policy affects all of us:

An increase in energy costs drives up the price of all of our goods and services as well.  It costs more to make the goods because energy prices for corporations are higher, it costs more to ship those goods because transportation requires fuel.  It costs more to keep the products on the shelf because the retailer is paying more for their energy usage. Therefore, when we get to the product, the price is increased.  Sound crazy?  Check the price of corn.  Since last year, the wholesale May delivery of corn has more than doubled from $3.67 to $7.23 per bushel and the crisis in Japan will push those numbers higher.  If the Middle East continues to rage and as Japan turns to rebuilding, we could see the price of a bushel at $10.  By the time we see that cost it's going to be up around $2 per lb (I saw them this weekend at Shoprite in Newport for $1 per lb). 

While the government doesn't include food and energy in their analysis of inflation, both of those commodities have been rising.  We've all seen a difference in our electric bills but we pay it withoutreally understanding why there is such a change.  There are many factors that go into it but I will try to make it simple.
  1. The electric company must make a profit to stay in business.  This means it must pay employees, pay loans for the upkeep of their offices, buildings, vehicles, transmission lines, pay for land it owns and cover all of its expenses with a little extra left over.  This also includes paying the salaries of many workers who are unionized.
  2. The state government puts regulations on energy companies and sometimes more than one state regulates an energy company.  For instance, a coal fired plant in Delaware is regulated by Delaware to comply with air quality standards, that same company (or another related company who passes the cost on to it) is regulated in West Virginia where the coal mines are located.  These regulations encompass anything from air quality to worker safety.  These regulations are not free and their cost is passed through the company.
  3. The federal government puts regulations on energy companies for various reasons as well.  Again, these regulations encompass everything from bookeeping to air quality and worker safety.  Likewise, these regulations are passed through the company as well.
  4. Electric companies are regulated by federal/state governments in terms of what KIND of power they are allowed to use as well.  That means they may be mandated (as we are in Delaware) to use wind/solar/nuclear/geothermal power in certain levels.  This can drive the cost of energy up depending on the unit cost of the energy. 
  5. Delaware has joined the Regional Greenhouse Gas Initiative which is nothing more than regional Cap and Trade.  It mandates certain energy usage levels and other price controls that drive up the cost to power companies.
 From all of those calculations (and more) we come up with a final number.  That's why President Obama said that energy rates would necessarily skyrocket under his Cap and Trade plan.  Because he understood that all of the costs would increase once they created a new trading market for carbon credits (which are an abstract concept).  So, after all of this, what is our energy policy?
We can't drill off of the coasts because we might spill oil like we did in that MASSIVE BP oil spill off the coast of Louisiana (the cleanup they thought would take maybe 100 years) took less than 90 days before they couldn't even FIND any oil to clean and that was after it took WEEKS to get the cleanup started. 
  • We can't use oil, coal or natural gas because they are fossil fuels that the government believes causes climate change (a natural cyclical event that has occured many times throughout the planets history).  But we can send hundreds of billions of dollars to the Middle East, Brazil and other countries who don't like us very much for THEIR fossil fuels. 
  • Ethanol usage drives up the price of corn and diminishes our supply of food.
  • We can't build more wind farms because bird migrations and bat movements are affected.
  • Nuclear technology is clearly too dangerous (despite the fact that in 50+ years there have been (now) 3 major accidents.  3-Mile Island (where 0 people were killed)....Chernobyl, Russia (4,000 died in a plant where safety precautions were not taken and in fact a plant that was not built properly)...Japan (the plant withstood an earthquake more than 10 times as powerful as it was built for and the current reactor leak has yet to kill anyone and radiation levels, while higher than normal, are still WELL below (about 4,000 times lower) the "safe" limit.
  • Solar is ok, as is geothermal but both combined provide about 6% of our needed power WITHOUT any growth.
Folks, something has got to give.  Our current "energy policy" is a recipe for disaster and if we don't change it, we face a huge energy crisis on top of everything else that is going on.  We need to have a common sense energy policy that responsibly turns over energy creation to the private sector while ensuring basic saftey and clean air/water safety.  With our safety standards, even a massive Gulf spill created a MINIMAL problem for fishing, coastlines and animal life.  We can also safely build nuclear plants, mine for coal and utilize alternative sources of energy to conserve and supplement our energy needs.  The only way that's going to happen is if we stop letting special interest groups and faulty science scare us into dismantling all of our sources of energy.

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