Monday, January 3, 2011

Breaking Our Addiction

The United States could potentially face a major energy crisis this year. Gas prices could hit $5/gallon by 2012, or more conservatively approach the $4/gallon mark. Additionally, the cost of electricity and heating would rise. The price of goods would rise as well, due to a need by suppliers to recoup increased costs of production and transportation or shipping. The economy would be severely hit, as was the case after the energy price spikes caused by the Iranian Revolution and Iraq's invasion of Kuwait.

A situation could arise next winter where millions are unable to afford home heating bills. The colder the winter, the worse this situation will be. People unable to afford heating oil might resort to trying to use other means of heating their home, which can often lead to dangerous or deadly consequences. Families planning to take vacations would have to cancel due to higher costs to drive, higher costs to fly, and less money available due to having to pay more for gas, energy, and other normal day-to-day goods. As a result, industries that rely on tourism would see earnings fall. They might be forced to reduce the size of their workforce, resulting in greater levels of unemployment, and even more American families who can't spend as much. The vicious cycle could truly bring the current recession from bad to worse.

The reason the American people risk facing $5/gallon gas is because of the lack of a sound energy policy. Indeed, as President George W. Bush said, "Keeping America competitive requires affordable energy... We have a serious problem -- America is addicted to oil." Like a junkie addicted to crack cocaine, the United States continues to simply pay the market price for the substance it is addicted to, rather than seeking means of eliminating the addiction. Under the administrations of President Barack H. Obama, President George W. Bush, President William J. Clinton, President George H. W. Bush, President Ronald W. Reagan, President James E. Carter, and even before, no sound energy policy has not been developed. The United States needs an energy policy that is sound and realistic. While any energy policy will have a very limited immediate effect on the economy, the long-run effect of a sound energy policy will be greater prosperity for the country.

A major effort of an energy policy must be for the United States to reduce its dependency on foreign oil and energy. The United States should not be subject to the OPEC cartel's manipulation of the market, because the country should be engaging in more drilling, both on land and off-shore. A large resource of oil exists in the Gulf of Mexico. If the United States declines to tap into that resource, then it will miss out while Cuba and Russia tap it. Additionally, the use of ethanol and development of bio-fuels can take place in order to produce more fuel domestically.

Coal, while still a "dirty" way to produce energy, has become much cleaner with modern technology than past coal use. For energy production today, coal remains a good option. Additionally, nuclear power is a great option for energy production. It is extremely clean compared to oil, gas, or coal. The United States hasn't built a new nuclear power plant since 1996. More nuclear plants should be built. Realistically, however, the supply of coal will eventually run out, as will the supply of oil, gas, and possibly uranium. More nuclear plants only provides a short-term solution. Thus, for long-term energy production, the United States must focus on sources of energy that are renewable, such as solar, wind, geothermal, and hydrogen. Before these sources of energy run out, the Earth as a planet that can sustain life will no longer exist.

To move the country forward towards eliminating its reliance on foreign oil and eventually eliminating reliance on sources of energy that will run out, the government's energy policy must incentivize advancement and research. The message must be sent to oil companies that oil is on the way out, and that in order to remain competitive in the long-run, they must diversify their business into other areas. Companies like Exxon Mobil would be wise to continue producing oil, while also investing heavily into renewable sources of energy. In the long-run, their businesses remain profitable by transforming from primarily selling oil to primarily selling energy from renewable sources. The way to send this message is not to hike taxes on oil producers, but to provide tax credits for investing in renewable energy, and allowing tax deductions for profits from renewable energy production.  Further, individuals and businesses large and small investing in renewable energy should be provided with incentives. Whether it is as small as a homeowner adding solar panels to their roof, or a company investing in a major research effort to developing a car that can be fueled up with water, there should be a tax credit for the money spent on it. Additionally, the government should have a policy that landowners may use the land they have purchased for any production of renewable energy without having to go through long approval processes. Often, people fight against the production of windmills in their areas. If someone owns a plot of land and wants to fill it with windmills, there should be no restriction on allowing them to do this. Likewise, if an existing business wants to place windmills or solar panels on its roof, there should not be a barrier of a long, costly process of approvals.

The United States' transformation away from it's addiction to oil and use of non-renewable sources of energy will not happen overnight, nor will it happen in a year or even in one President's administration. However, for long-run success and prosperity, the country needs sound, realistic energy policy that is adhered to.

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