PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Energy Reality Hits, But To No Avail?

By at 21 July, 2022, 10:10 am

by Raymond J. Keating-

The economic realities of energy keep smacking politicians in the face. Yet, they still seem unable, or unwilling, to grasp those realities. After all, political pandering and wishful thinking are so much more fun.

Consider what’s happening in Europe. Germany reportedly “has authorized the reactivation of 16 dormant coal- and oil-fired power plants. The Netherlands has amended its laws to allow coal plants to run at full capacity through 2023, and France and Austria are also reopening coal-fired units.”

All of this is in response to disruptions created by Russia’s invasion of Ukraine. But even as green activists oppose all forms of fossil fuels, European leaders are turning more and more to expanding natural-gas-provided energy.

And then there are rumors flying that President Biden, at some point, will declare a climate emergency, and in fact, he pledged executive action after negotiations over a massive package of higher taxes, more subsidies and increased regulation broke down. What would a climate emergency declaration do if it ever came about?

The Associated Press noted: “It would allow Biden to redirect spending to accelerate renewable energy such as wind and solar power and speed the nation’s transition away from fossil fuels such as coal, oil and natural gas. The declaration also could be used as a legal basis to block oil and gas drilling or other projects, although such actions would likely be challenged in court by energy companies or Republican-led states.”

Indeed, such a power grab by the president would be unconstitutional. After all, just because Congress doesn’t do what a president wants, doesn’t mean that the president gets to claim congressional powers and do what he wants anyway. (Some recent predecessors to Biden ignored this as well.)

Meanwhile, all of this continues to feed into a political fantasy with very unfortunate consequences. That is, the president and Congress stand willing to undermine U.S. energy production at nearly every turn.

Keep in mind that in terms of total primary energy consumption, according to 2021 U.S. Energy Information Administration data, the U.S. gets 79 percent of its energy from fossil fuels, and 8 percent from nuclear, but only 3.2 percent from wind and 1.4 percent from solar.

Thankfully, U.S. energy producers continue to work to supply reliable, affordable energy to U.S. small businesses, consumers and our allies. For example, the Oil & Gas Journal just reported:

“US natural gas production is expected to hit a record high of more than 100 bcfd by the end of the year, Rystad Energy analysis shows. Production growth in major US gas-producing basins, in addition to associated gas production in the Permian, will cement the country’s position as the world’s largest gas producer, stretching its lead over Russia.”

Also, the EIA noted: “In 2019, U.S. total annual energy production was greater than total annual consumption for the first time since 1957. Production also exceed consumption in 2020 and in 2021.”

This U.S. production record is impressive and essential to the U.S. economy and to the world. But it has occurred under a cloud of political hostility. That hostility, unfortunately, is being ramped up. And yes, policy matters, and hence, incentives for investing in U.S. fossil fuel production is diminished.

American small businesses, workers and consumers shouldn’t stand idly by and let politics trump sound economics and policy.

As SBE Council has explained through its Small Business Affordable Energy Project, the most beneficial energy policy agenda involves the following simple steps:

● First, the Biden administration should open federal lands and waters to leasing. That includes approving leases in the Gulf of Mexico and the Arctic.

● Second, Congress and the administration need to stop targeting the U.S. energy sector with increased taxes.

● Third, the administration should make clear its support for infrastructure investments, such as pipelines, needed to meet the energy needs of American individuals, families and businesses.  Speeding up the federal review process and cutting red tape would be big positives.

● Fourth, similarly, the president should fast track investments related to America’s vast supplies of natural gas. A streamlined review and permitting process capped at one year would make a real difference in meeting consumer and small business needs.

● Fifth, and perhaps most obvious, the Biden administration should be allying with and encouraging U.S. energy producers as opposed to playing games with unsavory regimes to boost energy production.

The key is to incentivize energy investment and innovation for reliable and affordable energy today and far into the future. Policymaking that deals in the economic realities of energy will make a real difference in the daily lives of American consumers, workers, entrepreneurs and small businesses.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.

 

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