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Romney’s Energy Plan Isn’t an Energy Plan

• September 11, 2012 • 3:00 AM

It’s a veiled stimulus plan to bring back fossil-fuel jobs.

Mitt Romney’s energy plan is a curious document. It is not actually an energy plan, but rather, a bet on a high-carbon job boom. If President Obama promised a boom in clean “green jobs” from solar energy, energy efficiency, and high-tech alternatives to fossil fuels, Romney’s answer is the opposite: You might call them “black jobs”—a return to fossil fuel-intensive industries like petrochemicals and steel manufacturing, which contribute both pollution and carbon to the air.

Romney’s “white paper” is a haphazard 21-page collage consisting of 75 percent clippings from newspapers, analyst reports, and think tank papers and 25 percent policy explanation. It was released several weeks ago and has been popularly described as pro-drilling, anti-regulation, against continuing to fund most of the “green” energy alternatives the taxpayers have already invested in, and devoid of a mention of climate change or carbon issues. Here are two good takes on it in the Washington Post’s Wonk Blog and the Christian Science Monitor.


First, why this document is not a plan: an energy plan has to solve some of our energy related problems, of which supply is only one—the others are climate security, international relations, creating a fair regulatory environment, and importantly, price—in particularly the cost of fossil fuels for workers and industry, and the cost to our economy.

If you want to see a Republican energy plan that tries to tackle some of these problems, with a carbon tax to cut emissions and oil consumption, see George Shultz talking about his work and his life at the Hoover Institution. For that matter, check out Romney’s 2004 plan for “Action Now” on the climate when he was governor of Massachusetts.

The new Romney-Ryan white paper focuses on encouraging oil and gas drilling, promising that the U.S. can be “energy independent” by 2020, meaning that we will not need to import oil from countries other than Mexico and Canada. Given the amount of oil available in new, higher-cost oil fields such as tar sands and oil shale, and declining U.S. oil consumption, this is not ridiculous. (Especially if you cheat by adding Mexico and Canada.) The problem is that being “energy independent” really isn’t all that great anymore.

“Energy independence” is an amnesiac vision, dating back to 1973, when the Arab oil embargo cut off oil shipments of crude from the Middle East to the U.S., precipitating price increases and national alarm about our dependence on imported oil. We haven’t had an embargo since then, in part because some of Reagan’s policies led to the world’s oil being traded in markets, while Carter and Ford’s energy efficiency policies reduced U.S. demand. Now no player can stop oil from going to one place or another because it’s all traded in international markets, for sale to the highest bidder.

“Energy independence” is a relic of a former time. It has a nice emotional ring, particularly for voters over 45, but practically it will do us no good. First, no one will cut us off—that’s simply not a risk. More importantly, even if we produce all of our oil in the U.S., we will still be paying world oil and gasoline prices. In other words: If China’s booming economy is willing to pay, say, $5 for gas, we will too, simply because they’re willing to pay. Leaving aside the carbon emissions, it’s oil’s price, not the fact that we import it, that drags our economy down, slows hiring, and makes struggling workers pay more and more of their salaries just to get to work. (Here’s a project I did on that last fall.)

Energy independence solves yesterday’s problem, not today’s. The Romney plan explicitly denies two possibilities that could reduce the amount consumers pay for energy. The first would be to ban oil exports from the U.S. (Even though it has been done before with oil from the Alaskan pipeline from 1973 to 1995, I happen to think is a tremendously stupid idea because in the past it distorted the market and lead to wasted fuel.) Romney’s proposal explicitly encourages exports.

Another option would be to increase fuel efficiency of vehicles. Romney the candidate has perversely stated that he would roll back Obama’s auto fuel economy standards, which are projected to reduce U.S. oil use by 2.5 million gallons a day by 2025—reducing the cost of worker’s commutes while reducing the amount of oil we use overall. Of all of the problems a true energy plan needs to solve, the only one Romney-Ryan solves (possibly) is reducing the trade deficit, which is not enough. If you read this as a plan about energy, you’re reading it backwards.

This is really an idea about how natural gas could form the basis for a jobs stimulus program, masquerading as an energy plan. Read the news clips in the Romney plan and you’ll see that that encouraging drilling will lead to substantially lower natural gas prices.

Because gas can’t be cheaply exported, drilling gluts here do translate to lower prices, at least temporarily, because when the supply of gas in the U.S. market rises, prices will fall for consumers here. Oil is easier to export, so gluts and low prices don’t stay here.

Romney’s news clips say this cheap natural gas will make the U.S. a global destination for manufacturers who are seeking cheap energy to use in the production of their products. A report done by Citigroup, quoted six times in the white paper, estimates that 1.1 million jobs could come from manufacturing—particularly petrochemicals, steel, and fertilizer—by 2025. Romney-Ryan’s white paper takes that idea to giddy heights, building a vision of the U.S. as an “energy superpower,” which will “reindustrialize” our economy. As of 2010 we had 153 million workers employed in the U.S. I don’t know that a million jobs by 2025 in petrochemicals signals U.S. re-industrialization as it would be well under a 1 percent addition to the force.

The Romney plan also suggests there could be another 2.5 million jobs from oil and gas extraction, but these forecasts are usually overblown, and the jobs themselves are ephemeral, rising and falling with the price of oil and gas.

The real motivation behind most of the Romney-Ryan plan’s elements: open offshore drilling, decreasing federal regulation in favor of state, speeding the okay of pipelines, and discouraging lawsuits against industry by the government and environmental groups, is to reduce costs for the oil and gas industry. Though the currency is indirect, this is a stimulus program. Instead of tax breaks and spending, this plan wants to cut the cost of complying with environmental laws, and sell U.S. taxpayer-owned oil to companies in greater quantity. Historically, the U.S. has charged less for its oil than almost all the other countries in the oil game, so the value of opening more lands to drilling may be considerable. The upshot is that it’s not possible to draw up a monetary value for the drilling stimulus this plan offers.

What’s more, the risks in reducing regulation, or fracturing the regulatory framework among states, as the plan proposes, could actually reduce jobs. The cost of poorly regulating drilling can be very high&,dash;as BP’s potential $70 billion bill for the 2010 Macondo Gulf spill shows. More than 300,000 individuals and businesses were compensated for lost work from that one spill. Betting on looser regulation can be a job killer.

As a jobs’ stimulus plan, Romney-Ryan doesn’t stack up against other stimulus plans. Take the American Jobs Act, which failed to pass in 2011. The firm Macroeconomic Advisors estimated that the act’s combination of $245 billion tax cuts and $202 in infrastructure spending would create 1.3 million jobs by 2012, which doesn’t compare favorably to Romney-Ryan’s 1.1 million jobs by 2025.

And then there are the jobs themselves. These are jobs where cheap energy and other cheap inputs like water will give the U.S. a cost advantage for manufacturing: That means the jobs are in petrochemicals, steel, and fertlizers. On the whole, these jobs are neither high tech nor high paying, particularly if they’re established in non-union areas. What’s more, they will have a steep cost in terms of pollution, carbon emissions, and water use in the towns that host the factories and the gas wells.

Do we want them? Probably. But a “green job” with a lower environmental footprint, a higher paycheck, and a bigger strategic role in the world’s low-carbon economy may be a better use of taxpayer stimulus money than a “black” job with low pay and a high carbon footprint. Do we want to pay to reinvent the Rust Belt?

Finally, there’s the very big question of whether the carrots Romney-Ryan offers to the oil and gas industry are even necessary to cause the boom. Oddly, Edward Morse, the Citigroup analyst who wrote the report that the Romney-Ryan plan quotes repeatedly, says that in his opinion the natural gas and manufacturing boom will happen regardless of who’s president. Furthermore, he says that Obama is doing nothing to stop it. (Here’s an interesting interview with The Atlantic’s Jordan Weissmann.). We could have these black jobs for free.

This future of this gas boom may be inevitable, but our response is entirely up to us, and if we want to increase jobs and build an economy for the future, we in the U.S. need to discuss how to best leverage our considerable natural resources in a world that’s increasingly hungry for them. We need to have a knock-down, drag-out discussion on these issues. Besides the unnecessary expense of the Romney-Ryan plan, I object to its muddled thinking, and its lack of vision.

I am certain Mitt Romney has a decent sense of how energy futures markets work, and he knows that this plan doesn’t really deal with our oil problem. He also knows that his dream of a jobs boom driven by natural gas is a far cry from his 2004 plan to fight global warming. So what is this? It’s something he thought we might like.

Lisa Margonelli
Lisa Margonelli is the author of Oil On the Brain: Petroleum's Long, Strange Trip to Your Tank. She is currently working on a book about termites.

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