Yesterday's Greenwire (June 14, 2007) presented the transcript of a speech by Sen. Majority Leader Harry Reid on the Senate energy bill. The following is a running commentary on the policy-relevant portions of Reid's remarks. Reid: Now, 76 years later [i.e., after Thomas Edison told Henry Ford he'd bet on the future of solar power], America consumes 21 million barrels of oil every single day. What twaddle! Reid speaks as if we've wasted some kind of golden opportunity. Despite decades of taxpayer and ratepayer subsidies, solar power provides less than 0.1 percent of all commercially-marketed U.S electricity. No one knows how to supply large quantities of affordable solar electricity, much less how to power millions of automobiles with sun beams. Reid: Think about it for a minute, 21 million barrels of oil. That's enough oil to fill a pool that's 10 feet deep and 200 football fields long or a pool that's 11 miles long and 10 feet deep, 21 million barrels of oil every day. Yes, Senator, that's a lot of oil, but Americans own lots of cars. Think about it for a minute: 216 million vehicles (according to this source). Stacked end to end, that's enough to circle the Earth a dozen times. Reid: And most of it comes from unstable regions of the world. This sounds scarier than it is. The United States remains the single largest supplier of the U.S. petroleum market, producing about 8-9 million barrels per day. The next biggest suppliers are Canada and Mexico. If Sen. Reid is so concerned about getting oil from stable countries, why does he oppose lifting restrictions on oil and gas production in the deep water areas off the U.S. West Coast, East Coast, Eastern Gulf of Mexico, and Alaska? Reid: Our addiction to oil has grown into a three-pronged crisis: threatening our economy, threatening our national security, and threatening our environment. We are not addicted to oil any more than our ancestors were addicted to horses. We depend on oil—just as we depend on electricity. As soon as someone develops a motor fuel superior to gasoline in price and quality, people will demand it and profit-seeking firms will supply it. There is no economic crisis. The economy is strong despite high gasoline prices, because U.S. petroleum intensity (petroleum consumed per dollar of GDP) continues its long-term decline. Reid: But as this crisis grows worse it's nothing but business as usual from President Bush. Maybe this president thinks it's fine that working families are busting their budgets just to pay for gasoline and heat, but we don't. Price is a function of supply and demand. Nothing in Reid's energy bill would do anything to increase petroleum supply. On the contrary, the bill's anti-price gouging provisions would set up a de-facto price control system, driving investment out of the energy-supply sector. Reid: Maybe this president thinks it's fine to let unstable countries dictate our foreign policy because they hold the oil that we can't live without, but we don't. If the oil-exporting countries were as influential in U.S. politics as Reid supposes, the United States would have abandoned Israel long ago and Bush would never have dared to launch an invasion against Saddam Hussein. Reid: Maybe this president thinks it's fine to let our children and grandchildren faced the devastating consequences up our climate crisis because he didn't have the foresight to turn the tide, but we don't. What climate crisis? During the past century, the world has warmed about 0.7 degrees Celsius and global GDP increased by an estimated 1,800 percent. For a meaty critique of the alarmist spin on global warming, see this report by the Center for the Study of Carbon Dioxide and Global Change. Reid: And maybe this president thinks it's fine to invite oil companies to write national energy policy at secret White House meetings, but we don't. Does Reid oppose all secret White House meetings, or just those hosted by Dick Cheney? I don't recall the Senator criticizing Hilary's secret meetings to further socialize U.S. health care. Reid: He may be fine with that approach to energy, but I'm not, the Democrats are not, and neither are the American people. President Bush asserts that America is “addicted to oil” and advocates a 35-billion gallon biofuel mandate to replace 20 percent of U.S. oil consumption by 2017. There's not a dime's worth of difference between Reid and Bush on these issues. Reid: At the G8 summit last week President Bush's so-called bold approach to global warming was to give the issue serious consideration, but that was in the future. Or, in other words, ignore it. The time for meetings, more meetings, and more blue ribbon panels is long past. It's time for action, time for bold steps, and big ideas. It's time for innovation. We're not getting it from the White House, but that won't stop us because innovation is exactly what Americans do best. Bush resisted EU pressure to agree to cut global carbon dioxide (CO2) emissions 50 percent by 2050. Nobody knows how to meet current U.S. and global energy requirements without fossil fuels and their associated CO2 emissions, and world energy demand could triple by 2050. It is unwise to put the cart before the horse. Until the market figures out how to supply vast quantities of affordable energy without emissions, it is reckless to promise cuts in emissions. Reid: The Democratic energy plan is all about harnessing power, the clean renewable power that exists, literally, all around us and the power of ingenuity that we have always called upon to solve our toughest problems that exists, literally, all around us. Our starting point is a bill we'll debate this week. Our bill promotes energy efficiency, drives investment in clean, alternative fuels. It sets new green standards for federal buildings and protects consumers from punishing price gougers. To say that renewable energy—the wind and sunshine—are "all around us," is just another way of saying that these forms of energy are diffuse. But that is what makes them less valuable than the concentrated energy we get from fossil fuels. Reid: Shouldn't we punish price gougers? Of course. Let's punish the biggest price gougers—politicians like Reid, whose oil and gas production moratoria, efficiency mandates, and bio-fuel mandates force consumers to pay higher prices for energy, autos, appliances, and food. Reid: After six-and-a-half years of the Bush presidency our bill puts the common good ahead of corporate greed. On the President's watch, the cost of gas and home heating has doubled. Every American is feeling that pain, with less to save for retirement, college, or health care. And no surprise, working families are getting hit the hardest. Energy prices are up and Bush is President. Does Reid know the difference between correlation and causation? Reid: Democrats in Congress just enacted an increase in the minimum wage that's 10 years overdue. We passed it, and I'm proud we did that. Congratulations, Senator, you have just ensured that the economy will produce fewer entry-level jobs. Reid: But we couldn't possibly raise the minimum wage high enough to keep up with these energy prices. When you're paying $3.30 a gallon for your daily commute, you've already spent a good portion of your paycheck by the time you get to work. Yet while the American people are forced to dig deeper, big oil is digging deeper into our pockets. They're bringing in record profits. Oil company profits are high because gasoline prices are high. Prices are not high because profits are high. Does Reid not know this or is he addicted to demagoguery? Reid: Remember the $400 million golden parachute given to the former CEO of Exxon? That's only one example. There's nothing wrong with companies making money. But there's everything wrong with manipulating energy supplies to keep prices artificially high. The Federal Trade Commission (FTC) continually monitors U.S. gasoline markets and has repeatedly investigated U.S. oil companies, most recently in the aftermath of Hurricanes Katrina and Rita, which shut down large segments of U.S. oil production, refining, and transport. The FTC found no evidence of market manipulation or large-scale price gouging. Just because Reid is a Senator, doesn't mean he gets to make stuff up. Reid: There's everything wrong with neglecting to reinvest a fair portion of those record profits in refinery capacity to increase supply. Oil companies invest billions to expand refining capacity. They would invest billions more if politicians like Reid did not put the future of petroleum refining in jeopardy by pushing bio-fuel mandates, fuel economy mandates, and Kyoto-style caps on carbon-based energy. Reid: And there's everything wrong with refusing to seek or promote cleaner alternatives that could create jobs here in America and clean up the environment. Some specifics please, so that ordinary folks can check your facts! Reid: This Democratic Congress will not hesitate to take action when energy companies gouge the American people. But this energy crisis is certainly not limited to our shores. Last year, Americans sent $300 billion to buy oil from countries like Nigeria, Saudi Arabia and Venezuela. Our relationship with many of these countries is shaky at best. And it's a safe bet that some of the $300 billion found its way to people and groups that seek to do us harm. Our oil addiction gives economic, military and political leverage to these countries at a time when we need every possible chip to address the threats they present. Grow up, Senator! The world is full of unsavory people, and if you're part of the global economy, some of your dollars go to people you wouldn't invite to dinner. Should we stop buying toys, clothing, and consumer electronics, because some of our dollars end up in the hands of Chinese Communist Party leaders and Red Army generals? Reid seems to forget that Americans produce oil too, and U.S. oil company profits not only benefit retiring oil executives, but also millions of Americans whose pension plans and 401(k)s own 41 percent of U.S. oil company stock. Reid: When the President of Venezuela calls our country a menace and constantly attacks our way of life, shouldn't we be able to tell him to keep his oil? No, we should tell him to dismantle state ownership of Venezuela's petroleum industry. Breaking the link between oil and government would do more than anything else to enhance U.S. and global energy-security. Reid: Right now, we can't and we don't, because we need that oil and that ties our hands. If that's not the sign of a dangerous addiction, I don't know what is. What is Reid talking about? Is he suggesting that Bush invade or Venezuela or starve it with a naval blockade? Reid: Yet for all of President Bush's tough talk about fighting the global war on terror, he has been dangerously silent about the role that oil plays in our national security. And with his foreign policy blunders fueling the flames of instability in the Middle East every day, our need for clean and sustainable energy right here at home couldn't be clearer every day. The third wobbly leg of our energy crisis affects us both at home and throughout the world. This is hopelessly muddled. The Iraq war may be a debacle but it is not mere “talk.” Also, again, when it comes to “oil addiction” rhetoric and biofuel mandates, Bush and Reid are Tweedle Dum and Tweedle Dee. Reid: No reasonable person continues to doubt that global warming is real and that humans are in large part responsible. But it took President Bush six-and-a-half years to even utter the words global warming. Bush used the words “global warming” in June 2001, during the very speech in which he explained his reasons for keeping America out of the Kyoto Protocol. Reid: The best scientists in the world are telling us we only have 10 to 15 years to begin to dramatically reduce carbon emissions. That means starting now, not 2012 or later as the President suggests, but right now. Doomsday predictions enjoy a long history of failure. Reid: Countries across the globe have shown that they're up to the challenge. Kyoto-constrained Europe's CO2 emissions are rising faster than ours; so are Japan's. Reid: Major corporations here in America are signing on, as are many state governments. They are facing reality and finding creative ways to turn it into opportunity. Science has been ignored on the federal level for too long. But that time is over. As CEI President Fred Smith explained in congressional testimony, the companies “signing on” to Kyoto-style controls are either rent-seekers—businesses scheming to profit from market-rigging regulations—or firms that fear they will be “on the menu” if they are not “at the table.” Reid: As I said, this week the Senate will debate our energy bill. As the ancient Chinese proverb says, "The journey of a thousand miles begins with one step." Our bill takes several steps, but for the first time in 30 years, it raises CAFE standards for new cars and trucks to 35 miles per gallon by 2020, with another 4 percent improvement every year thereafter. I know that the auto industry is still wavering on this issue. As my colleague Sam Kazman documents in this paper, CAFE kills. It's a matter of basic physics. Heavier, larger vehicles burn more fuel per mile than smaller, lighter vehicles. Consequently, the easiest way to increase fleet-average fuel economy is to reduce average car size and weight. But that makes the average car less crashworthy. Lighter vehicles have less mass to absorb collision forces; smaller vehicles provide less space between the occupant and the point of impact. A 2002 study by the National Research Council estimated that, in a typical year, the current 27.5 mpg CAFE standard contributes about 1,300 to 2,600 auto fatalities. Tighter fuel economy standards would put more motorists at risk. Sen. Reid's proposal assumes that saving oil is more important than saving lives. Reid: I met with the CEOs of the big three automakers last week and here's what I told them, the debate on raising CAFE standards should be over. It will happen. And perhaps if they had joined us instead of fighting us for the last 20 years, they might not be in the financial mess they're in today. But now is their chance to do the right thing, both for their bottom line and for the American people. And if President Bush is truly serious about raising CAFE he'll help us pass this bill. U.S. automakers might not even exist today had they been “ahead of their time” and emphasized “climate-friendly” vehicles in the 1990s, because consumer demand for SUVs exploded and profit margins were high—about $10,000 per each vehicle sold. Even in 2006, light trucks continued to outsell passenger cars in the U.S. market. Europe and Japan lead in the small car market. If Reid gets his way and American cars become indistinguishable in size, power, and performance from European cars, why should anyone buy American? Reid: The next part of our bill reduces crude oil consumption by more than 10 percent over the next 15 years by producing more renewable fuels right here on American farms, fields and forests. When we do this, we will also create tens of thousands of new American jobs. There is no Santa Claus. Government meddling in fuel and auto markets cannot create jobs in one part of the economy without destroying jobs elsewhere. See Fredrick Bastiat on the Broken Window fallacy. Reid: Last week I passed through Palm Springs, California, and everywhere I looked I saw hundreds and hundreds of wind mills producing clean renewable energy. These windmills create hundreds of construction and hundreds of permanent jobs and produce enough electricity to power thousands of homes. That's the kind of innovation we should be investing in everywhere. I've driven through there many times. What an eyesore! Thousands of acres of once-beautiful desert defaced with row after row of avian-chopping metal towers. A coal or natural-gas fired power plant would provide a lot more electricity at less cost, and on a fraction of the land area. Reid: The next part of our bill sets new energy and efficiency standards for lighting, appliances and water use, which will be regularly updated. That's going to save half a trillion gallons of water every year. Efficiency standards prevent people from buying lower-cost appliances that do not meet the standards. Hence, they invariably do two things—restrict consumer choice and raise consumer prices. Many standards have reached the point where the higher costs of the appliance outweigh the benefits from the electricity saved. There may also be unintended consequences. Consumer Reports recently studied washing machines that meet current federal efficiency standards and found that unless you can pay over $1,000 for a washing machine you can no longer buy one that will get your clothes clean in just one wash. You end up wasting energy and water! Similarly, federally-mandated low-flush toilets forced people to flush two and three times. BTW, where does the Constitution empower Congress to design toilets and washing machines? Reid: Because government should lead by example, our bill also dramatically improves the energy efficiency of federal buildings and vehicles, which will also save billions of your tax dollars. Maybe Congress should just do without air conditioning from May through September. That would force legislators to spend more time at home and less time passing taxes, subsidies, and mandates. Reid: Our bill protects consumers by punishing companies that price gouge or manipulate supply to pad their profits. It provides research funds for carbon capture and storage, a new technology will prevent carbon emissions from existing power sources from ever polluting the air. And for the first time, it directs the president and his Cabinet to improve diplomatic relations with our energy partners in order to give us more leverage in the global energy market. The idea that oil prices are high because we don't have good relations with our “energy partners” is daffy. Reid: Altogether, our bill will save American consumers tens of billions of dollars annually, cut our oil consumption by more than 4 million barrels per day and reduce our dependence on foreign energy sources right away. And by the way, we might just save the planet while we're at it. The bill will increase the price of fuel, autos, appliances, and food. To the extent that the biofuel mandate merges the fuel and food economies, the bill will make Americans more petroleum-dependent, not less, because oil price volatility will increasingly affect food prices. Reid: But as I said, this bill is just the first step. It is our roadmap, not our destination. Our bill funds important research, but we want to do far more. We want to start giving consumers more choices by investing in biofuels, renewable electricity, solar power and technologies not yet imagined. Thirty-five miles-per-gallon fuel standards should just be the beginning. Mandates give us choices? Yes, they bring to market options that otherwise might not exist. But if those options make economic sense, mandates are not be needed to provide them. Mandating the production of mud pies and eight-track tape players would also increase our options. Of course, persons subject to mandates are coerced. Reid doesn't mention that. Reid: And why do our cars need to run on fossil fuels at all? We need future generations of Americans and their cars to run on renewable fuels and electricity grown right here in America. Increasing energy efficiency is the single largest source of energy we can tap without breaking a sweat. “Why do our cars need to run on fossil fuels at all?” the good Senator asks. Reid talks as if cars run on fossil fuels because automakers lack imagination. Maybe, just maybe, it has something to do with the cost and performance of the alternatives. Electric vehicles dominated the nascent auto market in the late 1800s. However, gasoline engines soon replaced electric motors “because of their greater power and range,” note Rob Bradley and Richard Fulmer in Energy: The Master Resource. Gasoline-powered vehicles still outperform electric vehicles, and cost a lot less too, which is why California's attempt to mandate a 10-percent market share for electric vehicles failed. Some day, surely, clever people will figure out to build affordable, “beyond petroleum” cars that outperform today's vehicles in every way. But it is silly to think government intervention can make it happen. It's like Jerry Taylor says:
“If federal subsidy alone could transform ugly economic ducklings into beautiful economic swans, then nuclear power would be too cheap to meter, solar and wind power would constitute more than 0.1 percent of the electricity on the power grid, we'd be driving around in cars powered by synthetic fuel, we'd have fusion power plants outside every major American city, and conventional internal combustion engines in mid-size sedans would get better than 70 mpg without sacrificing space, comfort, or performance. Not on one single occasion over the entire history of the American energy economy has government subsidy performed the miracle promised by ethanol proponents.”Reid: In the future, we need to build homes and office buildings that consume little or no net energy. We need to change the tax code and government regulations to reward energy efficiency, rather than energy consumption. And we need all this new energy to come from sources that you or I wouldn't mind having in our own backyards. Who do you mean by “we,” paleface? I “need” my energy to be affordable and reliable. Yet you want to mandate the sale of costly power from wind turbines and solar panels that only generate work when the wind blows and the sun shines. Reid: The kind of future I describe won't be easy to achieve. But I know two things for sure, the trail will be blazed by America's next titans of innovation and their path will be lit by the support and investment of a determined federal government. We're seeing the first part already. Scientists, states, and venture capitalists are starting to work together. They're realizing, as countries like Japan, Germany and Brazil already know, that tremendous opportunity lies ahead. Those who develop the clean, safe and efficient energy of the future will reap enormous rewards. It's time for our federal government to not just catch up, but to take the lead and that won't be easy. But as great as the challenges may seem, history tells us that we can and will succeed. Blah, blah, blah. Reid: In 1878 Thomas Alva Edison perfected the light bulb and the world was illuminated. In 1908 Henry Ford introduced the Model T and Americans took to the roads. In 1961, President Kennedy challenged us to put a man on the moon and eight years later our frontiers were forever expanded. Reid invokes the Apollo Project. How predictable! He sees no difference between Edison and Ford's success and that of the Apollo Program. But the difference is fundamental. There was no market test for the Apollo program. Its goal was not to produce a product consumers would willingly buy but to beat the Russians to the Moon. It is a fundamental error to believe that, because federal R&D can accomplish military or geopolitical objectives, it can also pick winners in the private marketplace. Reid: If we could turn darkness into light, and we did, surely today we can use that light more efficiently. If we could build an automobile that connected millions of travelers, and we did, surely today we can build one that runs on renewable power. If we could send a man to the moon and bring him home safely, and we did, surely today we can protect our own planet for generations to come. If anyone doubts America's ability to meet this next great challenge, they don't know America. Today we must return to our endless well of ingenuity and we must turn to the endless sources of renewable energy all around us. To set a new course that will keep our country safe and grow our economy and protect the planet that we call home. Thank you very, very, much. Sen. Reid's professed optimism is actually a form of pessimism, because it assumes that Americans can't achieve great things unless government leads the way. Reid is peddling Carter-style, 70s-Show, energy interventionism. In Energy Aftermath, a retrospective on the Carter policies, MIT's Thomas Lee, Ben Ball, Jr., and Richard Tabors express the chief lesson learned:
“The experience of the 1970s and 1980s taught us that if a technology is commercially viable, then government support is not needed and if a technology is not commercially viable, no amount of government support will make it so.”To bad there is not a mandate requiring Senators to recite those words before they debate energy policy.