President Obama has been selling the economic stimulus bill as “critical” for the economy. It’s hard for most Americans to see how many of the bill's components—$650 million for digital-TV coupons, $150 million for honeybee insurance, $75 million for the Smithsonian, and the list could go on—have any relationship to creating economic growth in the near-term...or long-term for that matter. In fact, much of the bill seems less about job creation than about rewarding liberal constituents.
The policies coming out of President Obama’s Department of Interior also suggest that job creation isn’t the Obama administration’s priority. Last week, Interior Secretary Ken Salazar canceled oil and gas leases on 77 parcels of federal land in Utah, and the Interior Department has also indicated that it will review off-shore drilling policies, no doubt with an eye toward renewing restrictions that were eased under President Bush’s tenure. Congress is also moving in the direction of re-instating restrictions of drilling: this week, the House Natural Resources Committee is expected to hold its first in a series of hearings on offshore oil drilling.
Even in these tough economic times, politically speaking, it’s much easier to talk about re-restricting offshore drilling than in times past. Last July, the national average price of a gallon of gasoline reached $4.11, more than double today’s average. House Republicans spent their August recess staging a “sit in” in Congress to call for a special session to address the problem of rising energy prices. As recently as September, a poll found that high gas prices were voters’ top economic concern.
The banking crisis, the stock market free fall, the bursting of the housing bubble, and rising unemployment have made anxieties about gas prices seem a distant memory. Yet it’s worth considering how much worse it could be if we experience another energy price spike. Families struggling to pay bills amid massive job layoffs would be hard pressed to find it in their budgets to pay double for gas. Businesses facing reduced consumer demand would also strain under the additional burden of higher energy costs, which ripple throughout their overhead into transportation costs, factory fueling costs, and heating bills. State governments likewise would see additional budget pressures from rising energy costs in public schools, hospitals, and government buildings.
President Obama has emphasized his commitment to increasing America’s “energy independence,” but so far, policy-wise, that’s just translated into subsidies to support the development of alternative fuels. Alternative fuels are a great concept, but the government has already poured billions into developing alternative energy with little to show for it. Renewable energy today accounts for a small fraction (about 7 percent last year) of the U.S. energy supply. This is unlikely to change anytime soon, regardless of how much money the federal government gives to its green allies.
Fossil fuels, particularly oil and natural gas, will remain vital to America's energy infrastructure for the foreseeable future. The good news is that the United States has vast energy resources available within its territory. The Interior Department estimates that the Outer Continental Shelf alone contains about 86 billion barrels of oil and 420 trillion cubic feet of natural gas—that’s quadruple America’s current proved reserves.
Allowing energy companies to begin the work of accessing these reserves won’t bring more supply on-line immediately, but it will help ensure that we have an adequate supply in the future. Allowing additional exploration will also send an important message to America businesses and investors in the U.S. economy: we are committed to making sure that energy is available and affordable, lowering businesses’ overhead and paving the way for growth.
Of course, allowing greater access to energy resources would also act as an immediate stimulus, much like government spending on “shovel ready” infrastructure projects. According to a study by PricewaterhouseCoopers, as of 2004, the oil and natural gas industry employed nearly 6 million American workers, or about 3.5 percent of the workforce, and each job in that industry supported two in the general economy. Energy companies with access to new territories for exploration would be hiring workers and expanding their businesses.
Environmentalists frequently speak of the need to find a balance between protecting our natural resources and responsible development. Indeed, this should be our goal. But preserving our environment does not require making so much of our energy supplies off-limits. The Obama Administration should move ahead with facilitating environmentally responsible exploration, which can enhance—even stimulate—the U.S. economy in the short- and long-term.
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