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Tom Watson: Energy, Unicorns and Your Economic Future

We need to stop fantasizing that alternative sources will magically materialize and open access to our own untapped oil and gas reserves

As Americans helplessly watch their earnings disappear as numbers whizz by on the gas pump, our government continues to flail about aimlessly in search of a coherent energy policy.

Nearly 40 years ago during the OPEC oil embargo in the 1970s, then-President Jimmy Carter started the U.S. Department of Energy to make America less dependent on foreign energy. So how is that working out for us?

With the Department of Energy, the Department of the Interior and the Environmental Protection Agency, we have a troika of bureaucracies that seem more intent on denying our country access to the energy we need than getting us moving toward more energy independence with cost effective, available and proven sources of energy.

Throw in lawsuit-happy radical environmental groups, who successfully use the court system to bog down development projects, and we end up on the tip of the market whip.

Our misguided non-energy policy leaves us hostage to a volatile energy market in which we send hundreds of billions of dollars a year offshore. Energy represents a huge portion of our trade deficit — more than half.

President Barack Obama gave a speech recently paying lip service to more domestic energy production but mainly emphasized electric cars, solar panels and other potential green energy unicorns that are maybe going to be widely available at competitive prices at some indeterminate point in the future. This is not a plan; it’s a dream — a dream that is costing our country dearly in the present as the following chart from The Economist shows.

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Our own congresswoman, Rep. Lois Capps, D-Santa Barbara, chimed in with typically misguided and uninformed comments while chiding Republicans for daring to suggest that maybe we tap our own large untapped reserves. Here is one of her gems: “New drilling off our shores will do nothing to lower the price of gas or make us any more energy independent.” What?

Regardless of what one thinks about offshore drilling, this is just plain nonsense. Let’s start with some basic economics. Energy is a global market. More global supply, whether it comes from the United States or elsewhere, has a depressive effect on global prices. It’s called supply and demand. Making available our own oil and gas benefits us in two major ways: It makes us less vulnerable to wild price spikes by increasing supply, and we keep that money onshore.

More domestic energy production means more jobs, more profits and more tax revenue for the United States in general and California in particular. It also helps our trade deficit and reduces our balance of payments with foreign governments. Just because you may not be able to solve 100 percent of an energy problem doesn’t give you an excuse for not solving what part you can.

Capps also offered that “we cannot drill our way out of this problem” — yet another tired cliché of the radical left. The reality is that we can’t afford not to produce more of our own energy in this country. We are blessed with significant proven reserves to which we are willfully and self-destructively denying ourselves access. Corn-based ethanol that Capps supports is an economic disaster — even Al Gore admits that.

Whether or not we like it, oil is going to be required in increasing quantities as the primary transportation fuel for the foreseeable future. Currently, 97 percent of our transportation is petroleum-based, and any meaningful transition to alternatives will take many years. We can either buy more oil from ourselves while creating American jobs, or we can send our money overseas and create foreign jobs. It’s our choice.

The current secretary of energy is on record saying he would like to see gasoline cost $8 a gallon in order to force the transition to renewables and alternative energy. If you think our economy is dragging and the trade deficit is a problem now, wait until we have $8 or even $6 gas. Foreigners aren’t going to continue loaning us money to buy imported oil and at the same time loan us money to build a new renewable energy infrastructure.

It’s time to face some basic facts. If our economy is going to continue to be a competitive economy globally, we need access to cost-effective and readily available energy — be it electricity or transportation fuels. Denying ourselves our own readily available and massive supplies of our own energy is simply suicidal. This is becoming a national security issue.

We can’t afford to indulge ourselves in the hope that non-existent and/or affordable potential future energy sources will magically materialize. This path is harming our economy and our national competitiveness in the here and now.

Our competitors aren’t going to be so foolish as to hamstring themselves by arbitrarily paying more for energy than they need to. If we have a higher cost basis for the energy needed to produce our goods and services than our competitors, we are in deep trouble.

Researching and working to develop alternative energy sources is important. Let’s keep developing as many alternatives as we can and allow the free market to determine which ones in the future can provide us with some of the cost-effective energy we need.

Who knows, maybe someday the same radical environmentalists who shut down domestic conventional energy production will actually let us put a solar farm in the desert like the one they blocked in the Mojave a couple of years ago. In the meantime, let’s be adults and face reality.

Tom Watson is a Santa Barbara businessman and was the 2010 Republican nominee for the 23rd Congressional District.

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