The price of a barrel of oil reached the $101 dollar mark this week.  Brent crude is trading at nearly $120 a barrel.  A void of organized government structure now appears to exist in several Middle East oil producing countries following the recent civil unrest. The price of gasoline and diesel has jumped nearly 30% since that unrest began. That unsettled Middle East situation may cause oil prices to continuously climb to precarious levels and to stay at those elevated levels for an extended period of time.
 
Political and environmental leaders have been working for at least two decades to replace our fossil fuel energy with biofuels, solar and wind energy. This might be a good idea, if it were possible, if we did not have to pay for the energy three times, and if it were even necessary.

More than 80% of our nation’s energy is provided by fossil fuel sources. After subtracting the carbon free energy produced by hydropower and nuclear reactors, less than three percent of our energy needs are provided by biofuels, solar, and wind powered generation.  Less than 2% is supplied by biofuels. More than 97% of our energy continues to be produced by fossil fuel, nuclear and hydropower after decades of effort and after hundreds of billions of dollars of taxpayer and ratepayer investment. This clearly demonstrates that current technology will not allow these alternative sources to replace fossil fuel at any price.

Extensive tax credits and tax deductions are required to make alternative forms of energy economically feasible.  It is necessary to increase every citizen’s taxes, fees, charges and licenses proportionately in order to offset these losses in government revenue.  The taxpayers are currently being charged billions of dollars annually for the reductions in government revenue created by providing tax incentives for research and development, facility construction and the ongoing production costs of these forms of alternative energy. Increased taxes are the first payment on these alternative energy sources.

The second payment is at the gas pump and at the electricity meters. The cost of production and distribution for all forms of alternative energy remains much higher than for the production and distribution of fossil fuels that they would allegedly replace.  This remains true even after offsetting their cost of production and distribution with the incredibly large tax-break subsidies. These government subsidies paid to alternative resource industries include tax credits, deductions, accelerated depreciation and loan guarantees.

The third payment is for the increased costs of food and other consumer goods.  We pay more for food because the cost of their production and distribution is directly proportional to energy costs. Fossil fuel is required for tilling, planting, to produce and apply fertilizer, to power irrigation pumps, for harvest, processing, transportation and to power wholesale and retail delivery of the food products. Fossil fuels are used in the production of too many consumer goods to even attempt to list.

Biofuels sold for the energy market are driving up the cost of the food market because the federal government is subsidizing that segment of production.  Enormous demands for these crops are being made by the government which is seeking an ethanol mandate of 30% by the year 2030. Ethanol production currently comprises just 8% of the US demand for vehicle fuel, but it requires 40% of the US corn crop to produce. Ethanol production worldwide has increased fivefold over the past decade. It will have to increase considerably more to meet the target set by US political leadership. That increase in demand that is being created by subsidies for the biofuel market is driving the price of food ever higher.

About a tenth of the world’s production of cereal output is projected to be used for ethanol production if all of the world’s present targets for ethanol are to be met. The certain result will cause food prices to rise from 15-40% worldwide.  Millions of humans will go hungry on a global scale as food prices are driven out of their reach due to biofuels production. According to the London Economist, the simplest steps to ensure that there is enough food for the world’s population by 2050 “would be to scrap every biofuel target” worldwide.

Our state and national leaders are promoting these alternative energy sources to the exclusion of fossil fuels. Reduction in oil usage has been the primary target. An alleged dwindling supply of oil reserves is one of the primary reasons given for the supposed necessity to replace our use of oil. However, the United States may now have more known oil reserves than at any time in our history. The fact of the matter is that rapidly improving technology has made oil extracted from oil bearing shale and sands economically viable. The oil shale resources found in the continental United States is practically unlimited.

For instance, according to an April 2008 United States Geological Survey report, the Bakken Formation deposit in eastern Montana, North and South Dakota contains at least 3.65 billion barrels of recoverable oil. If recovered at a competitive price per barrel the Bakken Formation deposits alone will fully fuel the American economy for decades into the future.  Improved technology since that 2008 report has already significantly reduced the cost per barrel and increased the estimated recoverable amount of oil in the Bakken Formation. This recoverable petroleum is light sweet crude grade and does not involve drilling near oceanic waters, near national monuments, near mountains, near presently endangered species, or near major human or animal population centers. Further, the aforementioned states are already prepared for oil development. 

Instead of being held hostage by third world despots and anarchists, the US government should immediately apply all efforts to develop this source of desperately needed oil for its own citizens and businesses and leave the production of food crops to feed the world.

 For further information click on: http://energy.cr.usgs.gov/oilgas/noga/

Best,

Doug