Last week, Governor Romney released his plan for “Energy Independence”
that promises to “increase domestic energy production and increase
partnership with Mexico and Canada to gain energy independence by 2020.”
Briefly, the plan proposes to increase domestic fossil fuel production
by opening new areas to exploration and by reducing regulatory barriers
to the building of new power plants.
My concern is that this is simply a one-sided energy policy – it focuses solely on increasing the supply of energy (and almost exclusively on fossil fuels, especially oil). A true energy plan would realize that no matter how much oil your country produces, it can never escape the world market price. In a world with a globalized market for oil, OPEC will always be the most important price-setter, and the price of oil will not be set at home. The price will track with demand from economic growth in India and China and will follow supply shocks from the most recent unrest in oil-producing regions, whether Iran, Sudan, or the South China Sea.
A real energy policy would address the complete picture: The supply side, by growing supply and by pursuing alternatives, as well as the demand side, by reducing use.
The Romney proposal does not touch on how to reduce dependence on oil — only seeking access to more. The US currently devotes about 70% of its petroleum use to transportation, and most of that in gasoline to power our cars – so addressing transportation is key to oil energy policy. This week we saw that the Department of Transportation and the EPA finalized a rule that would increase average fuel economy of the U.S. fleet to 54.5 MPG by 2025. This is very important – it is estimated to reduce American oil use by about 2 million barrels per day once it is fully implemented. Although Romney does not address it in his energy plan, he has stated that he opposes these new fuel economy standards.
Read more: http://www.consumerenergyreport.com/2012/08/30/energy-policy-needs-to-look-at-both-supply-and-demand/
My concern is that this is simply a one-sided energy policy – it focuses solely on increasing the supply of energy (and almost exclusively on fossil fuels, especially oil). A true energy plan would realize that no matter how much oil your country produces, it can never escape the world market price. In a world with a globalized market for oil, OPEC will always be the most important price-setter, and the price of oil will not be set at home. The price will track with demand from economic growth in India and China and will follow supply shocks from the most recent unrest in oil-producing regions, whether Iran, Sudan, or the South China Sea.
A real energy policy would address the complete picture: The supply side, by growing supply and by pursuing alternatives, as well as the demand side, by reducing use.
The Romney proposal does not touch on how to reduce dependence on oil — only seeking access to more. The US currently devotes about 70% of its petroleum use to transportation, and most of that in gasoline to power our cars – so addressing transportation is key to oil energy policy. This week we saw that the Department of Transportation and the EPA finalized a rule that would increase average fuel economy of the U.S. fleet to 54.5 MPG by 2025. This is very important – it is estimated to reduce American oil use by about 2 million barrels per day once it is fully implemented. Although Romney does not address it in his energy plan, he has stated that he opposes these new fuel economy standards.
Read more: http://www.consumerenergyreport.com/2012/08/30/energy-policy-needs-to-look-at-both-supply-and-demand/
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