On Thursday, the Romney/Ryan campaign released “Mitt Romney’s Plan for a Stronger Middle Class: Energy Independence,” a comprehensive plan (as opposed to President Obama's “hodgepodge” approach to energy) that they claim will make America energy independent by 2020.
But like a college student trying to flesh out a sketchy midterm paper, the Romney Plan contains a lot of filler in the form of bold text “Did you know” segments – large excerpts from think tanks and press reports on various energy topics that in a fair number of cases merely obfuscate the topic they are meant to clarify, or just show a lack of understanding about the energy markets. Strip out the “Did you knows” and you're left with about 7 pages, out of 21, of original material to form Mitt's plan, which boils down to this: deregulation and much more drilling for oil.
That, in a nutshell, is the Romney plan. By Thursday, billionaire, and occasional Romney campaign adviser, T. Boone Pickens was on CBS This Morning registering his dismay that somehow America's vast reserves of natural gas were little more than an afterthought in the Romney Plan.
Electricity was also largely ignored, except for Romney saying that he would streamline the process to permit new nuclear plants. Coal was mentioned also largely in the context of deregulation and to attack Obama's environmental policies; and Romney promised to remove government support for the renewable energy (wind, solar, etc.) sector. Yet the Romney camp claims that this less-than-comprehensive plan will both revitalize the national economy, and create millions of new jobs.
It is not surprising to see deregulation playing such a large role in the Romney Plan, since it was also the main focus of the energy section of Romney's official campaign website, which I analyzed last week. The Romney Plan, though, goes beyond a mere slashing of regulations; Pres. Romney would basically take the federal government out of the picture entirely. States would be allowed to permit energy projects on their own, without federal oversight, while the states would also be allowed to open federal lands within their borders for energy exploration and production. Of course, as I've noted in this discussion about hydraulic fracturing, some states – Pennsylvania for example – have horrible records of regulating the industry, leading to widespread instances of groundwater contamination and land destruction in the state government’s zeal to put energy extraction revenues ahead of environmental and public health protection.
The section of the Romney Plan dealing with oil manages to be both disingenuous, while also showing a fundamental misunderstanding of the oil industry. A number of the “Did you knows” in this section talk about the onerous approval process for a drill site and how fewer permits are being granted for federally-controlled lands (which includes offshore sites). The takeaway is meant to give the reader the impression that Obama is stifling the oil industry, yet oil production has grown each year of the Obama presidency – after declining during the George W. Bush years – and that the U.S. will likely add about another 500,000 barrels of oil production per day in 2012.
The Romney remedy to this non-existent decline problem is to allow drilling in the Arctic and offshore, which (he claims) will lead not only to energy independence, but also to much lower oil prices in the U.S. But as I explained in this earlier piece, this basic bit of supply and demand economics doesn't hold for the oil industry because oil is a globally traded commodity. Our domestic oil prices are driven by demand in China and Europe as much as they are by supply issues here. So even if we massively expand domestic production, that oil is likely to head overseas if it can fetch a higher price in say, China, thus helping to negate the downward pressure on prices that an oversupply of oil would have if the US domestic oil market were a closed system.
And this gets to how the “Did you knows” in the Romney Plan are far less informative than they would first appear. The next section is titled “North America” and loops oil production in Canada and Mexico into the U.S. supply picture (this is a common assumption among plans that say America can be free of “imported” oil by 2020). A “Did you know” blurb on page 13 talks about how Canadian and Mexican crude sells in the U.S. at a discount to the benchmark U.S. price. The implication is that the discount exists because we're all such great buddies; the reality is that the Canadian (Oil Sands product) and Mexican crude has to sell at a discount because it's pretty crappy oil. In industry terms, the Mexican and Canadian Oil Sands product tends to be heavy and “sour” (high sulfur content), meaning that it needs extensive processing to turn it into something useful like gasoline, so this type of oil typically has to sell at a discount so refineries can offset their increased production costs in running it.
With the rollout of Mitt's Plan, the Romney/Ryan campaign had the opportunity to do something the Obama Administration has so far failed to do: to provide a comprehensive strategy designed to meet America's energy needs in the 21st century. Instead, they squandered this chance in favor of putting out a dressed-up partisan piece of campaign literature.