Energy Policy in Obama’s 2012 State of the Union Address

This past Tuesday President Obama gave his 2012 State of the Union Address. President Obama’s speech was split into three major topics: the economy, education, and energy in the United States. His ideas on energy can specifically be broken down into his political goals for oil, natural gas, and renewable energies.

According to the ideas expressed in his speech, Obama is looking to move away from oil consumption in the nation. His motivation for this view is that America has “only 2 percent of the world’s oil reserves” so, “oil isn’t enough” [1]. His plan to move away from gas is as follows: “We have subsidized oil companies for a century. That’s long enough. It’s time to end the taxpayer giveaways to an industry that’s rarely been more profitable, and double-down on a clean energy industry that’s never been more promising” [1].  The problem with this idea is that in the U.S. oil only accounts for 1% of energy used for electricity [3]. The oil America buys is mostly consumed in transportation. Therefore, a shift from one form of energy to another is probably not the solution to U.S. oil dependency. Rather, it may be more appropriate for President Obama to call for incentives for low-oil consuming transportation manufacture and consumption. To his credit, later in his speech President Obama speaks about the importance of American innovation such as the computer chip and the internet and the need to continue this innovation [1].

President Obama also had much to say on natural gas. First he commented on this as a possibility for America’s next major fuel source as it is a resource we have vast reserves of. “We have a supply of natural gas that can last America nearly one hundred years, and my Administration will take every possible action to safely develop this energy [1] .” According to the U.S. Energy Information Administration current estimates of natural gas inventories is 3,098 billion cubic feet [2].  Obama also said, “The development of natural gas will create jobs and power trucks and factories that are cleaner and cheaper, proving that we don’t have to choose between our environment and our economy [1].” This presumes that he hopes natural gas will take over coal as the primary energy source for electricity. Coal currently accounts as about 50% of the total electric energy source [3]. As President Obama said, natural gas would be a much cleaner energy source. However, the U.S. is also a major producer of coal. It is possible that a move to natural gas will only be moving jobs rather than creating them.

President Obama’s energy ideals are promising and it seems that he has hopes of energy consumption in the U.S. moving away from oil and toward natural gas. This appears to be the natural trend occurring in the world and the U.S. already [3]. However, while this hope for cleaner energy is refreshing, Obama has been criticized of having a history of optimistic over-reaching speeches with little action or results. In the Energy arena, lots of talk and not much action has been the staple for many of the past Presidents. It appears only time will tell if we see any tangible energy policy changes based on this address.

[1] http://www.usatoday.com/news/washington/story/2012-01-24/state-of-the-union-transcript/52780694/1

[2] http://www.eia.gov/

[3] Dr. Michael E. Webber Energy, Technology and Policy Lecture Slides

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3 Comments

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3 responses to “Energy Policy in Obama’s 2012 State of the Union Address

  1. I was unaware that oil companies received subsidies from the United States government until hearing the 2012 state of the union address. President Obama’s suggestion to remove all subsidies to oil companies is one I can agree to since they are very profitable with the price of oil in the recent past. Removing the subsidies will level the playing field with other forms of energy, and subsidizing an industry already well established will hold America back from developing new forms of energy. If tax dollars must be spent in the energy sector, the government should pick a direction that the country should be moving towards and place subsidies that will stimulate the free market to innovate.

    I am glad that President Obama emphasized that natural gas would be developed safely. Natural gas is a great resource in the United States, and if it can safely be extracted, it is a good choice of fossil fuels for transportation, heat, and electricity generation. With energy use likely to follow its current upward trend, more jobs will probably be created because more jobs will be needed for natural gas production without coal production loosing jobs. If the combustion of natural gas did not produce carbon dioxide, the United States could feel confident in their energy supply.

  2. nehughes

    Obama said that natural gas would create jobs, and this post made two points here about jobs: firstly, an assumption that the move to natural gas would result in a decrease in coal output, and that natural gas jobs would only replace coal jobs rather than adding to US job growth.

    On the first point, a decrease in US coal output is highly unlikely at this point given the demand for coal in Asia. Where the US may start to use less coal due to more stringent environmental regulations, the coal industry will likely look to China as a source of exports. Even now, China cannot meet their consumption with their own production and is importing coal from Australia. US coal companies are already aware of the changing dynamics in this country and are looking towards exports; Peabody Coal is looking to build a new coal export terminal in Bellingham, Washington. [1]

    On the second point, natural gas already employs more people than coal in the United States. The US Bureau of Labor Statistics tracks jobs related to coal as well as the oil and gas industries. The coal industry employs significantly fewer people today than 25 years ago, from 173,700 people in 1985 to an estimated 85,600 in 2011. The number in 2011 is an uptick of 22% from the 2003 industry low of 70,000 people. [2] Those jobs reported are solely from mining. The National Mining Association puts out a report in conjunction with PricewaterhouseCoopers on the Economic Contributions of U.S. Mining. In 2008, they estimated that coal supported 555,270 direct jobs, or activities directly attributable to mining, including the transportation of mine output to the purchaser. [3]

    Due to the joint nature of the industries, the Bureau of Labor Statistics does not split the statistics for the oil and gas industries. However, there are companies that specialize in breaking down these statistics between the two industries. IHS Global Insight published a report for America’s Natural Gas Alliance in 2009 reporting on jobs attributable to natural gas in 2008. They broke down the various Bureau of Labor Statistics categories, and estimated that natural gas directly employed 622,412 people in 2008. [4]

    These estimates both came from 2008, at the beginning of the US shale boom, when gas prices were as high as $12/mmbtu. Though gas prices are now extremely low, the abundance of shale gas and the enthusiasm for natural gas from national policy makers will likely ensure the continued robustness of the natural gas industry and the associated jobs. In parallel, the high demand for coal in Asia gives US coal companies a new market, and should they tap that market, it is unlikely that coal jobs in the US will decrease. The increase of natural gas in the US will not likely result in a replacement of coal jobs with natural gas jobs.

    [1] http://e360.yale.edu/feature/as_coal_use_declines_in_us_coal_companies_focus_on_china/2474/
    [2] http://data.bls.gov/cgi-bin/dsrv
    [3] http://www.nma.org/pdf/economic_contributions.pdf
    [4] http://www.anga.us/media/41062/ihs%20global%20insight%20anga%20u.s.%20economic%20impact%20study.pdf

  3. jillkjellsson

    I agree with utexasenergy that removing subsidies on oil companies, and thereby leveling the playing field, will greatly improve the energy sector. It’s hard for companies attempting to develop new energy technologies to compete with conventional forms that are well established. Similarly, if prices were to reflect the real cost from an entire life cycle assessment standpoint, than renewable energies would be better able to compete in the market. It seems only fair to give alternative energy an equal playing field to aid in development of all forms of energy. Since natural gas can be used as a fuel for transportation (especially in commercial transport industries, for public transit, or for police enforcement fleets) as well as for the production of electricity, Obama is not necessarily saying that natural gas will replace coal. For this reason, developing shale gas reserves in the US also lessens US dependence on foreign sources of oil.

    Some people argue that the government should not try to influence the economy and that the free market should determine the energy path the US takes, but I would argue that the oil and coal companies would not be where they are today if not for government support. I believe similar support used to encourage innovation, such as funding for research and development, should be made available to energy projects today, whether it be developing alternative energy or developing new technologies to better utilize conventional forms and to make them less harmful. That way the market and consumers are left to decide which path is taken and which source of energy used. I think that such action would create jobs across the entire energy sector, including wind, solar, natural gas, coal and oil, and not take away jobs from anther.

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