The Energy Deficit and the Pickens Plan

This graphic is from the EIA in their energy brief on energy subsidies:

From this graph, we consume more energy (blue line) than we produce domestically (red line). The difference between the two is how much we have to import to balance the books, so to speak. This deficit amounts to about 30% of all energy consumed on a yearly basis.

The question now goes to those who want the US to become “energy independent”. How do you get those two lines to converge. You have to either bring down consumption, increase production or end up with a combination of the two. But if you don’t, then you’re still going to be importing energy. That’s the bottom line.

This is the elephant in the room for the Pickens Plan. Right now, the plan is to shift consumption sources around, from oil to natural gas in road transportation and from natural gas to wind in electricity. But shifting the production resources doesn’t address the fundamental imbalance between demand and supply. The difference will still need to be made up, and the Pickens Plan doesn’t do that at all. He’s just playing Three Card Monte with energy.

But one argument would be: yeah, but we’re reducing our imports of oil, so that’s something. But something will have to replace it if you don’t increase energy production by 30%. That is not the goal of the Pickens Plan, so there will still be energy imports even if the Pickens Plan is implemented.

But we have to make sure those dirty Arabs and other terrorist nations don’t get any American oil money, even if we end up buying their natural gas, uranium and other energy sources, which then means that the Pickens Plan will accomplish nothing. Well, except put money in Pickens’ pocket.

Pickens Continues to Use $700 Billion Myth

From a Cato Institute Blog Post by Will Wilkinson:

Pickens: It’s more than me. I mean, this is about America. This isn’t about Boone Pickens and whether Pickens’ wind farm makes money or whatever happens to it. But I mean, here with $700 billion going out of the country, and let’s say that we could cut it in half — $350 billion in the United States, can you imagine how that would multiply for jobs here. I’d much rather that gonna $350 billion was being used here than to give some for foreign oil.

As I’ve stated before, $700 billion is a falsehood. In fact, all we’ve done in the past is import $320 billion or so, and given current oil prices, are on track for something in that neighborhood, say $400 billion. So even if we do NOTHING, we’ll get to that $350 billion number that Pickens would “like to see happen.”

Here’s another issue with this argument. Lets say the Pickens Plan is successful and it cuts down on oil imports by half (to $150 billion, not $350 billion). He says that all that money would be going towards American jobs. Yes, but at what cost? That’s something that Pickens does not address at all (nor has anyone else for that matter). If it costs $150 billion in tax incentives, infrastructure and whatever else is needed to get his plan off the ground, then it’s a wash. Sure some workers are happy, but consumers are left in the cold. And that’s if his plan works exactly as he thinks it will. As I’ve pointed out before, on both transportation and electricity, that’s far from a given. But this is the point that Will makes rather well in his post.

But I’m glad that at least more people are starting to call out Pickens on his economically illiterate thinking.

I also recommend the Cato@Liberty blog as an excellent resource or non-partisan thinking on political and economic matters.

New Graphic – Natural Gas Ain’t All Domestic

From my Photoshop to your desktop:

Pickens Wrong on Natural Gas Too

As usual, the information in the graphic comes from the Energy Information Agency, using 10 minutes of my time to get the data that T. Boone Pickens chooses to ignore.

Pickens Starts His Town Hall with His Lie

http://www.pickensplan.com/news/2008/08/21/t-boone-in-lincoln-2/

Go to about the 4:30 mark in the video. This is where he says incorrectly that we’re spending $700 billion a year on oil. This is incorrect, as I’ve shown before. I’ve even put this FACT on his website, but I guess he doesn’t check that too often. Or doesn’t care. I’m pretty sure it’s the second.

As far as I can tell, nobody (other than me) has challenged him on this. And yet, he uses it as HIS FIRST POINT in his town hall meeting. And it stays up there the whole time.

A commenter in my post on his website challenged me to suggest that he “change his commercials each time the oil price changes”. That would be silly, but he COULD use better numbers when he’s presenting things to groups. But he doesn’t, again because nobody is challenging him on this, and it has a shock value to it.

But someone, at some point, is going to bring this up, and then Pickens is going to have to cover his ass. I look forward to that day.

New Anti-Pickens Graphic

In light of my questioning of the $700 billion figure quoted by Pickens and perpetuated by… everyone else, I’ve “modified” one of the badges used by Pickens to help spread his plan.

I’m happy to take suggestions on how to improve the graphic. There are other of Pickens’ badges that I would like to correct, and I will post those in the future.

Proliferation of Protectionism

Has anyone noticed the noticeably increased amount of protectionist attitudes recently?

From Obama’s NAFTA gaffe to T. Boone Pickens “No Foreign Oil” shtick (this is the worst crisis the country has ever seen, ignoring 200 years of American History like the Civil War, for starters), there has been a marked changed in the amount of foreign bashing that’s been going on. I’ve noticed alot of this in the reaction to criticisms of the Pickens Plan, and is one of the reasons I’m writing this post.

Most people, when confronted with the issue of foreign import of oil, say “Yeah, that’s bad. We need to end it.” When confronted with issue, they come up with posts like this:

I guess you think you’re clever bringing all this supposedly accurate information to light. You’ve exposed the rich corporate fat cat for what he really is. Just a money hungry capitalist…. right?

Put this in your pipe and smoke it….

I DON’T CARE!!!

I guess you’d rather some “America hating” oil sheik to get that money. That way he can just funnel it to terrorists.

Pickens is what??? 80 years old? He’s got all the money he needs and even if your absolutely right and this is just a scheme to make him richer then I say FANTASTIC!!!!
At least the money and jobs stay here in America and thats just fine with me
In my America entrepreneurs have huge dreams, they put their money and hard work down on the table and risk it all with no guarantees and yet they do it anyway. That’s the America I love.

But what you failed to mention is that money aside, we import 70% of our oil from foreign countries. That is the true danger. A country that gets that much of it’s energy needs met by offshore concerns ceases to be a world power in short order. Want to bring the US to it’s knees? Everyone knows…. just turn off the tap

And the problem is that there are more people with ideas like this that don’t make any economic sense whatsoever. Ever since British economist David Ricardo came up with the theory of comparative advantage, there hasn’t been anything approaching a criticism of it that has gained legitimacy. In case you don’t know, the theory states that it is advantageous for a country to produce what it is best at making and sell it to everyone else, and then import what it isn’t as good at making from other people. Thus, in the US, we’re good at entertainment, so we produce alot of entertainment and ship it to the rest of the world. But we are inefficient at, let’s say, drilling for oil, because of… I don’t know, environmental and labor laws that dramatically increase costs for domestic producers. So we import oil from people who don’t have moral or political issues with drilling for oil. Thus, we export our entertainment (from sports to movies to television) and import oil.

Because the United States has become an “information economy” due to the rise (and government encouragement) of higher education, the US will be better able to do stuff that requires higher education. That’s OUR comparative advantage. So we’ll max out production of things that require education (and education itself), and import things that we will not do ourselves, like oil.

But protectionists see just one side of the issue (the large importation of oil) and fail to see the other side (the focus on the information economy and expanded education). Note that the US exports oil drilling services and equipment, again enforcing the comparative advantage in the US of knowledge-based industries.

But there’s no one defending free trade in general, and the move from industrialized production to knowledge based production. Not National Review or Reason. Not Marginal Revolution or Cafe Hayek. Not the Heritage Foundation or the Cato Institute (though Cato has been the best on this, but only marginally so).

The point is that all of these supposedly free traders are silent when it comes to the distortions of the Pickens Plan. Nobody is going to stick up for free trade and for the benefits of allowing the US to import what it doesn’t want to produce.

So you want the solution to oil imports. Ending government regulation of the oil industry completely. That includes all labor and environmental standards. But I bet even the most nationalistic people wouldn’t dare to say that.

Pickens Gives Another Unsourced Figure

From Boone’s Blog:

Last year we sent more than $300 billion to countries controlled by oppressive or unstable regimes.

Now, let’s see if he’s somewhat right here…

Last year we spent $360 billion on foreign petroleum products (more than just oil, BTW). Of that, we sent the following amounts just on crude oil:

Canada: $41 billion
The United Kingdom: $2.6 billion
Norway: $1.5 billion
Mexico: $ 30.2 billion
Columbia: $3.5 billion

Total for these five: $78.8 billion

So we’re below $300 billion before factoring in other petroleum products (like natural gas). And this doesn’t even include other stable countries like the Virgin Islands, Aruba, Brazil or the Netherlands. Looks like T. Boone is playing with the numbers once again.