Cheap Power = Prosperity

What are the biggest myths about energy?

The biggest myth is that we’re running out of energy. The reality is that we’re just beginning to understand the availability of energy resources that we have, particularly here in the U.S. Remember, it was as recent as 2005 that ExxonMobil CEO Lee Raymond said that natural gas production in North America has peaked. ExxonMobil is a pretty savvy outfit, but they got it wrong. What’s happened since 2005? U.S. natural gas production has increased 41 percent. The myth that we’re running out of energy has been predominant now for a century, and what keeps happening? Innovation. It’s evident in oil and gas exploration, in the downstream sector, in refining, and also in the way that we’re consuming energy. We’re becoming incredibly more efficient. Yet this myth that we’re running out of energy continues to prevail. It’s what certain sectors of society use to justify their rent-seeking and this has been damaging to the U.S. economy.

What will play out with the endlessly debated Keystone XL pipeline and what do you reckon the delay has cost the economy?

It’s really impossible to estimate the economic costs of the delay. In my view, the Keystone XL pipeline doesn’t matter anymore. Why? Because if you look at the amount of oil by rail loading capacity that has been built in North Dakota and is being built in Alberta and North Dakota alone, it represents a million barrels a day; Alberta, another million barrels a day. Keystone was designed for 800,000 barrels a day. So, the combination of the new push for moving more oil by rail has, in many ways, obviated the need for Keystone.

Clearly, moving oil by pipeline is safer and cheaper. But at this point, with the new rail information in place, the oil producers in the Bakken and in Canada are realizing, “We have more flexibility to move our oil by rail.” So this continuing delay on Keystone has led to a predictable response—oil is getting to market by rail instead of by pipeline.

You make a compelling case that the cheaper the energy, the better for the economy, especially for middle- and lower-wage earners. Yet, the prescription from the policy elites is to make energy more costly. Why?

It intrigues and horrifies me how the de-growth idea has become more mainstream. It is being carried by the most famous and probably the most influential environmentalist in America, Bill McKibben. In getting himself arrested protesting the Keystone pipeline in front of the White House, McKibben said he wants a twenty-fold reduction in global hydrocarbon use. And no one ever questions it. Instead,the reaction is, well, of course, that’s what we need to do to prevent climate change. This is a radical agenda, and it’s something that represents an incredible threat, not just to the U.S. economy, but to the global economy. These people want to take us backward. They believe fundamentally that to go forward, we have to go backward. This is silly on its face. For example, one of the prescriptions being advanced is having a global referee to decide who gets to use what energy. We’re going to cede our sovereign power to some unelected entity that gets to decide what size car we drive or how many miles per year we can fly?