What would you think of an energy policy that increases pollution, jacks up the cost of fuel and increases our dependence on foreign oil and oil refining? Nobody would sign up for that. But that's exactly what Congress did last week when it passed "cap and trade" — one of the most harebrained pieces of legislation ever conceived.
Here's the gist: The government taxes the daylights out of U.S. fuel plants to fight pollution under the guise of making energy so expensive that we switch to alternative sources. Problem is, we don't have any clean alternative energy sources that are commercially viable on a mass scale now, and likely won't for decades. So we'll still need oil.
But U.S. oil companies will now be forced to buy expensive allowances for the greenhouse gases their plants and refineries release here, putting them at a terrible disadvantage against refiners in other countries. In an ironic move for people supposedly serious about combating global warming, Congress has written the law so that if these companies refine their oil here, they'll have to buy the allowances, but if they refine it in some backwater hellhole and ship it back, no allowances are needed.
Last week, oil executives and industry analysts were in agreement on what will happen. We'll have to import more oil than we do now from overseas refiners. And U.S. refiners will begin to shut down their refineries here as the allowances -- essentially massive taxes on carbon -- wipe out their profits.
An industry trade group called the American Petroleum Institute predicted last week that one out of six refineries in the United States would close by 2020 as the new carbon taxes overwhelm their profits. Earlier this month, several American oil execs said these refineries would reopen overseas in places with cheaper labor and laxer environmental standards if cap and trade becomes law. And for all this -- more pollution, scarcer oil, increased foreign dependence and a loss of American jobs -- you'll pay higher prices at the pump (at least 77-cents-per-gallon extra, according to API).
ConocoPhillips CEO Jim Mulva summarized the situation in an interview on June 16, Bloomberg news reported.
"It will lead to the opportunity for foreign sources to bring in transportation fuels at a lower cost, which will have an adverse impact to our industry, potential shutdown of refineries and investment and, ultimately, employment," Mulva said.
Depending on which energy industry expert you talk to, U.S. refining capacity will be reduced by 2 million to 3 million barrels of daily refining capacity, or by 12 to 17 percent as smaller refiners close as carbon taxes wipe out their profits.
"Because it's going to be more expensive to produce the stuff, refiners will slow down production and cut back on inventories to squeeze every penny of profit they can from the system," Geoffrey Styles, founder of GSW Strategy Group LLC in Vienna, Virginia told Bloomberg. "We will end up with less domestic product on the market and a greater reliance on imports, all of which means higher, more volatile prices."
While the United States hasn't built a refinery since 1976, China adds one in its own territory or somewhere in the world -- hellholes preferred -- at a rate of about one every other month. China and India, both of which are in the top five in the world for greenhouse emissions from within their own borders, refuse to cap their carbon emissions. So they'll go right on polluting and increasing their capacity to pollute.
You've got to admire that in a way. It's more honest than having other countries drill and refine your oil and then claiming environmental superiority.
It's particularly telling that Congress could have banned imported oil products not refined to our superior environmental standards, but didn't. There are two reasons for that.
The first is that they know that after 30 years of in-vain funding of biofuels, there is no mass-producible replacement for oil and that we are going to need it for decades to come. After years of paying six and seven pounds a gallon for gasoline, Britain certainly hasn't developed one.
Given that, congressional leaders don't have the guts to attempt to politically withstand the gasoline lines that would inevitably form in coming years if they cut off too much of our fuel supply by mandating that foreign refiners meet our environmental standards.
Using the cap and trade scheme to battle global warming was never really about combating pollution. It's just an excuse to add huge new taxes to fuel. Direct fuel taxation would be about as popular as the gasoline lines. So they massively tax American fuel producers, figuring that when those producers pass these taxes on to us, we'll be none the wiser.
In a few years when all this hits the fan, they'll just blame the skyrocketing gasoline prices on the greed of the oil producers and the speculators. Who knows? It may just work.