Government Energy Investments Sell Us Short
Jigar Shah wrote an article recently discussing how Canadian and U.S. Energy Investment Policies differ in respect to diversion of funds. I though it was interesting to note how Canada puts an emphasis on Crude Oil in their oil sands while the Democrats in office here in the states appear to be doing everything they can to discourage domestic oil and gas production.
While Canada is clearly moving forward in their support for recently active oil sands (of which royalties and revenue goes back into various social programs and public services), the U.S. Government is shutting down expanded oil exploration and drilling offshore and making it difficult for new exploration in some locations onshore. What is even more interesting is that the federal government is trying to eliminate some of the tax benefits associated with oil exploration – an obvious benefit which helps private investors mitigate the risk with such investments.
This statement from Huffington Post basically sums it up:
One is a country making a short-term investment in energy in tar sands, another making a long term bet on renewable energy. But, each is a country making an investment in energy.
While it is certainly important to ensure over the long term that Alternative Energy sources are abundant, now is not the time to drive up the costs for expanded oil exploration in the United States. The U.S. Government should focus their efforts on encouraging private investment in both crude oil as well as alternative energy sources, however, the US Government should not be picking the winners and losers based on political matters or campaign donations.
The fact that the US government is choosing to spend tax payer money on questionable green energy efforts while increasing taxes on oil production and exploration is a double negative for American taxpayers. On one hand, we are developing alternative energy companies which are clearly not in a position to compete with foreign nations when it comes to oil while driving up the cost to explore for and produce natural oil and gas resources.
Earlier this year, the U.S. government put out over $6 billion in loan guarantees to catalyze banks to fund renewable energy in the United States. The U.S. was buoyant about the investment and then worried after the Solyndra failure only to be redeemed by the by First Solar and Solar City financings without the loan guarantee.
When an investment is made by Politicians using other people’s money, it is obvious to see that Government Energy Investments Sell Us Short. When an individual investor chooses to invest in energy, be it conventional or alternative, that investor has an opportunity to determine if the investment meets both short term and long term goals for profitability and sustainability. With personal skin in the game, the motive is a quite different element that those investors using other people’s money.