NEW YORK (
) -- The U.S. is set to become the Middle East of the 21st century, proclaimed a
report earlier this year. And that's, more or less, Mitt Romney's platform when it comes to energy.
The shale boom and the revolution in drilling technology mean that if there there's a will -- and a hands-off federal government, as far as the Republican Party has it -- there's a way in making America energy independent. In fact, Romney says we can accomplish the task in eight years. He's not the first American politician to set the ambitious goal of energy independence, though all who have come before him have failed. Yet, thanks to the shale boom, the goal is ever more in reach, or at least, within reason. It also leads to some important energy policy questions that haven't received enough focus amid the sound bites over creating jobs through oil and gas and getting away from "our addiction to Middle East oil."
With that in mind, here are five questions for Mitt Romney to answer about the implications of trying to make America energy independent in eight years.
1. The price tag for eight years to energy independence.
In the oil and gas business, there's a chart know as "the scorpion's tale." It shows the point at which capital spending on new drilling projects bends all the way back around to wipe out the profit from existing projects and become an economic "wash" for the companies involved.
Eight years seems like an ambitious target for making the U.S. energy independent. It will require a massive investment from companies that, by their nature, are extensively leveraged. A sudden change in the global economy and commodities prices can make leverage an existential crisis in a hurry. In the push to make the country energy independent, "getting out of industry's way" is a defensible idea, since they know much more about avoiding the scorpion's tail than the government does. But giving them this goal does beg the question:
Have you given any thought to how much this is going to cost?
2. Geopolitical destabilization.
Weaning the U.S. from foreign oil is a laudable goal that's been around for a long time. That said, there's about 100 years of geopolitical history that has been founded on the current status quo in the oil markets and, in particular, the Middle East. It doesn't seem like a simple point A (get off Middle East oil) to point B (no more geopolitical issues).
In fact, as we have seen in the aftermath of the Arab Spring, democracy is messy. That doesn't mean there shouldn't be democracy, and doesn't mean there shouldn't be an effort to make the nation as energy independent as it can be. However, a lot of current and historical foreign policy is based, at least in part, on oil politics. You know what they say: Be careful what you wish for, you just might get it.
How do you prevent destabilization in the Middle East as we break our "addiction" to their oil, and what is your specific foreign policy plan to manage this transition?
3. Coal and natural gas: a tale of frenemies.
You say President Obama is waging a war on coal, but let's face facts: The current woes in the U.S. coal market have many "enemies," from the unprecedented switching of fuels by utilities from thermal coal to natural gas as a result of low gas prices, to slackening demand in Asia for metallurgical coal right now.
You like to say the the country can create 1.5 million jobs with the shale oil and gas boom, yet at the same time, you say that there are hundreds of thousands of jobs in the coal industry that the president's policies are costing America. (We won't get into the fact that as governor of Massachusetts, you supported cross-state air-pollution rules, and even voiced support for this decidedly anti-Koch brothers concept in an early Republican primary debate.)
You say we have a 200-year supply of coal going to waste, but we once burned trees for fuel too. So I guess you would suggest by this logic that we go back to burning all of America's forests rather than let the fuel source go to waste.
It seems we could consider even retraining people losing jobs in the coal industry for the shale boom, since rather than an EPA-led "war" there are structural changes that have disadvantaged coal production and may not change any time soon (with the EPA only being a part of the issue). Even distressed investor Wilbur Ross, who has bought and sold distressed coal companies in the past, said recently (more or less) that "this time it's different."
In fact, the biggest issue could very well be the eight-year push for energy independence. Whether we are drilling in the Gulf of Mexico, or any of the blossoming shale basins around the country -- and even if we are after oil -- we never know just how much natural gas we are going to bring up alongside the "black gold." What we do know is that there will be natural gas and even if the unprecedented production levels that took natural gas below $2 early in 2012 level off, the shale boom implies that high natural gas production levels are here to stay.
How does an eight-year rush to energy independence, which you fully support, not effectively keep coal in the doghouse?
4. EIA crude oil and natural gas data.
Recently released data from the Energy Information Administration of the U.S. government shows that crude oil production and natural gas production on land owned by the federal government declined in 2011. Conservative think tanks jumped on this as one more "proof" that Obama's policies are holding back the natural resource opportunity in the U.S.
Crude oil sales from U.S. land in 2011 equaled 31.7% of total crude oil sales. Yet that was down from 37.2% in 2010. That 37.2% in 2010 was higher than any year's level of federal land crude oil sales during the Bush administration, from 2003 through 2007. Given that the largest oil spill in the history of the U.S. occurred in 2010, it seems reasonable that the government took a step back to reconsider whether the "checks" were in place to avoid another disaster before moving ahead. Natural gas production levels on federal land declined to a nine-year low in 2011, 20.6% of all sales, and yet, wouldn't you know it, natural gas sales from federal land have declined every single year since 2003.
You talk a big game about the "overreach" of the federal government under Obama and the tying up of our domestic natural resources, but explain to me how this EIA data set proves your case?
5. The pampered American.
Gasoline prices are a sensitive issue for Americans, a serious issue for consumers, and a real weight on the U.S. economy. However, look at gasoline prices around the world -- outside of state-subsidized oil-rich regimes -- and Americans can't complain.
A strong case can be made that the world economy depends on Americans getting their "cheap" gas -- why do you think the Saudi oil minister steps up with some comforting words about making more supply available, or about there being no rational basis for high oil prices based on supply and demand -- every time there is a bit of panic about rising prices at the pump.
Yet compared to European countries where gas can be as high as $8 a gallon, we've got it good. A staple argument of conservatives when it comes to President Obama's higher fuel-efficiency standards for cars is that it will just make people drive more and burn more gas. Telling Americans that we can be energy independent in eight years could have the same effect, especially when Americans seem to think that more domestic gas means cheaper prices at the pump. The search for more domestic oil is about improving the U.S. economy, creating jobs and providing the oil and gas industry with a way to maximize monetization of domestic natural resources, but doesn't necessarily imply that gas prices will get much cheaper.
When will you be ready to tell Americans that on a relative global gasoline price chart, $4 gas represents a veritable "gift" provided to the U.S.?
To see 5 energy policy questions President Obama should answer, click here.
To join TheStreet's live blog of the presidential debate starting at 8:30 p.m. ET with political reporter Joe Deaux, click here.
-- Written by Eric Rosenbaum from New York.
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