Figure 1: Trump isn’t exactly known as a fan of wind farms
Trump recently released his energy plan. As you can imagine it was slim on details but included the expected, bashing renewables, wanting to renegotiate the Paris deal and lifting numerous environmental restrictions on fossil fuel production, nuke the Whales, burn down the Amazon, usual. Needless to say the environmentalists are aghast at the prospect, as too are many other commentators on energy.
Putting aside the issues of the environment, his plan seems to be based on a simpleton vision of “green stuff bad” and “fossil fuels good”. However, not so, renewables, are creating far more jobs in the US than coal or the oil industry. Cutting off renewables at the knees will cost many American’s their jobs, not save jobs. The US renewables industry now employ’s over 750,000 people and is worth tens of billions of dollars.
Also the fundamental problem facing US coal producers, who are seeing their industry decline, is competition with natural gas producers. Yes, renewables, in particular wind energy are part of the reason they are getting hammered on price, but their main competitor is the natural gas industry. If Trump promotes more drilling, then those coal miners he was promising more work too will instead be all out of a job.
Figure 2: The decline in coal is closely matched by a rise in Natural gas demand [EIA & Zerohedge.com, 2012]
Of course, the oil and gas industry is stuck in the doldrums not because of Obama, but because of low oil and gas prices worldwide. Making more oil and gas available will not improve their situation, it would in fact lower prices even further. And similarly making the US energy independent would not lower prices. So long as America is connected to free markets, it is connected to changes in the global supply of oil and gas. If prices go up in other parts of the world, they will go up in the US.
The only way he could please both fossil fuel lobbies would be by intervention in the energy market and artificially inflating energy prices (i.e. what Sarah Palin would call “central planning“). Of course that may not be terribly popular with voters paying more for energy, in particular higher prices at the pumps. President’s have lost elections over rising energy prices before. Oh, and while a lost of subsidies would hurt renewables, higher energy prices would actually make them more competitive.
Indeed he’s hinted in speeches that he might directly intervene in the industry, baring the sale of oil to this country or that (in which case he’d be hit with retaliatory sanctions), blocking certain projects he disagrees with, etc. Well the problem straight away with that is that while American fossil fuel production has increased recently its still short by some margin, about 24% short in the case of oil. So cutting the US off from international markets would straight away push up prices and lead to 70’s style queues outside petrol stations.
Figure 3: US monthly motor oil demand, seasonal fluctuations [EIA 2012]
Also its worth remembering that oil supply/demand fluctuates, so even if the US was at 100%, there are times of the year (such as the summer driving season) when supply does not match demand and without imports from overseas, the price would skyrocket and there would be shortages. The opposite then happens during lean times.
But would such policies increase the rate of oil drilling? There’s a possibility the answer is no. Investors might well take fright at such direct action by the government. They would worry that while it benefits them now, it would be a step towards nationalisation of the energy industry longer term. After all, if the government pulls populist levers today, what about when energy prices rise in the future (back to where they were in 2007) and he’s under pressure from voters come the next election to bring down prices?
And what about the environment? He’s also talked about getting rid of the department of environmental…..until it was pointed out that there’s no such department (so the EPA might be safe because he can’t spell its name!). Also the only wall he’s building right now is a wall in Scotland to protect his precious golf course from future sea level rise, which he doesn’t believe will happen.
Figure 4: Climate denier Trump wants a wall in Scotland to protect his golf course for sea level rise…don’t think the Mexicans will pay for it tho!
Well quite apart from the long term impact of climate change, there’s the issue of pollution. Trump seems to assume everyone but hippies is okay with the pollution caused by oil and gas drilling. However this is not true. If the federal government reneges on its responsibilities, that will throw the decision back to state legislators. However, many of them will oppose such plans, as they will be besieged by lots of angry voters looking to get such projects stopped. Keep in mind, not everyone in West Virginia supports the coal industry. There are many voters in large cities in the Marcellus shale region who worry about the impact on drinking water from shale gas drilling.
Grassroots environmental campaigns have derailed major energy projects before. Recall that in the wake of three mile Island almost every single US nuclear reactor project then under construction was halted, generally due to pressure put on state or county level politicians by concerned voters and grassroot movements. And some of those reactors were only a few screw turns from going online. So there’s every chance his policy could have some unintended consequences.
Trump’s energy plan is in short a recipe for chaos. Fundamentally, what it reveals is that he’s less an advocate of free markets and more of a national socialist. He seems to mix all the worse aspects of Hugo Chavez with North Korean Juche, crony capitalism and an almost cartoonist hatred of the natural world.