SitNews - Stories in the News - Ketchikan, Alaska


Can we avert an economic meltdown?
By Sen. Kim Elton


May 25, 2008

We are in desperate need of a series of unaffiliated solutions -- neither Democrat nor Republican -- to the looming U.S. energy crunch.

I write this as the price of oil flirts, nay necks, with $130 a barrel.

The economic impact of $130 or higher oil will explore every nook and corner of a family's checking account, squeeze business profits like a boa constrictor, and plumb tax coffers. Every trip we take will be more expensive. Every consumer good that travels will be more expensive. Every public building we heat, from schools to courthouses, will be more expensive.

Every American family and every American business will be shaving spending on other goods and services to cover energy costs. Jobs go away. Wages sit still like prey as corporate accountants circle like wolves.

I'd like to tell you I'm way too pessimistic, but some experts make me sound like Pollyanna. Here's a sampling:

  • T. Boone Pickens expects oil prices to rise to $150 later this year;
  • a Goldman Sachs oil analyst declared crude will hit between $150 and $200 in the next six to 24 months;
  • the chief economist for the American Petroleum Institute notes the world demand for oil is exploding--"you have 2 billion people who want cars;" and
  • the top credit analyst at Standard & Poor's says airlines will be at the risk of bankruptcy if they don't restructure loans and raise revenues to cover oil costs.

I'm not just cherry picking negative assessments. Sorry. Wish I were.

Most folks, experts on the demand side like economists and experts on the supply side like oil geologists and energy corporations, note we aren't going to simply produce our way out of the oil crunch. Especially disturbing is the view from Big Oil.

Most oil multi-nationals have reserve replacement ratios of less than one (this measures whether finding new oil reserves outpaces draw downs of found oil). Many oil geologists believe that 90 percent of our globe's oil fields have been tapped.

The dimensions of the energy challenge are easy to discern. Solutions are much harder to find. Any solution is especially elusive if we spend more time finding scapegoats--whether corporations or environmentalists or booming economies in China/India or OPEC strongmen.

First on the agenda is going after energy demand. Ferociously. In this energy price environment, efficiencies in space heating, transportation, and manufacturing can no longer be ignored without devastating economic dislocations.

Second on the agenda is production. And we must define production more broadly than sticking a drill bit into sand or tundra. We can't bunker into the pro-nuke camp or anti-nuke camp because that focuses more on winning debates than solving the problems of nuclear waste and plant safety. Sifting through the pros and cons of Big Oil practices and profits must not divert focus from alternative fuels and non-conventional resources.

Alaskans have special opportunities to focus on conservation and energy alternatives while also working on production (especially production of our stranded natural gas). Last session the legislature took a huge leap forward on conservation by creating a $300 million pot for energy conservation through home weatherization programs. That's an investment that will keep on giving for years through reduced energy consumption. We also created a $50 million program to develop renewable energy alternatives.

Now the governor has cobbled together a few ideas that add up to $1.2 billion--mostly to subsidize energy bills. A billion point two really catches attention.

The governor tapped into an obvious populist appeal but some questions must be answered as the legislature vets her plan. Is a subsidy for consumption good politics and good policy? Will there be congressional ramifications when we use part of our wealth from high oil prices to subsidize consumption in Alaska while most states continue to wiggle on the energy hook (think funding for the Denali Commission, or road projects or other infrastructure spending in Alaska)? Will this new spending go away or go up if energy costs keep climbing? Are we out of balance if we spend nearly four times as much on new energy subsidies as we spend on new energy conservation and alternative energy programs.

I suspect there are no perfect answers as we rise to our challenge. But we can't wait for perfect. Neither can we try and skate on this $130/barrel challenge by simply scape-goating and politicking.

About: Sen. Kim Elton is a member of the Alaska State Senate representing Juneau.

Received May 23, 2008 - Published May 25, 2008


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Ketchikan, Alaska