Renewable Energy Receives 82X More in Tax Preferences Than Fossil Fuels, Adjusted for Output

2011	Tax Preferences	Production (quadrillion BTUs)	Preferences per Quadrillion  BTUs
Renewables	$12.9B	7.52	$1,715,425,532
Fossil Fuels	$1.7B	81.08	$20,966,946
	Renewable/Fossil Fuels	Fossil Fuels/Renewables	Renewables/Fossil Fuels
Ratio	7.6	10.8	81.8

The table above displays: 

a) The tax preferences in 2011 that went to renewables ($12.9 billion) and fossil fuels ($1.7 billion), for a ratio of 7.6:1 in favor of renewables over fossil fuels, data here;

b) 2011 production levels for renewables (7.52 quadrillion BTUs) and fossil fuels (81.08 quadrillion BTUs), for a ratio of 10.8:1 in favor of fossil fuels over renewalbes (data here); and 

c) Tax preferences per quadrillion BTUs for renewables ($1.7 billion) and fossil fuels (about $21 million), for a ratio of almost 82:1 in favor of renewables over fossil fuels.

And what kind of return have taxpayers gotten for their coerced investment in the renewable energy sector over the last few years, e.g. in terms of business success, industry profits, and job creation?  Not a very good return, and not very many jobs.  In fact, it's likely a pretty negative return.  As my AEI colleague Marc Thiessen reported in the Washington Post last week:

"Since taking office, Obama has invested billions of taxpayer dollars in private businesses [mostly in renewable energy companies], including as part of his stimulus spending bill. Many of those investments have turned out to be unmitigated disasters — leaving in their wake bankruptcies, layoffs, criminal investigations and taxpayers on the hook for billions."

And the Washington Examiner reported last week that "The wind industry has actually lost about 10,000 jobs since 2009." 

The White House here lists five reasons to repeal tax subsidies for oil companies, and some of those might be valid reasons.  But that brings up the question: Why is the government providing forcing taxpayers to provide subsidies to private energy companies in the first place?  And if the outrage for forcing taxpayers to subsidize successful, job-creating oil companies that provide more than one-third of our energy is justified, where is the outrage for forcing taxpayers to subsidize unprofitable, renewable solar and wind companies with weak job creation, at 82 times the production-adjusted level of oil companies? 

As I reported recently on CD, even the government's own forecast estimates that the renewable share of total energy demand will increase from about 7% currently to less than 11% even by 2035, while fossil fuel sources will still contribute more than three-quarters of our energy (77%) in 2035.  Even massive taxpayer subsidies won't change the economic and scientific reality that hydrocarbon energy will fuel America's economy for many generations to come.       

Update: See related analysis from my AEI colleague Steve Hayward last September on the Enterprise Blog (federal electric subsidies per unit of production).

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Drill, Drill, Drill = Shovel-Ready Jobs, Jobs, Jobs

While yesterday's disappointing employment report reflects an economy struggling to create jobs during an extended, sub-par "jobless recovery," it's been a much rosier employment picture in one of America's most successful "shovel-ready" job-creating industries: Oil and Gas Extraction.

The chart above displays the monthly percentage changes in employment levels since January 2007 for oil and gas extraction jobs compared to total nonfarm payroll jobs. As of last month, total nonfarm payroll employment is 3.0%, and 4.1 million jobs, below the January 2007 level. In contrast, the explosion of new oil and gas jobs has increased employment in that industry by more than 38% since January 2007. Over the last 12 months, oil and gas companies have added 21,800 new workers, at a rate of almost 100 new hires every business day. And this just accounts for the new jobs created that involve the actual drilling, extraction and production of oil and gas.

A recent study found that for every one new job added in oil and gas extraction activities, there were three new additional jobs created elsewhere in the economy. The report also found that "the jobs-multiplier effect of U.S. oil and natural gas activity is higher than many other U.S. industries, including the financial, telecommunications, software and non-residential construction sectors. This is the result of the energy industry’s long supply chains and relatively high levels of spending by employees and suppliers." As a result of the multiplier effect, the U.S. economy has potentially been adding almost 400 new jobs per day over the last year due to increased oil and gas production.

Imagine what the jobless rate might be today, and imagine all of the additional shovel-ready, energy-related jobs (direct and indirect jobs) that could have been created over the last several years in the oil and gas industry (and its supporting industries), if the Obama administration: a) hadn't been so unfriendly to the low-cost, job-creating, dependable fossil fuel industry (think Keystone XL pipeline for example) that doesn't require picking the pockets of the taxpayers; and b) instead been so over-friendly to the subsidy-dependent, high-cost, unreliable but politically-favored "green" energies. On the other hand, imagine what the jobless rate might be today if we hadn't had the tremendous "energy-stimulus" to the U.S. economy that has resulted over the last few years from increased oil and gas drilling due to technological advances of hydraulic fracturing and horizontal drilling, and taking place mostly on private land? 

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Weak Jobs Report Boosts Romney's Intrade Odds

Romney's Intrade odds got a boost yesterday up to 41.5% after the weak jobs report, and President Obama's odds took a hit, falling to 54.1% (see chart), the lowest since January.   

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Energy Stimulus Hits Texas: San Antonio Sees Unprecedented Growth Thanks to Eagle Ford Shale

Not even a hint of a recession in South San Antonio, where businesses are popping up overnight, like popcorn in a microwave.......

"Rarely does a week go by that the Southside Chamber is not involved in a ribbon cutting,” said Tom Shaw, president of the Southside San Antonio Chamber of Commerce. New apartments have also been constructed to account for a growing population.

"It’s just like popcorn starting to hit in the microwave,” said Shaw. “Pop, pop, pop; it’s hitting all over the place."

Shaw suspected that growth would continue for decades in the area. While growth is not a new concept on the south side, it is the explosiveness at which it is happening that is catching many by surprise. It continues to be driven by economic factors like the Eagle Ford Shale.

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Utilities Continue to Cut Natural Gas Rates as the Shale Revolution Saves Consumers Billions

More evidence of the significant benefits from the Shale Revolution....

1. "Philadelphia Gas Works announced today the latest decrease in natural gas rates, which have been falling because of low commodity prices. The new rate for residential customers is $1.35 per hundred cubic feet, down 2.5% from $1.40. Rates also decreased for commercial, industrial and municipal customers. In the last year, PGW’s residential natural gas rate has fallen 13%. On an annualized basis, a typical PGW residential customer now pays $181 less than 12 months ago."

2. "Elizabethtown (N.J.) Gas residential customers could spend less to heat their homes this upcoming winter. The company has filed a petition with the New Jersey Board of Public Utilities to lower rates for supplying natural gas to residential customers by an average of 2.3%."

3. "South Jersey Gas proposed a rate reduction today that would save residential customers an average of 1.1% on their natural gas bills. SJG has filed petitions with the New Jersey Board of Public Utilities that will lead to an overall decrease of $1.44 on a 100-therm monthly natural gas bill. This filing follows a series of other reductions to customers' bill costs over the past two years, including a 10.6% rate reduction granted in 2010, a 3.4% reduction granted in September 2011, and two Basic Gas Supply Service bill credits for $23 million and $20 million issued in April 2011 and December 2011, respectively." 

4. "In a filing made today with the New Jersey Board of Public Utilities, PSE&G has proposed to lower winter natural gas bills this fall by an additional 5.2% a month for residential customers. If the request is approved, it will result in the ninth decrease in a row in natural gas supply charges, for a total savings of 39% -- or about $674 -- since January 2009, when wholesale prices started to drop."

Update:

5. Electricity customers in Oklahoma are benefiting from low natural gas prices as the two largest utilities lowered charges for fuel going into the peak summer months. Oklahoma Gas and Electric Co. will lower its fuel costs by $50 million in the next 12 months, while Public Service Co. of Oklahoma will drop its fuel costs by $70 million.

MP: Lower natural gas prices have already delivered a powerful $250 billion economic stimulus to the U.S. economy over the last three years from cost savings for natural gas customers (residential, commercial, industrial and electric utilities), according to a recent study by the American Gas Association (see CD post). And these new announcements today of further rate cuts by utilities in Pennsylvania and New Jersey indicate that the significant cost savings from the energy stimulus known as the "Shale Revolution" will continue.  Importantly, this ongoing economic stimulus from shale gas, unlike the politically-favored alternative energies, doesn't require any tax subsidies, tax credits, public expenditures, procurement preferences or grants.

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Energy Milestone: Gas Rig Share Falls Below 30%

In response to natural gas prices falling to inflation-adjusted multi-decade low levels over the last several years, along with high oil prices, there has been an ongoing switch in drilling activity from natural gas to oil, as can be seen in the chart above of rig shares.  Now a new milestone has been reached.  For the first time since Baker-Hughes started tracking the rig split between oil and gas in 1987, the share of active rigs drilling for natural gas fell below 30% last week and the oil share rose to a new record high of 70%.

Economic Lesson(s): Prices transmit information about relative scarcity.  Incentive matter. Producers respond to prices and incentives.  Through the invisible hand of the market and the motivation of profit-maximization, producers are naturally switching production from relatively abundant natural gas to relatively scarce crude oil.  It's a good example of market forces at work, re-allocating resources through "spontaneous order," without any need for central planning.     

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Today's Employment Report

Today's employment report paints a somewhat bleak and mixed picture of current U.S. labor market conditions, with an increase of only 69,000 payroll jobs in May (less than half of the 150,000 consensus expectation) and an increase in the May jobless rate to 8.2%.  While most reactions to the job data could be best described as "disappointment," here are a few bright spots in today's report:

1. Manufacturing payrolls increased in May by 12,000, which was the eighth consecutive monthly gain in factory jobs, and the 18th monthly increase out of the last 19 months.  For the 11th straight month, the manufacturing jobless rate (7.1%) was below the national rate (7.7% NSA).  Manufacturing employment at just below 12 million in May was at the highest level in slightly more than three years, since April 2009.  Since 2010, manufacturing employment has increased by almost 500,000 jobs.

2. The more comprehensive measure of employed workers from the May household survey (includes self-employed workers) increased by 422,000 jobs last month, and has shown an increase of almost 1.5 million jobs this year, vs. the 823,000 increase in payroll employment from January to May.  Total civilian employment in May of 142.3 million was the highest since December 2008, more than three years ago.  

3. Temporary help employment for professional and business services increased in May to almost 2.5 million jobs, reaching the highest employment level for those workers in more than four years going back to February 2008.   With continued growth in temporary employment this summer, the number of temporary jobs in the U.S. economy should exceed pre-recession levels sometime this summer.      

4. The jobless rate for college graduates fell to 3.9% in May, the lowest unemployment rate for that group since December 2008, almost three and-a-half years ago.

Update: Scott Grannis provides some of his always-insightful commentary (and graphs) on today's jobs report:

"So I think the market's reaction to today's news has been excessively pessimistic. I don't see convincing signs of deterioration in the outlook; I see an economy that continues to grow at a sub-par pace, and that's been the case for the most of the past three years."

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