- The Washington Times - Wednesday, February 29, 2012

In an attempt to calm the country’s growing concerns about U.S. energy policy and high gas prices, President Obama addressed the nation last week from the University of Miami, in part calling for new subsidies for fuels made from algae. His claim: “We could replace up to 17 percent of the oil we import for transportation with this fuel that we can grow right here in the United States.”

With gas prices on a glide path to a $4 per gallon national average by May, the president is no doubt motivated to fumble around for new ideas. The fact remains, however, that the technology does not yet exist to turn algae into fuel on a reasonably priced commercial scale. While algae-based fuels may hold promise in the distant future, there’s a big difference between conducting research in a lab and translating it into a real-world solution. According to a recent study, to replace 17 percent of the oil we import, algae would need to be planted on an area of land roughly equal to South Carolina and it would require 350 gallons of water for every gallon of algae-fuel created.

If the president’s problem with oil stems from concerns about price volatility and alleged environmental impacts, why is he now proposing to replace oil with a potential fuel source that would require millions of acres of land and billions of gallons of water to produce at a wildly expensive price?

Even if algae-based fuels could be commercialized today, the need for further taxpayer-funded subsidies is both unnecessary and improper. First, Congress has already mandated that refiners blend 2 billion gallons of biofuel into gasoline in 2012 alone. In other words, there’s already a lucrative market in place for algae-to-fuel industries thanks to government mandates, however ill-conceived. Second, the government should not be in the business of picking winners and losers and has a horrible track record as a venture capitalist anyway. And yet with this latest proposal, it seems there is no end in sight to this type of meddling in the energy sector and the resulting higher costs to consumers.

Reasonably priced algae-based fuel is currently a concept. Using it in the manner that Mr. Obama proposes would be absurdly inefficient compared to making fuel from crude oil, and it would send the cost of transportation fuel into the stratosphere - or at least to European levels, much like Energy Secretary Steven Chu has wanted. Despite this obvious flaw in the president’s latest scheme, he had no problem dismissing calls for greater access to America’s vast energy resources as a “bumper sticker” rather than a strategy. To follow the president down the algae-paved path to energy security, Americans must ignore the fact that trillions of gallons of domestic oil is available today at much more reasonable prices than the administration’s algae farm.

Mr. Obama would like you to believe that no amount of drilling would have an impact on gas prices or energy security, and that we’ll always be at the mercy of global price fluctuations. It is simply not true. According to a recent report, the total recoverable oil in North America exceeds 1.7 trillion barrels, with 1.4 trillion barrels in the United States alone. That’s more than the entire world has used in 150 years, and sufficient to fuel the present needs of our nation for the next 250 years.

There’s no doubt that meeting the world’s growing energy demands will require various resources to work in tandem. Someday, biofuel from algae may be one of them. Even without government subsidies, oil companies already are recognizing that it’s in their best interest to research such alternatives. ExxonMobil, for instance, expects to invest more than $600 million toward the research and development of biofuel from algae.

This isn’t the first time the government has taken a keen interest in giving a leg up to a not-quite-ready technology. Last year, the Environmental Protection Agency employed a similar tactic when it mandated that U.S. refiners must blend cellulosic ethanol into petroleum products or pay a fine. Unfortunately, that ethanol wasn’t commercially available. As a result, refiners owed $6.8 million in penalties last year for failing to use nonexistent fuel - a fee that ultimately will be passed on to consumers at the pump. This year, refiners expect to pay even more as the EPA has increased the quota from 6.6 million gallons to 8.65 million gallons.

Mr. Obama’s “all of the above” energy plan is long on rhetoric and short on reality. His latest speech is a reminder that when it comes to real solutions to higher energy prices, the president is either clueless or callously indifferent.

Thomas J. Pyle is president of the Institute for Energy Research.