(Dow Jones Newswires), Oct. 19, 2011
The U.S. needs to refashion its energy policy in order to boost the development of fossil fuels, in lieu of giving precedence to expensive and unproven alternative sources of energy, Chevron Chief Executive John Watson said Wednesday.
"We need a refreshed policy approach that recognizes the value of fossil fuels and allows a market-driven transition to affordable substitutes over time," Watson said in a speech at the Peterson Institute for International Economics in Washington D.C., according to prepared remarks.
Watson said that in countries such as Canada, Norway, Australia and Brazil "the development of affordable fossil fuels is at the top of the policy agenda," while in the U.S. energy policy is "rife with contradictions" that hinder the exploitation of domestic oil and gas resources.
The executive of the second-largest U.S. oil company by market value after ExxonMobil said those contradictions include severe limits to deep-water exploration in the offshore continental shelf and government proposals for "punitive and selective" tax increases on the oil and gas industry, such as the elimination of the manufacturer's tax credit and double taxation on foreign incomes for oil and gas companies. However, enabling energy development "does not mean abdicating regulatory oversight," the executive said.
"We report large earnings but we also make large investments," Watson said, highlighting that Chevron and other oil companies are a major source of growth and jobs. In 2011, Chevron will invest $26 billion in capital programs, including $7 billion in the U.S., and "next year we'll spend even more," Watson said.
Despite the relative abundance and affordability of fossil fuels, they won't be enough to meet future demand growth, so other sources must be developed, Watson said. Nuclear energy is needed, and renewables will play a larger role, but they face enormous hurdles, and the current model of nudging their development through taxpayer subsidies has seen "spectacular failures," including the bankruptcy of several solar-panel companies, Watson said.
Aggressive government mandates for technologies that aren't ready can also hinder the affordability of energy, he added; the energy industry is unlikely to meet a U.S. rule mandating the use of 16 billion gallons of cellulosic ethanol by 2012 because the technology to meet that mandate "economically and reliably, does not exist," Watson said.
Copyright (c) 2011 Dow Jones & Company, Inc.
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