In today’s Wall Street Journal, the editorial board celebrates Exxon Mobil’s latest discovery of oil reserves in the Gulf of Mexico and notes an important contrast between oil companies and clean-energy boondoggles:
The great energy irony of recent years is that governments have thrown hundreds of billions of dollars at wind, solar, ethanol and other alternative fuels, yet the major breakthroughs have taken place in the traditional oil and natural gas business. Hydraulic fracturing in shale, horizontal drilling and new seismic techniques are only the best known examples.
Private companies must innovate to survive, and they have the profit incentive to do so, while government cash is usually steered to politically favored companies that may or may not know what they’re doing. If you live off federal grants, you need to work the corridors of power more than the technology. Federal grants for cellulosic ethanol are rife with political earmarks, for example. This is why these columns have argued that the political fad of alternative energy has misallocated scarce capital when the economy can least afford it.