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The great energy policy debate of 2003 is in full swing, and it’s déjà vu all over again.
Quickly returning to center stage is the sterile controversy over who has the best plan to reduce America’s “dependence” on imported oil. Is it the ANWR (drill oil in Alaska) gang? Or is it the CAFE (regulate consumers out of their SUVs) clique? Both sides talk as if oil imports were a national security problem — as if curbing our “addiction” to foreign oil were critical to defeating al Qaeda and disarming Saddam. That is silly. As the Cato Institute’s Jerry Taylor reminds us, Osama bin Laden’s family made its fortune in the construction trades, not the petroleum business. The conflict with Saddam is not about securing access to Iraqi oil. Recall that after the Gulf War, the U.S.-led coalition embargoed sales of Iraqi oil. The United States is on the verge of war because Saddam is a treaty breaker, is building weapons of mass destruction and has links to terrorists who would have few if any compunctions about detonating such weapons on American soil.
The United States today imports 55 percent of its oil. In 1973, the United States imported only 35 percent of its oil. Was 1973 a good year for peace in the Middle East? Was it a time when Europe and America were untouched by hijackings, bombings, and other acts of terror emanating from or linked to the Middle East? Was it a time when we got lots of respect from the Organization of Petroleum Exporting Countries (OPEC)? The widespread notion — sometimes only half articulated — that cutting oil imports is essential to U.S. security is intellectually bankrupt, and can only confuse discussion of domestic energy policies.
The CAFE (anti-SUV) crowd is quick to point out that ANWR production would barely slow the growth in petroleum imports. But that is irrelevant. Opening ANWR to exploration and drilling could boost domestic U.S. oil production by 14 percent. That means tens of thousands of new jobs and tens of billions of dollars of additional GDP. Those who would be most directly affected — Alaskans — support opening ANWR by wide margins. It is mind boggling that many who have never set foot in the state believe they have a right to cripple Alaska’s economic development.
Like opening ANWR, tightening CAFE standards would also barely dent overall U.S. petroleum consumption. However, instead of creating wealth, higher CAFE standards would restrict consumer choice. Technologically, the easiest way to increase average fuel economy is to make fewer big, heavy vehicles — the very models millions of Americans want. Worse, CAFE’s downsizing effects could have lethal consequences, because lighter, smaller vehicles provide less protection in crashes.
Some people suppose that reducing petroleum imports would make us less vulnerable to oil price shocks when war or civil conflict curtails oil shipments from abroad. Not so. As Taylor points out, even if we got all our oil from Texas, a Middle East war would raise gasoline prices just as much as if all our oil came from Iraq. Oil is a global commodity, with global market prices. In 1979, Britain got all its oil from the North Sea, yet the price spike from the Iranian Revolution hit Britain as hard as it hit Japan, a country totally dependent on petroleum imports.
Because the White House seems to think voters will reward the GOP if Congress passes an energy bill — any energy bill — Republican members may come under increasing pressure to make concessions.
They should draw the line at any anti-energy initiative — any measure that would ration energy, build institutional capabilities for energy rationing, or legitimize energy rationing. There are at least three items in last year’s Senate-passed “energy” bill that pro-market, pro-energy lawmakers should reject outright as deal breakers.
One deal breaker is any provision to establish a “Renewable Portfolio Standard” (RPS) for the electric power sector. An RPS is fundamentally a set-aside program — a corporate welfare entitlement for industries that would not exist in a free market.
Non-hydro renewable-energy technologies (wind, solar, geothermal, biomass, landfill waste) have such high capital costs and produce so little power that it is almost always cheaper to produce electricity from natural gas, the primary source of most new generating capacity. That is why, despite two-plus decades of multi-billion dollar state and federal subsidies, non-hydro renewables supply only 2.4 percent of total U.S. electric power.
Mandating the use of uneconomical energy sources will force consumers to pay more for electricity. It will ratify the Kyoto Protocol goal of restricting Americans’ access to hydrocarbon fuels. It will also boost the political sector’s power to play central planner.
Any RPS — even a scaled-down, 5-percent version — will imperil America’s energy future. Whatever level it is initially set at, the RPS will function as a floor, not a ceiling. Once enacted, it will strengthen the renewables lobby and grow like other entitlements. The potential to exploit consumers and distort energy markets is vast.
Another deal breaker is any “sense of Congress” resolution that affirms the Kyoto vision of an impending greenhouse apocalypse. Once Congress puts its seal of approval on pseudo-scientific alarmism, it will be constrained to adopt Kyoto-style policies — policies that chill the economy without benefiting people or the planet one whit.
A third deal breaker is any provision to establish a mandatory greenhouse gas emissions registry. This will set up the monitoring and enforcement framework for a future, Kyoto-style emissions cap-and-trade scheme. Mandatory reporting is just a step away from mandatory reductions. If you don’t want to end up with energy rationing, then don’t lay the groundwork for it.
Opening ANWR would be a spectacular victory for rational public policy. It would prove — for the thousandth time — that oil and gas production is compatible with good stewardship. But opening ANWR could be a Pyrrhic victory if purchased at the price of enacting the Kyoto vision or energy rationing. What would be the point of drilling for oil if Americans are not allowed to use it?